Private Equity Inflows Into Sub-Saharan Africa up by 43 percent

Sub-Saharan Africa attracted 1.6 billion US dollars of private equity investment in 2013, the highest in five years.  The Emerging Markets Private Equity Association (EMPEA) noted in its recent report that private equity into sub-Saharan Africa had increased by 43 per cent from 1.1 billion US dollars in 2012 to 1.6 billion dollars in 2013.

However, there are indications which suggest that direct inflows into private equity have been in large infrastructural sectors especially in West Africa.  “The traditional sectors that have attracted investors from private equity to West Africa have been predominantly those large infrastructure in oil and gas but in recent times as more money began to flow in consideration has been given to smaller business in manufacturing, agriculture and education,” Tokunboh Ishmael, co-founder and Managing Director of Alitheia Capital advised.

Ishmael also added, “We are looking at sectors that are consumer driven looking for ways to help entrepreneurs create wealth. We are also looking in sectors where the masses have lack and demand whether in financial services or affordable health care.”  She then went on to say that certain sectors that are equally attractive had not received much needed private equity due to structural challenges such as energy and power problems.

She also noted that entrepreneurs needed to look beyond making money as investors are looking for projects that assist with job creation, wealth creation, general sector development and economic development.  According to one of the leading think-tanks, Bain & Company’s report on private equity, the sector has been facing challenges in the past four years chiefly as a result of the global recession.

The report also noted, “Private equity investors welcomed the calmer macroeconomic conditions, profited from the stronger public equity markets and enjoyed the persistent low interest rates and accommodating debt markets the central bankers helped engineer. Exit channels opened up.”

There has been increased pressure within Africa to generate more private equity demonstrating a shift in the geographic focus of funds raised within the region.  EMPEA notes that, even though sub-Saharan Africa leads a new tier of emerging markets, displacing the BRICs as most attractive, political risk remains primary deterrent to emerging markets private equity investing.

Source: CNBC Africa