Africa urged to scale up private equity funds - CNBC Africa

Africa urged to scale up private equity funds


by Trust Matsilele 0

Some of the operational private equity funds have invested in toll roads, dams and airports

Addressing a seminar in Addis Ababa-Ethiopia organised under the theme - Capital Flight and Tax Havens in Africa - the executive secretary of the Economic Commission for Africa, Carlos Lopes, said the continent needs to tackle the issue with the sense of urgency.

(READ MORE: Private equity is still misunderstood in Africa)

“As many of these [private equity funds] are likely to be trans-boundary projects, African countries should coordinate efforts to deepen these bond markets and incentivise capital to stay in African countries,” he noted.

“Capital flight represents a direct loss of domestic capital and highlights the effects of the country’s policy distortions on investment [and] the factors that fuel it, such as real exchange rate overvaluation, [which] have to be central in the discussion.”

The seminar is jointly organised by the Nairobi-headquartered African Economic Research Consortium, and the Economic Commission for Africa.

Lopes proposed that new public-private partnership financing models should be explored to entice private investors to invest their resources in viable high return projects. He also stressed the need for trans-boundary coordination at a continental and global level.

There is a low concentration of private equity funds in the continent. South Africa holds 53 per cent of private equity in Africa, followed by Egypt, Mauritius and Morocco at eight per cent. Nigeria holds five per cent. There are however growth prospects in Africa’s private equity industry.

Just recently the United Kingdom’s department of international development partnered with JP Morgan Chase and Co in establishing a new private equity business fund known as Novastar Venture.

“Compared to a decade ago, today, there is a thriving private equity industry in Africa, valued at approximately 30 billion dollars,” Lopes said.

He added that there are up to 38 private equity funds which are invested in infrastructure across the continent including toll roads, dams and airports.