Factors affecting private equity deal flow in Africa

Last year proved to be a challenging period for private equity in Africa, as fluctuating commodity prices and currency devaluations impacted the investment landscape. However, 2017 has shown signs of recovery and renewed investor confidence in the market. Niyi Adenubi, Vice-Chairman at the VFD group, shed light on the key factors shaping private equity investments this year in an interview with CNBC Africa. Adenubi highlighted the positive impact of the INE window, which has restored confidence among investors. The stability in crude oil prices, trading in the range of 50 to 60 dollars per barrel, has also contributed to this newfound optimism. This improvement in market conditions has drawn investors back to the sector, leading to increased deal flow and activity. In terms of investment trends, Adenubi pointed out that real estate has been a focal point in 2017, with leading players like Actis engaging in strategic deals. Additionally, the tech and telecom sectors continue to attract interest from investors, showcasing the diverse opportunities available in the market. The insurance industry has also seen notable investment activity, with discussions around consolidation and various deals taking place. Adenubi emphasized the potential for further mergers and acquisitions within the sector, highlighting a growing interest from both trade and financial buyers. When discussing fundraising in private equity, Adenubi raised concerns about the saturation of large funds in the market. He suggested the need for mid-tier private equity firms to step in and provide growth capital, as the current landscape is dominated by billion-dollar funds with limited viable deals. Adenubi emphasized the importance of local players and funds operating within the market, focusing on ticket sizes ranging from 1 million to 10 million dollars. Looking ahead, the private equity sector in Africa is poised for continued growth and evolution. As the market dynamics shift and new opportunities emerge, investors and fund managers will need to adapt to navigate the changing landscape. By embracing diversity in sectors, exploring consolidation opportunities, and fostering the participation of local players, the private equity industry in Africa can unlock its full potential and drive sustainable value creation.