Private equity funds inclined to be inventive

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“Private equity fund managers are very creative about how they look to exit. So it’s not always on the stock market, they look to sell to trade-buyers, to private investors or sometimes, to other private equity firms,” Osibo, an analyst from the Africa Venture Capital Association (AVCA) told CNBC Africa on Monday.  

According to the AVCA African private equity funds have outperformed US venture capital over the last decade. Private equity investors closed three billion dollars’ worth of deals in Africa in 2011.

That amount is continuously increasing as the continent promotes a promising environment for the fund type.

“We’ve seen the levels of investment into Africa increase and we’ve seen that grow steadily. In 2012 it’s estimated that 1.4 billion dollars was raised for funds in and we expect that trend to continue,” said Osibo.   

Private equity investors are seen to be very innovative and he specified that a key element to that is the different methods an investor would incorporate to lessen risk.

“Before they go in they look at the company, make sure that due diligence is done extensively but they also instigate what we call environmental social governance issues – they tackle those. They mitigate those risks, for example, making sure there’s enough safety in the mines, innovative technologies are deployed to create value,” he explained.

The details and diversity of each country also presents a range of opportunities for private equity investors.

“Private equity investors are very savvy about the look and the demographics but beyond that they also have teams that are analysing the country and looking for opportunities constantly. You can see this reflected in the returns that private equity investors have deployed over the years,” said Osibo.    

The AVCA identified financial services as the most active sector in Africa, driven mainly by consumer growth.

“Traditionally we’ve seen a lot of activity in the financial services sector, in manufacture, industrials and that trend is continuing. Added to that we’re seeing a lot more involvement in the agriculture space, fast-moving consumer goods, we’re seeing specific funds being raised in healthcare and technology,” he concluded.