Africa’s infrastructure deficit an opportunity for PE investors

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The Southern African Venture Capital and Private Equity Association (SAVCA) believes that private equity investors, with their appetite for risk and ability to mobilise a variety of other forms of capital are ideal partners to help fund the infrastructure gap.

“Private equity funds from various regions – including Southern Africa – are funding infrastructure projects across sub-Saharan Africa, in the energy, transport and ICT sub-categories,” said SAVCA chief executive, Erika van der Merwe.

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

She also stated that investment into African infrastructure offers compelling exposure to African growth, while simultaneously helping to drive that growth.

“Unlike performances in other regions, infrastructure assets in Africa still offer private equity-style returns, and moreover enable private equity to invest in scale on a continent where there are limited investment opportunities of sufficient size,” van der Merwe said.

According to SAVCA, the industry body and public policy advocate for private equity and venture capital in South Africa, inadequate infrastructure is the biggest single constraint to Africa’s development.

Estimates by the World Bank suggest that the continent needs to spend around 90 billion dollars per year to bridge this deficit.

“Private equity investment in Africa can serve as a catalyst for development on the continent, in a way that fosters the achievement of targeted and specified developmental goals,” said van der Merwe.

“Growth prospects are enhanced if infrastructure is made more efficient and can better support the flow of economic activity.”

(READ MOREInfrastructure still Africa’s biggest problem)

The 2014 SAVCA-KPMG Private Equity Industry Performance Survey indicated that of the 162.2 billion rand in assets under management – committed capital plus investments – by its members in 2013, around 38 billion rand is from funds with a dedicated infrastructure mandate.

“Moreover, because this asset class entails equity ownership, the fund manager has influence and can define and shape the philosophy and principles by which the funded organisations and projects operate,” van der Merwe added.

“Through its growing participation in African infrastructure, private equity will continue to demonstrate its capacity for functioning as a force for good.”