What is driving private equity funds into Africa?

by Trust Matsilele 0

Africa Private Equity and Venture Capital Association shows that the total value of private equity funds on the continent is on the rise, from US1.9 billion dollars in 2014 to US4.3 billion dollars in 2015.

Alex-Handrah Aime, Managing Director, ECP told CNBC Africa that the growth and the total private equity capital raised was a reflection of western markets and western investors paying attention to Africa and recognising that markers have developed and diversified.

“New investors are entering private equity space compared to a few years ago. The markets are now volatile and this is affecting a lot of countries. The African continent should not be treated like a single country but as 54 different countries,” she added.

She also warned against investors viewing the region as a single geographical block.

“Issues affecting South Africa are dissimilar with issues affecting East Africa and other regions.”

Danladi Verheijen, Managing Director, Verod Capital said the rest of the world was slowing down and Africa had become the new frontier with the GDP growth at the top compared to other peers.

“In the short-term investors will be hesitant with regard to micro-economic climate. We have just closed a fund which demonstrates investor appetite in the long term,” he said.

“African GDP growth is faster than the rest of the world, there is also a growing demographic boom that is about to happen. This will make the region a huge consumer base, [part of the reason driving private equity funds into the region].”

Dorothy Kelso, Director of Research at the African Private Equity and Venture Capital Association said there was an increase of institutional investors in Africa.

“In 2016 we are likely to see lots of large funds closing which might see fundraising going down. This reflects fundraising cycle and not necessarily investor appetite,” she argued.

“The consumer driven story for private equity is still there, rising urbanisation and increasing middle class which are some of the positive factors.”