Private Equity Firms Prefer Africa as Investment Destinations

In a survey released last week, majority of private equity firms favor Africa as an investment destination over other emerging markets. Most of these firms are largely drawn to Africa by the potential earnings from the higher economic growth rate forecast for most countries compared with other developing and developed markets. The survey involved 48 private equity firms conducted by RisCura, an investment adviser specializing in emerging markets among the continent’s other venture capital associations. Rory Ord, head of RisCura’s private equity valuation business said that the results of the research show that 70% of institutional investors surveyed believed Africa is more attractive than other emerging markets. The survey confirms a similar finding by the Emerging Markets Private Equity Association (EMPEA) based in Washington whose members ranked Africa as the most popular private equity investment destination last year. With Sub-Saharan Africa attracting $1.6bn in private equity investment last year, EMPEA found out that 54% of the private equity fund managers surveyed and 49% of which were based in North America planned to begin or continue investing in sub-Saharan Africa over the next two years. Furthermore, Mr Ord of RisCura said that the survey found out that 85% of respondents planned to increase their exposure to private equity in Africa over the next 24 months. The survey responses indicate that private equity investors are not partial to any one region in Africa, but rather favour economic sectors. Given the continent’s growing middle class and increasing disposable income, the consumer sector is the most appealing. “This view is evident in recent deal-flow activity, which has favored assets positioned to benefit from a growing middle class and lively growth prospects,” Savca CEO Erika van der Merwe said. Industry, mining and real estate are seen as the sectors least attractive to private equity investors.