BY Richard Summerfield
Private equity’s interest in the continent of Africa has never been higher, according to a new report from EY.
The firm’s report , 'Private equity roundup Africa', notes that PE has spread across many of the emerging markets with vigour in recent years. Indeed, many developing regions, including Latin America, Eastern Europe, India and Asia have attracted considerable interest from PE groups. However, PE’s interest in Africa is particularly strong.
Fundraising on the continent trended higher in 2014 than in recent years, as investors sought exposure to Africa’s seemingly unlimited potential. The value of transactions conducted in Africa nearly doubled over the course of last year, as PE firms across the continent put billions of dollars to work following significant fundraising activities. Exits continued to gather momentum in 2014, achieving an eight year high.
The outlook for the industry in Africa looks particularly positive, although the continent is still battling with political instability, economic torpidity and mass poverty. However, the emergence of a burgeoning middle class and the rise of consumer culture will play a transformative role in the economic fortunes of Africa.
Much of Africa’s recent growth has been marked by development in a number of consumer-related sectors - most notably the retail and consumer products space, the financial services sector and the technology, media and telecoms industries. This diversification of industries has had a positive effect on employment. Though we are a way off Africa becoming an economic power, the recorded growth, and potential for further economic development across the continent, are very real.
Investors in Africa will have obstacles to overcome in the years ahead, but the interest of both domestic and international investors across a range of industries will go some way to plugging the investment gap Africa has suffered for decades.