Global private equity managers are ready to double down on their African investments

Investor confidence.
Investor confidence.
Image: REUTERS/Siphiwe Sibeko
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Global private equity investors remained bullish on their prospects in Africa in 2018, promising to increase their allocations and doubling down on their decade-long plans, a new study shows.

At least 76% of those surveyed planned to increase or maintain their provisions to African private equity over the next three years, while 53% anticipated increasing their allocation to the continent. Of those surveyed, 67% said they would consider investing in a first-time African fund.

Nearly two-thirds of investors also viewed Africa as more attractive for ventures than developed markets over the next ten years. Increased performance and diversification are part of what’s driving this preference, with almost half of the financiers expecting their returns to exceed more than 2.5 times over the next decade.

The new report, from the African Private Equity and Venture Capital Association (AVCA), draws from a survey with 60 limited partners from across the globe.

Private equity exits in Africa have steadily increased year-on-year for much of the past decade, weathering political uncertainty, weak currencies and the slowdown in growth in some of Africa’s largest economies. In 2016, players invested $3.8 billion in 145 deals across Africa up from $2.5 billion in 2015. And even as West Africa, especially Nigeria, continues to attract the biggest proportion of these monies, southern Africa’s attractiveness increased in 2018 from 35% in 2017 to 44% this year. Egypt has also risen as a popular option among non-African investors.

In relation to sectors, financial services and consumer goods continue to remain popular among investors. Technology has risen as the third most popular sector, compared with its position as sixth in AVCA’s 2017 survey.