Two African economic giants, South Africa and Nigeria, lead other countries on the continent in attracting US$1.1 billion private equity (PE) finance last year, according to a survey carried out by KPMG, a private consulting firm, based in Nigeria’s commercial city of Lagos.
Quoting the survey, the private Guardian newspaper Monday said though Africa’s private equity (PE) landscape is uncharted and at its infant, it is growing steadily and giving good returns.
“Africa is now viewed by PE houses and fund managers as a priority investment destination. As growth in other economies have slowed in recent years due to the 2008/9 recession and current crisis in the Euro zone, investors have been looking to emerging markets and economies that will provide higher return rates and Africa is continuously proving its business case for investment,” Mr. Dapo Okubadejo, partner in charge of Corporate Finance and Financial Advisory Services at KPMG Nigeria, said.
The survey revealed that about 25.7 billion rand (US$3.03 billion) in PE fund from Africa was returned to investors in 2011, up from R18.1 billion in 2010.
Mr. Okubadejo said Africa is currently one of the fastest growing regions in the world.
“We are seeing growing interest and activity from both international and African-based PE investors, in raising funds and targeting a range of markets and investments opportunities – including energy and natural resources, infrastructure, consumer goods, financial services and the entire agriculture value chain for instance – that capitalise on Africa’s growth opportunity,” he said.
According to the International Monetary Fund (IMF), by 2015, seven of the world’s top 10 fastest growing economies are expected to be in Africa and gross domestic product (GDP) for the continent is expected to grow to US$2.6 trillion by the year 2020.
South Africa is where about 40-50 per cent of all Africans PE funds are currently invested, followed by Nigeria.
The KPMG official said while some investors have made direct investments into new and uncharted regions or countries, more cautious PE houses and fund managers have used their existing investments and portfolio companies in South Africa, to springboard their investments into the rest of the continent.
“Whenever we speak with investors or potential investors about Africa, we always advise that Africa is about having the right risk-versus-reward approach.
“It is true that Africa faces many risks and challenges ranging from weak infrastructure, government bureaucracy and weak legal and regulatory framework especially the judicial system, but with a long term investment horizon, the risks can be broadly evaluated against significant growth potentials and investment incentives available to investors in many African countries,” Mr. Okubadejo assured.