The volume of PE funds committed dropped by 47%, from $4.3bn in 2015 to $2.3bn last year. This is undoubtedly a function of the downturn in the continental economy as a result of much lower commodity prices.
However, the future looks bright because of the recent upturn in the price of most mining commodities. Moreover, this fall could be a short term blip, as AVCA identified $3.8bn in planned but not completed PE deals last year, up from $2.5bn the previous year. A total of 919 deals were reported in Africa over the period 2011-16, with a total value of $22.7bn. AVCA was launched in Cameroon in 2003 and now has more than 130 members.
The utilities sector, including telecoms, attracted 46% of total deal value, making it by far the most popular target for investment. West Africa was the most active region, with 27% of the deals by value over this period, in comparison with just 5% in Central Africa. North Africa proved of limited interest but it seems likely that investment here will increase in line with the upswing in security and political stability in the region
Cyril Odu, the CEO at the African Capital Alliance, said: “As the effects of rapid urbanisation, a resilient and adapting middle class and accelerating consumption patterns begin to take shape, increasing investor interest will continue to boost deal flow and intensify capital injections. As the 2016 Annual PE Data Tracker shows, private investment in Africa is developing at an exciting rate.”
However, there are always failures – or perceived short term failures – in any kind of investment. Carlyle invested $147m in Nigeria’s Diamond Bank in 2014 but Diamond’s market capitalisation fell by 90% over the subsequent two years. The director and head of research at AVCA, Enitan Obasanjo-Adeleye, said: “This is no flash in the pan; we now have seen strong and sustained PE investment in Africa over the past ten years.”
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