Keeping Your Business in Mind

East Africa sees a marked increase in Private Equity (PE) activity

The East African region has recorded a marked increase in the number of PE funds looking to invest in the region from 72 in 2016 to 97 in 2018, according to a new report released by KPMG and the East Africa Private Equity and Venture Capital Association (EAVCA).

In 2017 and 2018, 84 PE-backed deals were reported at an estimated value of USD 1.4 billion.

Speaking during the report launch EAVCA Executive Director Eva Warigia, noted the region recorded a 12% increase in the amount of funds sourced from the domestic market largely driven by participation by pension funds.

“Local participation by pension funds is one way to mitigate against the risk attached to investing in Africa.”

Noted Eva Warigia, Executive Director at EAVCA.

“Participation of pension funds in private equity investments is improving access to capital for small businesses whilst enabling the funds to tap into new sectors for their portfolio diversification,”

Ms. Warigia added. 

The region’s inbound M&A has been boosted by the emergence of Ethiopia as a key investment destination buoyed by its population size and positive growth in the manufacturing, agribusiness and FMCG (Fast-Moving Consumer Goods) sectors.

“A total of 190 PE-backed deals in East Africa have been reported over the period 2007 to 2018 with an estimated value of over USD 2.7 billion. In addition, the average number of deals reported per year increased to 42 per year for the period 2017 to 2018 compared to 18 in 2015 to 2016,”

said Sheel Gill, Director, and Head of Strategy and Deal Advisory at KPMG.

Overall, Kenya reported the highest number of reported deals at 61 in the 24 months to December 2018 followed by 13 in Uganda, five in Ethiopia, three in Rwanda and two in Tanzania. While Kenya maintains the lead by PE deal volumes and values, dedicated funds in Ethiopia as well as divergence from traditional investments (such as agribusiness) in the East African provides new opportunities for varied investment sectors and stages.

The Survey was unveiled during the fifth annual PE conference held in Addis Ababa, Ethiopia last week. The forum organized by EAVCA brings together PE fund managers operating within the region to discuss key themes such as challenges facing the sector and advocacy for change. The deliberations are key in helping drive policy at both regional and national level and to promote ease of doing business across East Africa.

Whilst globally PE funds raised has increased over the period 2017 and 2018 by 25% to USD 1.6 trillion, there has been a decreased level of fundraising for Africa by 15% to USD 5.1 billion and East Africa by 18% to USD 0.6 billion. This is attributable to the challenging fundraising environment.

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