EMPEA Insight: Sub-Saharan Africa

Sub-Saharan Africa has emerged from a once overlooked region to an increasingly attractive destination for private equity investment. In 2007, Sub-Saharan Africa funds raised US$2.3 billion, falling just slightly from US$2.4 billion raised in 2006. During the fi rst half of 2008, Sub-Saharan Africa funds had already raised US$1.3 billion, up from US$592 million during the same period in 2007.

South Africa, which had been the focus of 50% of funds raised in 2006, accounted foronly 24% of the total in 2007. This drop was partly due to the timing of multiple large South African fund closings in 2006, but also refl ects the rising interest in other Sub-Saharan African markets. Capital raised for investment beyond South Africa—Pan-African funds,Sub-Saharan regional funds, and country-dedicated funds focused on other markets—grew 50% over the same period, rising from US$1.2 billion in 2006 to US$1.8 billion in 2007. This increase is explained by growth in funds focused on sub-regions such as West or East Africa, as well as an increase in the number of pan-African funds in 2007.

Notable improvements in the economic and political environments across a number of countries are being refl ected in changing investor attitudes about risk in Africa. LPs responding to EMPEA’s 2008 Survey of Institutional Investor Interest assigned a risk pre- mium to Africa of 6.7%, down from 8.9% in 2006—a lower premium than that assigned to Brazil and Russia and equivalent to the premium for Latin America.

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