Sub-Saharan Africa
While South Africa has led the industry’s development in the region, private equity has since flourished throughout Africa, with funds raised topping US$4.7 billion in 2006–2007, versus a total of US$3.5 billion 2001–2005.
EMPEA’s LP Survey reveals that institutional investor interest in Africa has grown dramatically, with 52% of LPs surveyed in 2008 predicting they will be investing in Africa in five years’ time versus only 4% investing there in 2006.Investors indicate that risk premiums assigned to African PE have declined, falling from 8.9% in 2006 to 6.7% in 2008.
Africa’s private equity industry first took shape in South Africa in the late 1980s and early 1990s, with the emergence of fund managers tapping into a swell of multinational divestments and MBOs towards the end of the apartheid era. The South African industry’s roots were well established when Sub-Saharan Africa’s first private equity wave began in the mid-1990s. Development finance institutions such as the IFC, CDC, and FMO catalyzed the industry by backing first-time funds investing beyond South Africa.These veteran firms subsequently raised a series of successor funds—including some of Africa’s first US$1 billion-plus funds—and spawned a new generation of PE talent helming debut funds across the region.
South Africa accounts for the majority of activity in the region, drawing over 40% of all funds raised and 70% of investment to date. South African private equity reached a new milestone in 2007, with multiple investments of more than US$1 billion. In 2008, several South African managers are raising funds with broader Southern or pan-African investment mandates.The balance of the African subcontinent is highly fragmented—roughly 80% of countries have fewer than 20 million inhabitants and under US$20 billion in GDP. Managers investing outside of South Africa therefore tend to target sub-regions such as West or East Africa with multiple culturally and economically linked markets, or alternatively focus on larger standalone markets such as Nigeria.
Additional Resources:
EMPEA Research
(Available exclusively to EMPEA Members)
- QR South Africa feature (2005)
- QR Sub-Saharan Africa Feature (2007)
Members, please login here to access the files.
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