Private Equity activity expected to increase by 83% over the next 12 months – Deloitte

Johannesburg, South Africa (Capital Markets in Africa) :- The African continent is becoming an increasingly attractive investment destination for private equity players looking to access its high-growth economies and rapidly emerging consumer class. A survey by Deloitte, partnered by The Southern African Venture Capital and Private Equity Association, SAVCA, showed that the interest has been buoyed by oil and gas discoveries and a growing consumer class.

The expectation that emerging markets will generate growth has seen a number of new funds dedicated to investing in Africa. This is underscored by the recent announcement by the Dubai-based Abraaj Group, which oversees $9 billion across several emerging markets, that it had raised $990 million for its third Sub- Saharan Africa fund. Approximately 64% of the capital committed to the Abraaj Africa Fund III came from Europe and North America with institutional investors, pension funds and sovereign wealth funds accounting for 76% of the fund.

PE funds from the continent are also beginning to flex their muscles, both in Africa and other parts of the world. Brait’s purchase of an 80% stake in Virgin Active from Richard Branson’s Virgin Group for £682m ($1bn) is a recent example.

It is this growing appeal and international visibility of the African PE landscape that has prompted Deloitte to compile a comprehensive view of the asset class across the continent.

The Research by Deloitte provides key insights into how the asset class is developing in the continent’s major economic hubs. The Report breaks down these findings into 6 areas:

1. Market Outlook
2. Economic Climate
3. Deal Activity
4. Fund Raising
5. Exit Environment
6. Challenges ahead

Over the next twelve months, overall PE market activity is expected to Increase 79% in East Africa, 83% in West Africa and 67% in Southern Africa, owing to greater awareness of PE as an asset class as well as the ever expanding base of PE players.

This attraction is driven by strong macro-economic fundamentals, rising consumer spending from a growing middle class and improvements in political governance. Some respondents indicated that the constrained nature of debt financing could make PE a more viable option for companies looking to fund expansion.

PE activity is also expected to increase in the West African region. This is largely driven by sentiment in Nigeria, the continent’s largest and most populous economy. Nigeria’s importance to West Africa is underscored by its estimated 180 million strong population as well as the rebasing of its economy in April last year, which resulted in it overtaking South Africa as the continent’s biggest economy.

Although Nigeria’s PE market is still relatively immature compared to South Africa, its potential is enormous. Southern Africa however, has seen portfolio companies growing and new funds being raised.

Download the full Report at Deloitte Africa Private equity Confidence Survey

Source:  Deloitte and The Southern African Venture Capital and Private Equity Association, SAVCA