Private equity opportunities within Africa appear to be more and more attractive to investors in 2011. With further instability in the economic markets, institutional investors are increasingly looking towards emerging markets for better opportunities within private equity. Within the emerging markets, the private equity market in Africa is developing at a considerable pace, with opportunities in the region, due to under-developed financial markets, playing into the hands of investors who are eager to capitalize, making Africa one of the fastest growing regions in the world.
The H2 2011 Preqin Investor Outlook: Private Equity Report, which included the results of a study of 100 global investors in private equity funds, showed that 78% have an appetite for investing in emerging markets. In addition, 14% of investors with an appetite for emerging regions felt that Africa was presenting the best investment opportunities within emerging markets in the current climate.
Preqin’s Investor Intelligence database shows that Africa attracts LPs from all over the world. It currently tracks 1,637 LPs that have stated a preference for or previously invested in private equity funds that have exposure to emerging markets, a category in which Africa is included. More specifically, the database tracks 391 investors that state Africa as a particular geographical investment preference or have previously invested in funds targeting the region. 94 of these investors are based in MENA and rest of world, which includes other Africa-based investors, with 167 LPs with an appetite for Africa based in North America and the remainder headquartered either in Europe or the Asia Pacific region.
Of the investors monitored on Investor Intelligence that indicate an appetite for investing in Africa, foundations represent 14%, fund of funds managers account for 13%, banks make up 7% of the universe and 6% are government agencies. One investor in particular that sees Africa presenting strong private equity opportunities is the International Finance Corporation. The US-based government agency has shown an appetite for investing in Africa and has recently committed to Maghreb Private Equity Fund III which is a growth fund investing in SMEs in the North Africa region. The fund secured commitments from a number of LPs including Swiss Investment Fund for Emerging Markets (SIFEM), European Investment Bank and Africa Development Bank.