An Eye on African Private Equity – March 2015

by Kathryn Sharpe

  • 30 Mar 2015
  • PE

Activity in Africa’s private equity market may currently be relatively low, but its status as an important emerging market to watch has increasingly piqued the interest of investors over the years. Strong rates of economic growth, high levels of urbanization and an increasingly middle-class population are but a few factors that contribute to the continent’s pull as an investment destination. This blog explores the private equity fundraising activity of Africa-focused vehicles – a testament to the significant levels of LP interest.

According to Preqin’s Funds in Market online service, funds targeting Africa collected an aggregate $3.2bn in 2013, the highest full-year figure since 2007. As we approach the end of the first quarter, 2015 has already surpassed this amount, having accumulated $3.4bn in commitments and implying a record amount of capital could be secured by year’s end if the pace continues. While this suggests a marked increase in appetite, we must note the small amount collected in 2014 ($1.8bn) is indicative of a sense of caution investors maintain, given the unstable environment created by recent conflicts and the Ebola crisis, which began at the end of 2013.

From 2010 to 2015 YTD, growth vehicles raised the greatest amount of capital ($5.2bn) of all types of Africa-focused private equity funds, which is unsurprising given the nature of growth equity investments and their suitability to emerging market economies. Despite securing only $916mn in 2010 to 2015 YTD, venture capital is the second most numerous Africa-focused fund type, with 27 such funds reaching a final close in the same timeframe, compared to 28 growth funds.

Helios Investors III is an example of a fund following a growth investment strategy and is the largest Africa-focused vehicle to have closed so far in 2015, closing on $1.1bn in January. This vehicle is targeting a broad range of industries including telecoms, healthcare, transportation, financial services and agriculture. The GP, Helios Investment Partners, has raised $2.3bn for four private equity vehicles over the last decade, and is headquartered in the UK but exclusively focused on Africa.

South Africa-based firm Acorn Private Equity is currently raising the largest Africa-focused fund, seeking $1.5bn for expansion/late stage venture capital opportunities. Half of the capital raised for this vehicle will target opportunities in South Africa, with a further 30% focusing on the Southern African Development Community and the remaining 20% on other sub-Saharan countries.

The recent growth in Africa-focused private equity fundraising points to a positive trend of investors recognizing the continent’s investment potential. It will remain worthwhile, despite the headlines of instability, to keep an eye on Africa. 

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