Foundations Investing in African Private Equity

by Bogusia Glowacz

  • 17 May 2011
  • PE

Foundations are important investors in Africa, with Investor Intelligence indicating that they represent 11% of investors in the region, approximately the same proportion that they make up of limited partners in private equity globally. Foundations typically make investments with the objective of making social, political and economic impacts, but they also seek strong investment returns.

Preqin recently interviewed a sample of 34 foundations with an exposure to emerging markets in order to determine their attitudes towards Africa, which has been attracting increasing interest within the private equity industry recently.

Respondents with prior experience of investing in Africa have shown an overwhelming enthusiasm for investments in the region, while those less experienced firms cited caution and lack of knowledge as the main reasons for not entering African private equity. Among those with no previous experience in Africa, one foundation stated it preferred to continue investing in the emerging markets of Latin America and Asia as it does not want to be the "first kid on the block.” Others cited political instability, particularly in North Africa, as a reason for not looking to private equity in the region.

In terms of future plans, foundations are expected to remain important contributors of capital to private equity funds over the next year. Preqin learnt that nearly a third of the foundations are below their target allocation and approximately 40% of the foundations surveyed want to make their next commitment to a private equity fund in 2011. A further 9% are set to commit to new vehicles in 2012.

However, many of those foundations, though positive about opportunities in Africa, feel it may still be another few years before they actually begin making investments in the continent. GPs will, therefore, need to make an additional effort to educate foundations about the opportunities offered by the African private equity market in order to attract capital from those more reluctant investors in the future.

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