African Private Equity Investments Fall In 2015 As Big Deals Dwindle

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Written by Kevin Mwanza

Africa’s Private –Equity sector experienced tough times last year with transactions hitting the lowest it has ever been in three years, as the number of large deals dwindled.

According to African Private Equity and Venture Capital Association (AVCA), a Pan-African industry body that facilitates private investment in Africa, private-equity deals worth over $250 million fell last year compared to 2014, resulting to an overall fall from $8.1 billion to $2.5 billion.

London-based AVCA said the value of private-equity deals raised a total of $4.3 billion in 2015, the highest since 2010 and higher than the $1.9 billion collected in 2014, as larger funds closed during last year.

South Africa’s portion of deals fell to 15 percent, down from 24 percent the previous year, while West Africa has remained stable at 25 percent over the last five years, Bloomberg reported.

According to AVCA, the stability in West Africa was proof of increased private-equity investment activity in other regions of African outside Southern Africa.

Over the last decade, private equity has significantly grown in sub-Saharan Africa from less than US$1 billion in 2009 to over US$4 billion in 2014. (Ghraph: thehabarinetwork.com)
Over the last decade, private equity has significantly grown in sub-Saharan Africa from less than US$1 billion in 2009 to over US$4 billion in 2014. (Ghraph: thehabarinetwork.com)

The association said stability in West Africa and East Africa will ensure that the regions remain attractive for investors in the private-equity sectors in the foreseeable future.

The recent fall is a major blow to the industry that had experienced sound growth, with a total $16.2 billion raised since 2010.

Consumer driven industries such as food production and beverages remain the key targets of private-equity transactions and other sectors such as energy, real estate and infrastructure remain largely untapped, added the association.

The sectors that saw increased Private-equity investment in 2015 include information technology, health sector and commercial and professional industries.

The fall in private-equity deals has been blamed on challenges facing economies across the continent such, as currency depreciation, collapsed prices n oil and other commodities, a slowdown in China and a volatile global economic environment.

Dorothy Kelso, director of research at AVCA, was optimistic for private-equity deals to be made in 2016, saying that despite the challenges, the sector had shown resilience and expected more investors to show interest in real estate and energy sectors.

AVCA further said that its Private-equity tracking system has shown huge interest by investors to explore the untapped market in Africa through private-equity funds.