Africa Investment Heats Up As Pension Funds Stay Local

Africa Investment Heats Up As Pension Funds Stay Local

By Paulina Pielichata – From Pension & Investments

African private equity is having its moment in the sun, with pension funds on the continent ready to invest in their own backyard as investment banks continue to retreat from lending and domestic strategies mature.

Sources cited East Africa as “hot.” Countries such as Tanzania, Kenya, Ethiopia and Rwanda were mentioned as offering emerging opportunities in private equity, while Nigeria — whose attractiveness as an investment destination took a brief hiatus this year when its currency was crippled by the collapse in oil prices — also is back in vogue.

After a record wave of inflows in 2014, when sub-Saharan focused funds raised $4.5 billion globally, up from $1.8 billion in 2013, and maintaining a high level throughout 2015 at $3.8 billion, private equity inflows have slowed in the first quarter of 2016, according to Emerging Markets Private Equity Association. But while global flows are slowing, there still is an upward trend among domestic pension funds, making managers optimistic.

Jeff Schlapinski, director of research at EMPEA in Washington, believes that the downturn in the commodity cycle and currency volatility have made fund managers hesitant to act on opportunities in sub-Saharan Africa this year, choosing to delay the deployment of the capital they have already raised.

“However, in Q3 2016, an $80 million deal (made by a consortium led by African Capital Alliance and 8 Miles) with Nigerian biscuit manufacturer Beloxxi was completed, which could signify a turning point and bring private equity in Africa up again,” said Mr. Schlapinski. He said EMPEA has in particular seen private equity projects in the power sector on the rise.

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