Good returns outweigh high risk in African private equity investment
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African private equity investment has always been riskier than investment in other regions, but for those willing to invest long term and sustainably, the region provides opportunities that will outlast current economic shocks.
With much dry powder around for private equity transactions (almost $2.5-trillion was waiting to be deployed globally, Preqin reported last year), private equity investors are now studying African markets carefully to find good value opportunities in the region.
Due diligence has always been a crucial aspect of the investment decision and is expected to be more in-depth and last much longer after the pandemic. Private equity investors will, in addition to looking at a target country’s approach to governance and corruption, now also consider GDP, ability to deal with social issues and how all of that is affecting the population, economic growth and the interplay between them.
They will study policy and regulation, location, infrastructure and pricing. They will look at the impact of Covid-19 and government responses. In the short term, country-specific restrictions such as those on movement and travel may affect transactions and the ability to conduct on-the-ground due diligence and site visits.
Private equity investments in Africa differ from those elsewhere in the world in that they tend to require holding investments for longer than in developed markets, use less debt and improve corporate strategy and governance, investing in the growth of their investments. Returns on private equity transactions can also be far higher than in developed markets, and investors are known to play a catalytic role for much-needed investment in Africa.
ESG investing
Post Covid-19 (and in some cases under current circumstances), private equity investors with strong market positions will want to capitalise on the opportunities available in the most challenged sectors, such as retail, transport, energy, construction, hospitality and leisure. The oil and gas industry and noncore infrastructure sectors are also facing stress, producing opportunities for buyers. There are also opportunities in the sectors that have performed well during the pandemic, such as those in technology, health care and fintech.
Environmental, social & governance (ESG) investing has become a focus for investors in Africa. General partners and limited partners prioritise ESG elements such as energy efficiency, sustainability, carbon footprint, community involvement, workplace health, education, skills development and governance.
Few sectors will not be affected by the pandemic, and many will produce good opportunities for fast-moving private investors who have done their homework ...
With much dry powder around for private equity transactions (almost $2.5-trillion was waiting to be deployed globally, Preqin reported last year), private equity investors are now studying African markets carefully to find good value opportunities in the region.
Due diligence has always been a crucial aspect of the investment decision and is expected to be more in-depth and last much longer after the pandemic. Private equity investors will, in addition to looking at a target country’s approach to governance and corruption, now also consider GDP, ability to deal with social issues and how all of that is affecting the population, economic growth and the interplay between them.
They will study policy and regulation, location, infrastructure and pricing. They will look at the impact of Covid-19 and government responses. In the short term, country-specific restrictions such as those on movement and travel may affect transactions and the ability to conduct on-the-ground due diligence and site visits.
Private equity investments in Africa differ from those elsewhere in the world in that they tend to require holding investments for longer than in developed markets, use less debt and improve corporate strategy and governance, investing in the growth of their investments. Returns on private equity transactions can also be far higher than in developed markets, and investors are known to play a catalytic role for much-needed investment in Africa.
ESG investing
Post Covid-19 (and in some cases under current circumstances), private equity investors with strong market positions will want to capitalise on the opportunities available in the most challenged sectors, such as retail, transport, energy, construction, hospitality and leisure. The oil and gas industry and noncore infrastructure sectors are also facing stress, producing opportunities for buyers. There are also opportunities in the sectors that have performed well during the pandemic, such as those in technology, health care and fintech.
Environmental, social & governance (ESG) investing has become a focus for investors in Africa. General partners and limited partners prioritise ESG elements such as energy efficiency, sustainability, carbon footprint, community involvement, workplace health, education, skills development and governance.
Few sectors will not be affected by the pandemic, and many will produce good opportunities for fast-moving private investors who have done their homework ...
