Africa’s Maturing Private Equity Market: Trends Investors Are Watching

Africa’s Maturing Private Equity Market: Trends Investors Are Watching

More than 200 African private equity deals were reported over the past year. Almost a third of them were in South Africa, but the potential in Nigeria is mind boggling.

The transaction activity is expected to continue into 2017, with a good pipeline of deals already spilling over into the first quarter of 2017.

Collaborations between private equity managers, institutional investors and the companies they invest in mobilize capital from international and local sources. These fruitful partnerships build better businesses, create jobs and shape healthier communities, according to the Southern African Venture Capital and Private Equity Association (SAVCA).

SAVCA represents about 90 private equity and venture capital fund managers in Southern Africa, who collectively manage more than $13 billion in assets. At this week’s two-day 2017 SAVCA conference in Stellenbosch, around 200 industry industry players discussed industry trends and expectations for the private equity industry and investing in Southern Africa in 2017.

One trend is the notable exit activity as fund managers realize portfolio investments using a range of mechanisms, Daily News Bulletin reported.

Keith Woodhouse, partner at Hogan Lovells, saw an increased use of secondary buyouts as a way of exiting. “This demonstrates that the private equity market in Africa is maturing,” Woodhouse said. “It is also evidence of some private equity houses needing to achieve exits. This need to exit is typically the case where the funds are reaching the end of their life cycle or where there is a need to support future capital raises.”

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Lexi Novitske is the principal investment officer at Singularity Investments, a private investment office focused on Africa and North America, with offices in Lagos. She is responsible for managing investments in the firm’s Africa portfolio.

She talked to The Guardian about digital media trends she’s looking out for as an investor.

From The Guardian. Column by Lexi Novitske.

When a market boasts $3.8 billion in spend with a compound annual growth rate eclipsing 15.7 percent, I notice.

Growth of this magnitude happens with the maturation of market-moving forces: consumers, technology, infrastructure and governmental support. Essentially, the seed of marketplace success finally has the right soil to grow.

And that’s what makes the above figure so awesome, and frankly, appetizing.

In Nigeria, these billions spent refer to the entertainment and media market. Without exception, entertainment and media segments are rocketing up a hockey-stick growth curve and are forecast to continue among the top two fastest growing entertainment and media spend markets for the next half decade. More remarkable is that, according to PwC, the internet makes up nearly 50 percent of this spend.

Internet-segment spend was nearly $2 billion last year – with only 3 percent of Nigerians having fixed broadband access, and even then that access being centered in the largest metro areas. This means that multiples of billions in spending, with healthy growth forecast, is basically driven by mobile internet users. Digital content and the subsequent advertising and brand exposure are, for the first time, accessible by the majority of Nigerian consumers, on their mobile devices.

Showing no signs of letup and maintaining incalculable reach, here are the digital media trends I’m looking out for as an investor.

Global as a market

I’ve written before about Africa’s potential to boast more billion-dollar startups than anywhere else on the planet. Taking it a step further, I’ll wager that many of these success stories will exist as digital media plays. The requisite developed economy trappings (access to capital, infrastructure, education) that perennially inhibit massive scale are muted in the digital world.

Application and cloud delivery, with accessible markets in the billions, finally level the playing field.

Traditional content goes digital

The extinction of traditional media and its tried-and-true methods of information delivery seemed a sure thing with the dawn of the digital revolution. But, it didn’t die, it just got savvy. As Ogilvy Media Influence says, “Traditional media companies evolved from being in the paper business to being in the information business.” Instead of blunt campaigns with untargeted, non-personalized and limited segmentation, traditional media has wizened up – serving the right content, in the right format, to the right segment at the right time. Often digitally.

Empowering through Digital

As media delivery changes, digital enhancement has raised personal, civil, commercial and social empowerment to unprecedented levels. Connectedness, enhanced by digital, grows transparency and opportunities for education and awareness. If knowledge is power, then digital channels are the current.

Data and analytics to drive revenue

The rise of digital campaigns have allowed data on consumer behavior and market performance to become accessible for the first time on the continent. Obvious beneficiaries of this data are digital advertising companies, yet other companies are leveraging data to drive their bottom line.

The inevitable ongoing fixed broadband penetration and an anticipated 31 percent of mobile internet user rate growth, highlight what has become priority to me – and obvious to anyone logging into Facebook, reading the news, or instinctively sneaking a peek at an SMS over dinner: digital content, and the subsequent advertising opportunities are everywhere.

Read more at The Guardian.