2016 Was A Bad Year For Private Equity In Africa. Commodities Prices Could Turn That Around
Private equity investment in Africa fell 47 percent in 2016, according to a report at the African Private Equity and Venture Capital Association, which recently held its annual conference in Abidjan, Cote d’Ivoire.
The volume of African private equity funds committed dropped from $4.3 billion in 2015 to $2.3 billion in 2016. This is a function of the downturn in the continental economy as a result of lower commodity prices.
However, the future looks bright because of the recent upturn in the price of most mining commodities.
From African Business Magazine. Story by Neil Ford
The fall in African private equity investment could be a short-term blip. The African Private Equity and Venture Capital Association (AVCA) identified $3.8 billion in planned — but not completed — private equity deals in 2016, up from $2.5 billion the previous year.
A total of 919 deals were reported in Africa from 2011 to 2016, with a total value of $22.7 billion. AVCA was launched in Cameroon in 2003 and now has more than 130 members.
The utilities sector, including telecoms, attracted 46 percent of total deal value, making it the most popular target for investment. West Africa was the most active region, with 27 percent of the deals by value over this period, in comparison with just 5 percent in Central Africa.
Cyril Odu, the CEO at the African Capital Alliance, said, “increasing investor interest will continue to boost deal flow and intensify capital injections. As the 2016 Annual PE Data Tracker shows, private investment in Africa is developing at an exciting rate.”
However, there are always failures – or perceived short-term failures – in any kind of investment. Washington, D.C.-based Carlyle Group (one of the world’s largest and most successful investment firms with $178 billion of assets) invested $147 million in Nigeria’s Diamond Bank in 2014. Diamond’s market capitalization fell by 90 percent over the subsequent two years.
There is a trend of increasing private equity investment in Africa. On April 13, pan-African private equity firm 8 Miles LLP made an undisclosed investment in Blue Skies, a British fruit firm that operates in Africa. (London-based 8 Miles was founded by Irish punk rock singer-activist-businessman Bob Geldof).
Blue Skies supplies fruit juice and cut fruit across the U.K. and Western Europe from its operations in South Africa, Ghana and Egypt. The investment will allow the company to expand its operations, including its juice production in Egypt.
Doug Agble, a partner at 8 Miles LLP, said, “This is an exciting opportunity to partner with a highly successful founder and a top-quality management team who have built a business based on solid and unique foundations. We aim to support Blue Skies in their continued growth and help them develop their brand across Africa.”
On April 11, Investec Asset Management (based in New York City), Deutsche Investitions- und Entwicklungsgesellschaft and Avanz Capital (Washington, D.C.) completed the management buyout of 100 percent of SJL Group, which is a logistics operator connecting Morocco and Tunisia with Europe via the Port of Tangier.
Investec investment principal Gerben Dijkstra said, “The buyout of SJL represents our first private equity investment in Morocco, which we see as a very attractive market. In acquiring a market leader, with a high quality service offering comparable to global operators and led by an experienced management team, we are very excited about the opportunities for it to capitalize on the rapidly growing manufacturing sectors in Morocco and become a true regional leader.”
Just five days earlier, private equity fund manager Kibo Capital Partners (based in Mauritius and Kenya) invested in I&M Bank Rwanda.
Read more at African Business Magazine.