From Financial News

When Kohlberg Kravis Roberts invested roughly $200 million in a rose farm in Ethiopia this summer, many in the market were surprised.

The investment itself made sense – Afriflora grows more than 700 million flowers to export to Europe each year, making it an important part of the east African nation’s cut flower industry – but large private equity deals outside of South Africa, Nigeria and Kenya remain rare in sub-Saharan Africa.

Kayode Akinola, a director at KKR, said: “Fewpeople expected us to make our first African investment in Ethiopia. But when you look at Ethiopia, you realise its scale, its population and its potential, you can see some of the attractions.”

KKR is not the only big buyout firm to notice opportunities beyond Africa’s main economies. In January, Carlyle Group and Investec Asset Management teamed up to invest in J&J Transport, a logistics company in Mozambique, while in 2012 Blackstone Group commissioned a hydroelectric dam in Uganda.

But the major economies still dominate. The value of private equity deals in Nigeria, Kenya and South Africa in the year to date makes up 82% of the value of private equity deals across all of sub-Saharan Africa, according to Dealogic. Three quarters of sub-Saharan Africa private equity deals over the same period were done in those three countries.

Dushy Sivanithy, a principal at private equity investor Pantheon, said: “The reason people spend so much time in Nigeria, South Africa and Kenya is because they are scalable and sizeable markets.

“Once you start going down to other markets, you’ve got to find businesses that can take the kind of capital we’re talking about. But some of the local firms have been investing successfully right across the continent for a long period of time. KKR’s recent investment in Ethiopia is evidence that [firms] are willing to invest in other markets. We know some [firms] are currently looking at opportunities in Mozambique, Ghana and even Zimbabwe now.”

Some emerging markets-focused private equity firms are now looking to open offices in some of these less-developed economies.

Helios Investment Partners and the Abraaj Group are both considering opening offices in Ivory Coast, which will act as platforms to capture deals in French-speaking Africa, according to the firms.

Abraaj is also considering opening offices in Ethiopia and Angola and setting up teams there in the next three years.

Read more at  Financial News