Private equity firms turn to Africa
19 October 2011

Private equity funds are expected to play an increasing role in investments flows into Africa in the next 12 months as they seek new growth opportunities outside the depressed markets of developed countries, according to Brian Marshall, Director of Diversified Lending and Leverage at Standard Bank Group. 

Mr Marshall says an increasing number of private equity firms are raising capital to invest in sub-Saharan Africa investment strategies and scouting for deal opportunities. 

He says Standard Bank Group has been receiving a number of enquiries from several private equity firms seeking partnerships with financial institutions with sub-Saharan Africa presence. 

Standard Bank Group has recently been involved in some of the biggest deals involving private equity firms. Earlier this month it acted as debt coordinator and lender in the Actis-led acquisition of vehicle tracking company Tracker. Standard Bank Group also acted as co-debt underwriter in the Brait restructure and acquisition of stakes in Pepkor and Premier. 

Other notable recent private equity deals involving Standard Bank Group include the acquisition of a stake in IHS (Nigeria) by a consortium of private equity investors and tower portfolios in Ghana and Tanzania by Helios Towers. 

Although funds available to invest in Africa are still relatively small when compared to global funds and other emerging markets, an increase will be good for Africa as it will provide local firms with much needed capital. 

According to EMPEA, an industry body, funds raised for sub-Saharan private equity strategies totalled US$1,499-million in 2010 up 55% from the US$964-millio raised in 2009. The EMPEA study shows that emerging markets, and sub-Saharan Africa in particular, are claiming an increasing share of private equity funding raised globally. 

Mr Marshall cites global private equity firm Carlyle's announcement earlier this year of the launch of its sub-Saharan Africa Fund and the recent acquisition by CVC of a controlling stake in Virgin Active as an indication of the interest by large international private equity funds in the region. 

Carlyle, which has about US$17-billion worth of assets under its management in emerging markets, more than US$106-billion globally, and who is actively looking for assets in Africa, said the sub-Saharan Fund will be managed from Johannesburg and Lagos. 

Standard Bank Group has established a team to conduct buyout and growth capital investments in Sub-Saharan Africa. Furthermore Helios Investment Partners, a leading Pan African fund, recently announced the closing of their second successful fund which raised a total of US$900-million in commitments from investors. 

"Opportunities in emerging markets in general and sub-Saharan Africa in particular are expected to fuel pipeline of deal activity in the next 12 months. We are already seeing through our presence in Africa a flurry of activity on the continent from private equity firms that are increasingly showing an interest to invest in sub-Saharan African assets. Africa has turned into the place to be for many investors seeking growth markets," says Mr Marshall. 

"This should be good news for the growth of Africa's private sector and is happening at a time when many companies are expanding and in need of capital to fund that growth as well as finding efficient ways to manage their businesses. Private equity is all about enhancing efficiencies in business, taking them to the next level of growth and governance, and delivering solid returns to investors in the process." 

Mr Marshall's comments comes as new deal opportunities, especially in developed countries, have been showing signs of drying up from the latter part of 2011 because of the on-going economic slowdown and sovereign debt crisis in the eurozone. 

The global economic uncertainty and market volatility are spurring the renewed interest in Africa because of its expected higher GDP growth rates. According to the IMF, the sub-Saharan Africa region is expected to achieve real GDP growth of 5.9% in 2012, well ahead of most developed economies. 

"The combination of accelerating and diversified economic growth, favourable demographic trends, substantial infrastructure requirements and improved macroeconomic and political stability offers a compelling investment thesis for investors in private equity. Furthermore, private equity investment in the region is underpenetrated relative to other emerging markets and sets the scene for an increased level of activity on the continent." 

"Consequently, we have seen an increasing level of activity from local and international private equity funds which have shown a lot of interest in African assets." says Mr Marshall. 

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