The Private Equity (PE) industry remains in a period of rapid evolution. Globally, PE firms are changing how they do business — having a rapid expansion of PE across the emerging markets.
Mainly in Africa, the PE funds invest through a partnership between the management, family owners and entrepreneurs to foster a company’s growth. Their fundraising for investments in Africa has increased and the interest in the region continues to increase, driven by a number of the trends below:
• The rise of the middle class. According to The World Bank, the poverty rate in Africa has been falling by approximately 1 percentage point a year since 1995 and the proportion of Africans living beneath the poverty line has been reduced.
• Demographic growth.
• Low Private Equity funds penetration.
These are some of the reasons why investors see significant long-term potential in the region.
Most investors are aware that Africa’s investment opportunities go well beyond commodities. Africa’s recent growth has been marked by development and growth across a range of consumer-related sectors, including RCP (retail and consumer products).
Perhaps most importantly, PE firms bring to the table far more than just the capital needed to expand the companies. These funds can help them to articulate and execute a well-defined strategy that brings to bear significant operational expertise, financial discipline, and good governance. While volatility will remain an ever-present feature of the African investment landscape, those firms with local market expertise, broad networks, and market connections, and an ability to add value through the value chain will be well-positioned to benefit from one of the most exciting opportunities in the global economy.