February 28, 2014
Interviewed by: David Snow
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African Private Equity Roundup 2013

Michael Rogers of EY gives an overview of private equity deal and fundraising activity in 2013, as well as a snapshot of the economic growth across the continent that is driving private equity opportunity. Download the EY white paper on African private equity trends here.

Michael Rogers of EY gives an overview of private equity deal and fundraising activity in 2013, as well as a snapshot of the economic growth across the continent that is driving private equity opportunity. Download the EY white paper on African private equity trends here.

African Private Equity Roundup 2013

With Michael Rogers of EY

What was notable about African private equity activity in 2013?

Michael Rogers, EY:

The majority of the countries in Africa, over half of them, are growing by greater than six percent. In fact, in this past year Africa grew more quickly than Asia. Here’s a couple things of note that we saw there from a private equity perspective. First of all, over $3 billion of US dollars of deals were done in 2013. That was double what it was last year. There was also over $3 billion raised in new capital, which was almost double as well. A lot of capital going into Africa, a lot of interest by the private equity partners and private equity firms moving into Africa these days.

EY’s recent Roundup report on African PE finds that a remarkable number of African countries have reached “middle income” status. Why is this important to note?

Rogers: One of the things that I think is really important to investors around the world is that they understand the consumer growth in Africa and the economic expansion that’s going on there. 

In fact, our report shows that over half of the countries within Africa are now deemed middle income and that’s, of course, subject to metrics based in Africa.  

Because of this expanded consumerism in Africa, they’re going to be purchasing consumer products, of course, but also they’ll become greater users of financial services and that bodes well for other basic industries like the infrastructure, oil and gas, and natural resources. 

Back to deal activity – did Africa see some comparatively large PE-backed acquisitions in 2013?

Rogers: We saw over almost 100 deals last year, 98 deals in this market last year totaling about 3.2 billion US dollars. That was really interesting because it was literally almost twice what was done the year before. We’re really seeing a ramp up in that trend. Along those lines, we’ve seen some big players come into the market like Warburg Pincus who made a deal in the energy space and also another fund, Abraaj, that did an acquisition in the consumer product space in Ghana. 

Do you see a growing diversity among fund managers targeting Africa?

Rogers: There are a number of small funds that are dedicated locally and then you have some targeted funds that are focused on emerging markets around the world. On top of that, you have a couple of funds, larger funds like Carlyle and Abraaj who are global players that are raising capital specifically to be invested in Africa. On top of that, what’s sometimes missed in the numbers is that many of the global funds that are out there have global disposal for their funding so they can do transactions in any market. The deal or the fund may have been put together in New York but they can invest in Africa. It doesn’t necessarily show up as an Africa specific fund.  Those monies are being put to work in Africa very aggressively.

Despite this growth, what headwinds might African PE face in the coming months?

Rogers: Africa’s been on a nice trajectory here the last few years, but they are subject to all the frailties that emerging market economies sometimes run into. A couple of things that we’ve seen in that direction: First, FDI has slowed this last year, 2013 versus 2012, and in fact, it reached a peak in ’07.

Also, the fed taper and some of the announcements by the policy setters in the United States and other central banks around the world have caused a little bit of a ripple effect around the world. That has caused, I think in some ways, emerging market economies to at least pause.

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