More than 90% of the capital raised by Private Equity comes from outside the continent, yet the value is created in the dusty, bustling markets of Africa. Doesn’t Private Equity in Africa similarly run the risk of become insulated from groundswells at the bottom of the pyramid – i.e. the consumers upon whom their investments depend? After all, most GP professionals learnt their skills in the investment banks of Johannesburg, Europe or New York. How do GP’s resident in the global capital markets of the world remain in touch with the reality of African markets?
Global financial markets have become extremely skittish about the prospect of a global trade war. The main protagonists are the world’s two largest economies, namely the United States and China. The populist base that helped President Trump get elected is largely viewed as the losers in the globalised world that crystallised after the World Trade Organisation’s founding in 1993. Meanwhile, the United Kingdom’s European Union (EU) membership referendum outcome in June 2016 reflected dissatisfaction by some constituents about the benefits of free trade and labour mobility within the EU. Thus, the gains of free trade in the developed world have been seriously questioned. It is, therefore, somewhat supremely ironic that the leaders of forty four African countries recently signed an agreement to create a free trade bloc, known as the African Continental Free Trade Area (ACFTA). There were high hopes amongst signatories of fast track implementation, possibly within six months, after being ratified by national parliaments. There are, however, two important omissions in initial membership, notably Nigeria and South Africa.
While 2017 only saw a trickle of divestments, some private equity firms nevertheless managed impressive sell-offs during the period. What is the outlook for exits in the coming months?
What contribution can Private Equity make to the financing of infrastructure in Africa? The issue was brought into sharp focus at the recent SuperReturn Africa Conference in Cape Town, South Africa, which brought together a number of experts to consider the current challenges and potential solutions. The scale of the task is immense, with World Bank research from 2017 highlighting that Africa’s urban population - which now estimated at 472 million people - may double over the next 25 years, and that $93bn may be needed to close the infrastructure investment gap. Securing the right infrastructure investment will clearly be vital in translating rapid urbanisation into sustainable economic development on the African continent.
RisCura has launched the 2017 private equity (PE) update of its Bright Africa report, providing a comprehensive view of PE investment across Africa. This research covers fundraising, transaction activity, pricing and investor focus. “The latest findings point to a favourable shift in PE deal sentiment in Africa,” says Head of Independent Valuations, RisCura: Heleen Goussard.
The path to robust data management remains an ongoing journey, though there is growing recognition among African investment firms that the time for transformation has arrived, writes Amit Bharakda, Sales Director, Eagle Investment Systems, a BNY Mellon Company
Africa’s funds industry may not have the scale or scope of those in North America or Europe (yet). But the markets are dynamic and evolving rapidly. To keep pace, asset managers will have to evolve too. And one key area of focus must be the efficiency and sophistication of their operational infrastructures.
The youngest of three daughters Refilwe Mekwa was born and raised in a small village in Limpopo by her single parent mother, a teacher at a government school and someone who naturally values education and the benefits it brings to people’s lives. Refilwe’s mother made many personal sacrifices so that she could send her daughter to an affordable private school that provided high quality education.
To reach our potential as a Continent we need unprecedented innovation and investment; core to which is the ICT sector and access to affordable, reliable broadband services. The developmental and economic benefits of internet access to economies and especially developing economies is well documented. Undoubtedly, internet access is a critical catalyst to bridging the gap on some of the social needs of the Continent be it in banking, education, government services, entertainment, health etc.
After registering the worst decline in over two decades, economic growth in Africa is showing signs of rebounding, with the continent’s aggregate growth expected to rise to 3.2% in 2018 and 3.5% in 2019. However, as was recently highlighted by the World Bank following their analysis of the state of African economies, improved infrastructure is a key requirement for stimulating this necessary growth. Africa’s critical requirement for core infrastructure, coupled with the increased development of private investment programmes, is driving a strong pipeline of opportunities in infrastructure investment.
Central banks in the developed world are contemplating an end to their dalliances with quantitative easing. Crucially, the US Federal Reserve announced its intention to commence balance sheet normalisation by ceasing to reinvest maturing principal of its bloated holdings of US Treasury securities and mortgage backed securities. Currently, the Fed’s balance sheet is 25% of US GDP. Normalisation will, therefore, require many years, but there will be important implications for the international cost of capital.
