FT report says optimistic outlook in store for African private equity industry in 2014

January 2
12:43 AM 2014

Except for South Africa, the private equity industry of the African continent is said to be relatively young and has its fair share of weaknesses. However, activity in private equity hotspots in Africa's western, eastern and southern parts has increased because of political stability, growth of infrastructure and growing consumerism, the Financial Times reported. This has given rise to a more optimistic outlook for the industry in 2014, the report said.

The report also stated that private equity was able to earn some solid returns for its investors last year. The private equity division of KPMG revealed that for 2013, the funds closed or are closing for Africa reached up to R160 billion or $15 billion. About R40 billion of this could be used in South Africa, the report added. This compared with the R15.4 billion gathered by South African funds in 2007. The report said the deployment of capital secured by private equity fund managers in South Africa is set to grow by the new year.

Early in 2013, the Ethos Fund VI closed with R8 billion, the report said. This was followed by Capitalworks, which announced that it had raised a total of R2.7 billion for its second fund. For its ICT infrastructure fund, Convergence Partners first closed with nearly R1.5 billion and is looking at raising R2.5 billion for its final close. Metier also said recently that it was able to gather R690 million for its Lereko Metier Sustainable Capital Fund.

South African Venture Capital and Private Equity Association or SAVCA Chief Executive Officer Erika van der Merwe told FT, "The industry is now in a strong position to provide equity funding for expansion and growth, across a range of sectors and regions."

In East Africa, increasing investment has also fueled the development of the sector. Deloitte's 2013 East Africa Private Equity Confidence Survey revealed that private equity funds have poured $475 million in Eastern Africa in 2012, representing a substantial increase from the year before, the report said.

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