Penetration and fundraising for Africa-focused funds is continuing to grow rapidly in sub-Saharan Africa. The focus is turning more towards regional hubs like East Africa, which is becoming increasingly attractive. Kenya, as the region’s financial hub, remains a key gateway country for investors that are interested in neighbouring countries such as Ethiopia, Uganda and Tanzania. As governments in East Africa continue to roll out major infrastructure plans, we believe the region will remain a centre for investment activity.
East Africa has a healthy investment pipeline with the base of investable companies certainly increasing. Infrastructure, telecoms and retail provide strong investment opportunities given the burgeoning middle class. We expect to see more deals in the oil, gas and related services sectors in the not so distance future. We are also seeing more investors competing for a relatively small number of ‘big ticket’ deals each year.
As we continue to build our infrastructure, the region will remain an attractive investment destination. The sustained growth in consumerism continues to play a critical role in the development of the economies in the region. Accordingly, we will continue to see investments taking place in high growth sectors linked to the rising middle class.
Healthcare and education and fast moving consumer goods remain attractive investment opportunities as more people reach middle income status. In November we witnessed a US$6.5-million capital injection into Nairobi Women’s Hospital by Abraaj and Swedfund, supposedly the “largest single foreign direct investment in healthcare this year” according to online database and analysts Africa Assets. Coupled with this, we have seen several deals finalised in those sectors from investments made by Fanisi Capital into Kenya’s Haltons Pharmacy, to Catalyst Principal Partners acquisition in the FMCG sector of a stake in the Yes Brands in Ethiopia earlier in the year. Abraaj acquired stake in Uganda’s Vine Pharmaceuticals at the start of the year.
Real estate continues to beckon investors and capture attention. Leading this is pan-emerging markets private equity firm Actis with its development of Garden City Mall off Thika Superhighway. The Mall promises to be the largest of its kind in East Africa, which gives an indication to the continued growth being seen in the region’s retail sector particularly in Kenya. Indigenous investors like Britam and Centum are also looking at real estate plays having announced proposed developments in or around Kenya’s capital Nairobi.
Given the nascent stage of the industry, entrepreneurs rarely seek out private equity as a source of capital. Institutional sources of local capital, such pension funds and insurance companies, have not invested in the private equity asset class unlike their counterparts in more developed markets. Private equity players thus need to continuously educate stakeholders on the growing sector and its impact on developing economies.
EAVCA was as a result of this, established to represent the industry in East Africa and provide a “voice” for industry players to raise awareness and engage on regional policy matters, with a mission is to “provide authoritative knowledge and information critical to its members and the development of the industry in East Africa’s nascent PE market.” EAVCA, driven by regional players to promote regional investment and unite the industry under one voice, will create in the medium term a framework which will support the industry’s fundraising efforts globally, regionally and at a local level.
We believe EAVCA, as a collective body, is well positioned to provide leadership in awareness building, to benefit and support investors.
