Private Equity in Africa

During the past few years, Africa has attracted increasing amount of private equity investments. In 2011 private equity investors closed USD3 billion worth of deals in Africa, up from USD890 million in 2010. In 2010, Sub-Saharan Africa accounted for 6% of total emerging markets private equity investment, up from only 3% in 2007. Currently, around 200 equity investors are actively involved on the African market. Beyond traditional development institutions and institutional investors, more global frontier investors are exploring opportunities in Africa, seeking to diversify risk, improve efficiency, and unlock value. Currently the bulk of the equity funds attracted to Africa are ‘specialized funds’ with focus on natural resources, infrastructure and renewable energy sectors. However, funds targeting other sectors, principally those driven by the growing appetite by Africans for quality consumer products and services, are poised to be the main drivers of private equity funds to the region in the coming years. With the global financial crisis that has sharply affected the private equity industry in developed economies, Africa is likely to remain an important market for foreign as well as local private equity investors.

Figure 1 below shows the significant increase of private equity’s fundraising in Sub-Saharan Africa (SSA) from 2006 to 2008 before halving in 2009 as a direct consequence of the global financial crisis. The financial crisis had a more pronounced impact on South Africa’s (SA) private equity market, with inflows declining significantly in 2009. Equity flows to the continent rebounded in 2010 and grew sharply in 2011. However, the South African market has remained in distress, overshadowing the continental recovery.  Nonetheless, prospects in other emerging markets in Africa remain favorable.

Stock exchanges and African growth

 Days before Facebook became a public company on 18 May, the hype behind the social network giant went into overdrive. Investors salivated over a rare chance to make quick profits. The 900-million plus fans who had turned Facebook into a global giant wondered publicly what was in it for them.

In the event, Facebook’s crowning achievement as a public company was an anticlimax - and even almost turned into a disaster. Yet the flotation showed the twin power of stock markets: an ability to raise capital for business expansion (a massive US$16-billion for Facebook), along with a potential to destabilize economies.

With African stock exchanges becoming important sources of investment capital for large corporations, Facebook’s experience has revived the debate on whether exchanges are capable of promoting economic growth. If such practices could happen on the world’s biggest exchanges, critics ask, how can Africa’s fragile economies withstand the whims of markets?

Africa to foreign investors: We're open for business

Squeezing the poor for the sake of corporate profit? Or providing vital jobs and incomes? Whatever your view of foreign investors, analysts believe that business will be essential to African development.

With Africa’s population likely to double in the first quarter of this century, the private sector may be the only sector able to match this growth with precious jobs. In Africa, one job goes a long way towards protecting a family or community, as Africa Progress Panel member and former Nigerian President Olusegun Obasanjo told a recent conference of investors ahead of this week’s UN General Assembly meeting.

Besides, many issues confronting the African continent can only be resolved with private sector involvement. Only the private sector, for example, has the know-how to build power plants that will reduce Africa’s enormous energy shortages. Fortunately, foreign investors are increasingly keen to invest in Africa, because, as stated in our policy paper, “Africa – Investment Ready”, this is a great time to get involved.

Ghana’s rising economic fundamentals fetches it a B+ rating by Fitch Ratings

Ghana has been rated B+ by the International rating agency, Fitch Ratings, which cited the country’s robust economic performance and strong growth outlook.

A statement issued by Fitch Ratings, London, on September 21, 2012 also acknowledged Ghana’s good governance record and favourable business environment as factors underpinning the country’s B+ rating. The international agency “affirmed Ghana’s long-term foreign and local currency Issuer Default Ratings (IDR) at B+ with a stable outlook and short-term foreign currency IDR at B. The agency has also affirmed the country ceiling at B+”.

Ghana’s ability to maintain its rating at a ceiling of B+ attested to good governance and demonstrated its capacity to repay external and domestic debt liabilities, thereby giving confidence to investors accessing sovereign debt opportunities in Ghana.

Fitch Ratings, which forecast Ghana’s growth at an average of 8.6 per cent over the next three years, projected the country’s growth to be boosted by rising oil production and its positive spillover effects on the economy, as well as infrastructure spending.

Mining sector offers wealth of investment openings

With billions of tons of mineral reserves,Cameroon is enticing many international investors.

Ministry of MINMINDT plans to turn natural assets intoreal industrial 

opportunities.

Rich in natural resources thanks to its vast mineraldeposits such as gold and diamonds, Cameroon istaking advantage of its mineral wealth with the help offoreign investors, including numerous companiesfrom Asia.

The Cameroonian government has identified thedevelopment of the mining industry as a priority in theshort, medium and long term as the country strives to hit key economic goals by 2035.

Despite the global economic slowdown that affectsWestern countries currently, the government isdetermined to make the mines and geology sector acore pillar of economic growth and sustainabledevelopment. Ignored by previous administrations,the fledgling mining sector has yet to contribute muchto GDP or socio-economic development, but that isnow set to change with dozens of new projects in thepipeline.

‘The winds of change’ blow over Africa — again. This time from the East. Is anybody paying attention to this world-altering trend?

By Dr. Jeffrey Lant

Author’s program note. On February 3,1960 my distant cousin and British Prime Minister the Right Honorable Harold Macmillan delivered to the Parliament of South Africa a speech that changed not merely Africa but the entire world. It came to be called the “Winds of Change” speech thanks to a (generally misquoted) line in the text:

“The wind of change is blowing through this continent. Whether we like it or not, this growth of national consciousness is a political fact.”

When the speech was reported, “the wind of change” became “the winds of change”, and even the author himself came to use the misquoted version. The first volume of his memoirs (1966) was titled “The Winds of Change” and rightly so since this single speech and the ruling Conservative Party’s 180-degree shift on the grave issue of decolonization and self-rule was the result of many winds, not just one. And these winds not only continue to blow; they blow now with new intensity and force. This time from the East, from China. We are all feeling these winds. They are important already… and each day they become more so as they build to gale force and a world we will hardly recognize, our own hegemony an historic fact, no longer an active reality.

For this geo-political transformation of the first magnitude, I have selected as its musical theme one of composer John Barry’s most moving compositions, “Out of Africa” (1986) for which he received the Golden Globe Award for Best Original Score. It evokes a world now gone forever. Find it in any search engine…