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.