Private Equity in Africa

When engaging in private equity on the African continent there are a few nuances that needs to be considered.

Firms tend to be family owned with the implication that the 2nd generation needs to be taken into account in succession planning.

Talent acquisition is also more complex if say a replacement CEO or FD needs to be sourced, something that in the US or Europe is less of a limitation.

Local knowledge is a crucial factor of success from a continent and specific regional jurisdictions point of view, access might be limited.

Diversification across jurisdictions ie countries is required for effective risk management.

This also relates to currency risk, the cost of hedging is to high and needs to be managed through diversification and modeling and planning for a deterioration

As with any PE investment the exit options should be taken into account upfront and thess are limited or take longer in emerging markets.

Leverage is also viewed differently, much lower multiples seen in the market and with limited ability to gear to return funds to the GP or declare dividends. The norm is to use leverage to fund trade or growth funding.

DFI's have a key role to play in the development of the market specifically in the co-funding space where by taking the lead creating the environment for institutional investors from US and Europe to invest and also assisting local funds to leverage their capability.