Kenya signed the highest number of private equity deals last year in sub-Saharan Africa ahead of its main rivals South Africa and Nigeria .
It recorded 12 private equity deals, with South Africa netting 10 and Nigeria nine, a PE report released yesterday by Deloitte and Africa Assets indicates. The country shrugged off the March 4, 2013 elections jitters to catch PE attention.
“We see investors quite optimistic on economic climate especially in Kenya and Ethiopia fuelled by infrastructure developments and stable political environments. Early last year there were some jitters on Kenya before elections, but this has since changed,” said Deloitte East Africa's director of corporate finance services Alexander van Schie.
The number of deals in the SSA region last year grew to 84, a 44.8 per cent increase from 58 deals disclosed in 2012. Most of the deals were struck in East Africa, 26, followed by West Africa with 24.
Southern Africa and Central Africa recorded 19 and seven deals respectively. Five deals were cross-regional and another three were continental. Deal-hunters faced stiffer competition for lucrative transactions last witnessed in 2011.
“Private equity funds invested more than three times as much in sub-Saharan Africa in 2013 as they did in 2012,” states the report titled ‘2014 East Africa Private Equity Confidence Survey: Clarity and Distinction’.
East Africa was the most attractive for PE funds with four out of the top eight countries with most deals in SSA. Kenya, Rwanda, Uganda and Tanzania had 23 deals collectively out of the total 51 deals for top eight countries in the region.
“Deals doubled in East Africa to 26 from 13 in the previous year, and Kenya had a huge chunk of these,” said Andrea Bohnstedt, a director of Africa Assets.
She said Kenya remains a top destination for PE continent-wide. The major deal in Kenya related to Norfund and Africa Infrastructure Investment Manager’s $60 million (Sh5.19 billion) equity investment in a wind power project. The project is worth $150 million (Sh13 billion) but the remainder will be financed through a debt from South African Standard Bank Group.
Despite the huge number of deals in East Africa however, smaller deal sizes resulted in lesser value. Only 46 deals out of the 84 recorded disclosed their worth, amounting to $3.69 billion (Sh319.2 billion).
East Africa’s $163 million (Sh14.1 billion) worth of deals trailed West Africa’s $545 million (Sh47.14 billion) and Southern Africa’s $491 million (Sh42.5 billion). The value of continental deals was the highest at $1.85 billion (Sh160 billion), followed by cross-regional deals worth $678 million (Sh58.65 billion).
“Nearly half of the $3.58 billion fundraising last year for Africa-focused PE funds had Africa-wide mandate; which is a good thing,” Bohnstedt said.
The biggest deals were recorded in infrastructure and extractive industries, but consumer-focused deals and agribusiness remain popular. Funds are looking at banking, fast-moving consumer goods, healthcare and education as some of the routes to reach down-market.
Deloitte and Africa Assets said that despite the growth in this asset class in SSA, “the PE industry is still in its nascent stages (when) compared to other more advanced emerging markets.”