AfricaBusiness+, a Jeune Afrique Media Group outlet extensively covering business deals in Africa, has recently introduced a pioneering ranking of private equity firms operating on the continent. The “Private Equity Powerlist” is designed as a critical tool for investment decision-making, aiming to identify leading private equity players in Africa and evaluate their operational capabilities.
The introduction of the Powerlist is particularly timely given the current economic climate in Africa. The continent is grappling with numerous challenges, including rising interest rates, inflation, devaluations, and political instability. Moreover, the impact of the global energy crisis adds to the complexity of the business environment. After a surge in activity during the post-Covid recovery phase in 2021 and 2022, where transactions surpassed $7 billion each year, 2023 has seen a return to more standard levels of activity. This change is reflected in the Powerlist results, which show a notable decline in activity, with only a few of the top 35 asset managers exceeding ten transactions over the year.
One of the key insights from the Powerlist is the emerging trends and the geographical focus of investments. The average size of transactions is shrinking, and large-scale deals are becoming rarer. The slow start of the African Continental Free Trade Area (AfCFTA) and the lack of integration among African economies are significant factors impacting business activities. Consequently, the majority of funds remain concentrated in leading jurisdictions like Nigeria, Kenya, Morocco, South Africa, and Egypt. This geographical concentration extends to the location of general partners (GPs), with a significant presence in South Africa and Nigeria, as well as financial centres like Mauritius and London. Interestingly, London’s attractiveness to investor-capital interests in Africa seems unaffected by Brexit.
The Powerlist also sheds light on sectorial investment trends. The consumer goods sector, driven by Africa’s demographic growth and the rise of the middle class, has remained robust, accounting for a significant portion of investments. Despite global economic headwinds, this sector continues to attract attention, although private equity firms are increasingly cautious about inflation and local currency weaknesses impacting dollar revenues. Similarly, the healthcare sector is witnessing a movement of funds, marked by significant deals and a trend towards consolidation. Prominent examples include transactions in Morocco’s medical equipment distribution industry.
The finance sector, however, stands out as the most attractive area for investment, drawing almost 23% of investments since the start of 2023. The pace of deals in this sector remains brisk, with notable transactions like Enko Capital’s exit from Imperial Holdings in Nigeria.
Despite these sector-specific successes, Africa’s private equity landscape faces broader challenges. The continent, projected to raise about $3 billion in funds in 2023, is still a marginal player in the global private equity industry, which is expected to raise $1,100 billion. The reluctance of international private investors and the departure of large firms like Carlyle and KKR underscore Africa’s isolation in this domain. Key issues include difficulties in achieving
exits, the relatively small size of companies, and a scarcity of comprehensive data. These challenges need to be addressed to meet Africa’s substantial financing requirements.
The methodology behind the Powerlist is rigorous and comprehensive, focusing on a specific category of PE firms to ensure comparability. It excludes firms primarily involved in infrastructure or venture capital and values the number of investment and exit transactions over the past year, along with total assets under management. The data was meticulously collected over three months from various sources, including direct company contacts, open-source reports, and industry databases, ensuring the Powerlist’s reliability and accuracy.
