It is now established that several parts of the African economy have experienced renewed interest over the past ten years, not to mention the difficult economic situation experienced by the continent and linked to the years of Coronavirus. This is the finding that emerges from the latest report just published by the African Private Equity and Venture Capital Association (AVCA). The publication of this document is not accidental.
Indeed, it comes as a prelude to the AVCA’s annual conference scheduled for 1is to May 5, 2023 in Cairo, Egypt. A meeting that aims to be the world’s largest gathering of private and Africa-focused capital, attracting investors who collectively manage more than $1.5 trillion in assets. Better still, leveraging insights into the fluctuations seen in the private equity industry in Africa over the past few years, the 19th Annual AVCA Conference and VC Summit will focus on unlocking lasting and transformative change in Africa through private capital.
The objective assigned to the conference is to think ambitiously regarding how private capital can build and contribute to a prosperous African future. Throughout the week, distinguished speakers and delegates will reflect on the past and connect opportunities, risks, returns and impact in Africa. It will also be an opportunity to explore the pros and cons of investing in Africa,
Participants will also engage in a practical dialogue regarding how managers have met challenges and succeeded, and will discuss the systemic changes needed to create sustainable growth in the industry. Hence the particular interest of this report which is already taking a look at the avenues for reflection in this area.
Indeed, although private debt is still a minority asset class, the private equity funds present on the continent are moving towards greater specialization. Sector investment vehicles now account for nearly 60% of fundraising, the editors say.
On this subject, the AVCA estimates that local and international private equity firms injected 72.9 billion dollars into African companies between 1is January 2002 and June 30, 2022. A giant step that testifies to the dynamism of the continent’s economy through its start-ups. The report highlights that the largest amounts were invested in 2007 ($9.3 billion), 2014 ($7.8 billion) and 2021 ($7.4 billion).
However, the report notes the disparity between the different regions of the continent in terms of competitiveness or attractiveness. In this context, the distribution of the amounts invested during the entire period under review by sub-region shows that West Africa holds the upper hand with an overall amount of 19.8 billion dollars, ahead of Southern Africa (19.7 billion), North Africa (13 billion), East Africa (6.1 billion) and Central Africa (2.4 billion). While $11.9 billion was further invested in companies operating in more than one sub-region of the continent.
In total, 3,359 transactions involving private equity funds were recorded in Africa between 1is January 2002 and June 30, 2022. In this chapter, Southern Africa comes first with 1012 transactions. Then come West Africa (932 transactions), East Africa (568), North Africa (576) and Central Africa (102).
The sectors concerned are not the least since they are: Technology, Consumer Discretionary, Industries, Communication Services, Consumer Staples, Energy, Materials, Utilities, Real Estate and Healthcare. With regard to the sectoral breakdown of investments made by private equity firms on a continental scale, we note that the targeted sectors have undergone some major changes between the decade 2002-2011 and the period from 1is January 2012 to June 30, 2022.
Similarly, between 2002 and 2011, the sectors that captured the most funds were consumer discretionary (22%), materials (17%), telecommunications (16%) and financial services (14%). %). The same is true between January 1, 2011 and June 30, 2022, the sectors that attracted the most investment were public services such as the production and distribution of electricity and gas or water treatment ( 19%), financial services (18%), telecommunications (17%) and industry (11%).
Additionally and on another level, the report highlights that most of the private equity funds that were active on the continent between 1is January 2011 and June 30, 2022 are investment vehicles dedicated to a sub-region (33%) or funds focused on a single country (31%). 21% of the funds are pan-African in nature and 14% are focused on sub-Saharan Africa.
Finally, by targeted sector, the breakdown of funds reveals that generalist funds predominate at 45%. Next come funds specializing in growth capital (16%), venture capital (14%), infrastructure (10%), private debt (6%), real estate (4%), transmission (4%) and replacement capital (1%). It will be up to the Cairo conference to breathe new life into the contents of this report and this within the framework of the African Continental Free Trade Area (ZLECAF).
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