Global Private Equity firms eye investment opportunities in East Africa

With the East African region growing at an average growth rate of 7% annually, the region has certainly arrived on the global economic landscape. East Africa has demonstrated economic stamina over the past few years, emerging relatively stronger from the financial crisis in comparison with most other regions and continuing to grow rapidly despite concerns about slowing growth in other emerging markets, such as China and India.

Today, East Africa accounts for 3 of the 10 fastest-growing economies in Africa, driven by an expanding middle class, improved business environment, harmonized customs procedures due to the region’s economic integration, and a relatively stable political environment (in an African context) – save for the recent troubles in Burundi.

Because of this impressive performance, many global private equity firms have started exploring investment opportunities beyond the already established markets of South Africa, Egypt and Nigeria. Foreign investors, mostly from Europe and the US, are scouting for opportunities in East Africa with plans to pump $1.5 billion into the region’s private companies.

According to a recent survey by KPMG and the East Africa Venture Capital Association, large global Private Equity firms are looking to the East African market to capitalize on the growing investment opportunities available in sectors such as Agriculture, Finance, Fast Moving Consumer Goods, Real Estate, Infrastructure, ICT, Health and Natural Resources.

According to the study, of the total private equity funds of $3.7 trillion raised globally between 2007 and 2014, an estimated 0.6% ($22 billion) was earmarked for Africa, with 0.04% ($1.5 billion) destined for East Africa. Though minimal relative to what was invested elsewhere, this is an impressive start for the region, and with over 21 exits (valued at $260 million) already successfully concluded, this is expected to boost investor confidence.

The survey further showed that 79 private equity-backed deals valued at $822 million were concluded in East Africa over the same period, with signs that the upward trend could be maintained. The largest share in the region was taken by Kenya, which accounted for 63% of the total deals. Tanzania, Uganda, and Rwanda accounted for 15%, 10%, and 8% of the deals respectively.

The survey also revealed that most investors used Kenya as the financial hub and gateway to the other East African countries such as Uganda, Tanzania, Rwanda and Ethiopia.

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