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Deloitte survey notes cautious optimism as private equity continues to be an agile asset class across Africa

20 March 2019 Deloitte
Clinton Wolder, Deloitte Southern Africa Financial Advisory Partner

Clinton Wolder, Deloitte Southern Africa Financial Advisory Partner

The Private Equity industry is expected to continue its resilience amidst multiple political and economic challenges across the continent, according to a report released today by Deloitte Africa.


The 2018 Deloitte Africa Private Equity Confidence Survey (PECS) indicates that there is cautious optimism as private equity (PE) continues to be an agile asset class, navigating tough geopolitical and macro-economic conditions across Africa. The annual survey was conducted between August and November 2018 throughout the Deloitte Africa network, with a focus on PE activity in East, Southern, and West Africa. A total of 77 surveyed participants included both General Partners (GPs) and Limited Partners (LPs).

“In this survey we focused on respondents from three regions across Africa with operations, activities, and knowledge in each of these regions,” says Clinton Wolder, Deloitte Southern Africa Financial Advisory Partner. “Our forward-looking survey posed questions to respondents that would provide valuable insights into how private equity practitioners currently view the African private equity landscape, as well as their future expectations.”

It is clear from the responses that the PE industry is expected to weather the storm of ongoing economic challenges, such as Southern Africa’s subdued GDP growth, while positioning itself to take advantage of anticipated growth opportunities. With many key African economies expected to grow, the overarching message from practitioners is that the investment path should be trodden with cautious optimism.

When asked the question of where investors will look for viable investment opportunities that would deliver relative returns, the survey’s respondents highlighted the food and beverages, manufacturing, healthcare and pharmaceutical sectors as growth areas to watch. Furthermore, a significant improvement in Southern Africa’s fundraising environment is also expected over the next 12 months.

Deal activity for the East Africa region is expected to increase on the back of regional managers being armed with fresh capital and favourable economic conditions.

Most respondents believe that PE activity in West Africa will increase over the next 12 months, despite Nigeria’s economic struggles. Fundraising in the West Africa region has proved to be relatively more challenging through the year, particularly for first time fund managers. Despite the challenges, the enabling force of private capital in Nigeria’s economy cannot be trivialised and there remains the expectation that PE in Nigeria will continue to adapt to the peculiarities of its ecosystem in order to unlock opportunities
layered within.

Investor confidence remains favourable across all three surveyed regions, with overall PE activity expected to increase or remain the same. Findings from this forward-looking survey generally indicated that there is a high level of investor readiness, yet this is complemented with a level of caution, as PE players target the acquisition of quality assets at the right price and management of exit timing, to deliver the expected returns on investments.

 

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