Africa private equity

By Simon Currie and Laura Kiwelu, Norton Rose Fulbright

Harnessing abundant and free solar energy has long been regarded as the obvious solution to Africa’s persistently low electrification rates. After a sluggish start due to unproven technology and high capital costs, we are now witnessing a solar revolution which will transform Africa’s energy landscape over the next decade.

In February 2015 the first solar photovoltaic (or PV) grid connected plant in Africa outside of South Africa was inaugurated at the Agahozo-Shalom Youth Village in Rwanda, a refuge for those orphaned during and after the 1994 genocide.

With a layout resembling the Africa continent, its ramifications have spread far beyond the 8.5MW it exports to the grid, attracting visitors such as Bono and members of the US Senate. In Africa the usual development period for power plants is nine years from inception. Yet this project was generating power barely two years after completion of the feasibility study. Read more

It seems to be getting harder and harder to find a news story about the Middle East and North Africa (MENA) that doesn’t fall within the narrow narrative of disorder and political violence. From state collapse in Libya and the tragic conflict in Syria to the geopolitical flashpoint in Yemen, the headlines from the broader region make for bleak reading indeed.

These challenges are real and they are significant, but there is another story about the region that remains under-reported. It is a story of dynamism and entrepreneurship, and it’s one of how private capital is playing a critical role in creating new realities for the region and its people. Read more

By Mike Casey of EMPEA

Last month, EMPEA took part in the UN Economic Commission for Africa’s Ninth African Development Forum held in Marrakech, Morocco. The theme of the forum was “Innovative Financing for Africa’s Transformation”. David Ashiagbor of Making Finance Work for Africa, EMPEA’s partner for the report Pension Funds and Private Equity: Unlocking Africa’s Potential, also spoke at the forum, where he presented the study’s findings.

Our insights from the Forum discussions may be found below in the context of the latest data from the region and in comparison with other EMPEA statistics on emerging market private equity industries. Read more

Late at night during a power blackout in Ghana’s capital Accra is neither the time nor the place you’d expect pop diva Celine Dion to come to your rescue. But when a rider from restaurant delivery service Hellofood Ghana lost his bearings with a customer’s dinner on the back of his motorbike, he turned to Celine for help.

Unable to find his customer’s home in the gloom, he arranged for the client to come onto the street playing “My heart will go on” on her phone. The driver, also a Dion fan, played the same music on his phone, allowing the two of them to locate each other by siren song.

“Luckily, he still had a mobile phone signal so he could phone the client,” says Yolanda Lee, a 26 year-old Canadian who runs Hellofood Ghana, a subsidiary of Hellofood Africa which manages a meal delivery service in 10 countries and 14 cities in West, East and North Africa. Read more

By Hurley Doddy of Emerging Capital Partners

This week, at the US – Africa Leaders Summit in Washington DC, the Obama administration will be discussing ways of stimulating growth, unlocking opportunities and creating an enabling environment for the next generation with African heads of state and business leaders. The summit, which builds on President Obama’s trip to Africa in the summer of 2013, is intended to advance the administration’s focus on trade and investment in Africa. Read more

Kenya’s conservative but fast-growing $7.8bn pension fund industry has just taken a pioneering step. For the first time since the 1990s, a leading Kenyan pension fund is putting its cash into a private equity fund.

The pension fund for Kenya Power and Lighting Company, which has 6,000 workers and $300m under management, will invest $4m with Ascent Capital, a new regional private equity fund that makes its first close this week with $50m and will back companies in Ethiopia, Uganda and Kenya. Read more

“If you wake me up at 2 am and ask me what I am thinking about, the answer is power,” says Pankaj Kulshrestha, chief operating officer of Eaton Towers, one of a crop of infrastructure companies that have sprung up in the past five years to control some 15 per cent of Africa’s telecoms towers.

Such nighttime frets arise from the fact that telecoms towers – which much of Africa relies upon to enable internet access – need diesel-powered generators to keep humming. And the supply of diesel in sub-Saharan Africa is prey to theft, political upheavals and economic volatility.

As a result, the business model of “towercos” such as Kulshrestha’s, as well as the operation of some 170,000 telecoms towers and the provision of wireless internet for communications, banking and commerce in large swathes of the continent all hinge on the vicissitudes of the market in the fuel. Read more

South Africa’s Ethos Private Equity has teamed up with the country’s $150bn Public Investment Corporation, one of the continent biggest asset managers, and Development Partners International to acquire a majority stake in logistics company RTT Group.

With the investment in Johannesburg-based RTT, Africa’s largest privately-owned parcel distribution company, the consortium is backing a business poised to benefit from the growth of e-commerce as more people join the middle class. RTT, which has annual revenues of R2.5bn ($235m) and employs nearly 5,000 people, delivers on behalf of large fashion retailers, as well as companies in the telecoms and pharmaceutical sectors. Read more

Mergers and acquisitions activity is on the increase in Africa, with the number of deals in 2013 close to the record high reached in 2007, an encouraging sign for private equity groups looking to exit investments on the continent, according to a new report by RisCura, a Cape Town-based consultancy.

Last year, there were 991 reported M&A transactions in Africa, up 13 per cent from the previous year and close to the 1,019 deals before the global financial crisis, as illustrated in the chart below from RisCura’s 2014 Bright Africa report out on Wednesday. Read more

South Africa, the African continent’s largest economy, had better take note. West Africa, an area that includes Nigeria, has for the third time in three years notched up more private equity (PE) deals than Southern Africa.

West Africa had the highest reported value of deals ($545m) during 2013, surpassing Southern Africa ($491m) and Eastern Africa ($163m), according to the 2014 Deloitte’s East Africa Private Equity Confidence Survey, published this month. Read more

Africa’s private equity industry, with the exception of South Africa, is at a phase of relative infancy and has its share of shortcomings. But factors like political stability, infrastructure growth and rising consumerism have helped spike activity in the continent’s PE hotspots across west, east and southern parts of the continent, fuelling optimism for 2014. Read more

Actis, a British private equity investor, wants to provide Cameroonians with power. On Thursday it agreed to pay $220mn to acquire 56 per cent of Cameroon’s national grid, Société Nationale d’Electricité (Sonel), and two power plants in the country, Kribi and Dibambe.

The grid’s current majority owner, US energy titan AES, is credited for giving Cameroon greater access to more reliable supply of power. Cameroon is now level with Spain in terms of ease of getting electricity according to World Bank data. Can Actis continue AES’s legacy? Read more

Addis Ababa: hello PE

When I heard about the US investor, Gabriel Schulze, who’d gone out on a limb and started up Ethiopia’s first private equity fund, I couldn’t wait to meet him.

The feeling wasn’t mutual. Famously reticent, it took me more than a year to convince him to meet me. But when we did, we ending up busting our two-hour time slot over tea and coffee at a private members’ club in London and speaking for six hours. You can now read the interview from that meeting, Portrait of a frontier investor, on Read more

By Andrew Brown of Emerging Capital Partners

Last week the International Monetary Fund (IMF) predicted a further drop in China’s growth to 7.3 per cent in 2014, the lowest figure that the country has experienced in the last 23 years.

China’s continued economic slowdown as it shifts from export-led to consumer-driven growth has prompted speculation as to the knock-on effect on economies that have benefited from China’s rise. Debate has centred on whether many frontier economies, including those of sub-Saharan Africa, are reliant on continued rapid growth in China’s demand for commodities to drive their own economic development. Read more

Despite South Africa having the most active financial markets in Africa, as well as an established track record in private equity, black empowerment companies have struggled to attract PE deals over the last few years.

In 2012 however, things were a bit different. The number of investments has picked up. But the average size of invesments has shrunk. What’s going on? Read more

South African private equity funds rarely took an interest in neighbouring countries, preferring to invest at home. All that is now changing as Africa rises, and South Africa faces stagnation.

In May, Johannesburg-based Vantage Risk Capital made its first investment in West Africa, and only its second transaction outside of South Africa, with a $30m mezzanine capital investment in Genser Energy’s Ghana operations. Metier says it is expanding its southern Africa portfolio. South African banks Investec and Standard Chartered are investing in private equity off their own balance sheets.

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A lot has been written about the potential of the African consumer but there’s not been exactly a flood of deals to demonstrate investor interest.

Well, here’s one: the Abraaj group, one of Africa’s larger private equity groups, has snapped up Fan Milk International of Ghana. It’s a vote of confidence for the west African country, which has seen consistently high growth over the last few years, and for the region in general. Read more

Private equity in Africa is on the up – so it was only a matter of time before investors started looking at the more extreme end of the market: distressed assets. Funds in South Africa are showing a keen interest in what is a new area, buoyed by a new law that helps to rescue ailing companies from the brink of collapse.

But are South African dealmakers fully equipped to handle what is considered to be a highly risky asset class? Read more

East Africa’s largest private equity fund Catalyst Principal Partners reached its final close last week, at $125m, writes Katrina Manson. It marks a growing pot of money chasing deals in the region whose nascent private equity industry has little record but is keen to make the most of a dearth of capital for a growth market of 200m people. Read more

With Africa playing catch-up on developed countries and other emerging markets, it’s easy to focus on the infrastructure projects or the big consumer market plays. And at the other end of the spectrum, for (really) small investments, there’s microfinance.

That leaves something of a “forgotten middle”: African SMEs with the potential for high growth but are not big enough to get on the radar of most western investors, and have trouble getting lending from local banks.  Read more