PE firms drooling over East Africa

While Africa’s private equity (PE) waters are teeming with investors of all shapes and sizes, it is the East African region, and its largest economy Kenya, which continues to attract the bulk of attention. Aamera Jiwaji has the details of some of most interesting new PE deals in the region.

In 2013, East Africa signed 26 private equity deals, the highest number on the continent; and of the top five sub-Saharan countries to close the most deals, two were from East Africa: Kenya led with 12 deals worth over KSh9.6bn ($110m) and Rwanda came in fifth place with five deals worth KSh3.6bn ($41.3m).

The key transaction in Kenya related to the KSh5.2bn ($60m) investment in a wind power project by Norway’s Norfund and African Infrastructure Investment Managers, while Rwanda’s big-ticket deals included Fusion Capital’s KSh2.9bn ($33m) investment in a real estate development project in Kigali and a KSh172m ($1.9m) investment in Rusororo, a stone extraction mining company.

Continued interest in the Kenyan economy may be attributed to its traditional market appeal, but Rwanda’s arrival in the top five suggests that affordable deals in less-established countries are on the rise. Either way, East African is the darling for private equity firms, who are drawn in by her strong economic performance and good growth potential.

According to Burbidge Capital, 35% of the PE deals in the East African region were in the financial services sector followed by oil and gas (18%) and agribusiness (15%). Along with mining, IT and real estate, these constituted the top six.

However, it is the consumer-facing sectors that continue to be popular, says investment analyst at Centum Group, Anthony Kimani, noting that investor attention is focused on Africa’s middle class and its consumption patterns. “They are investing in Africa because the opportunity lies in the growing middle class. Investors expect the purchasing power of the African consumer to increase so they want those industries that target them,” he says. Since many PE firms adopt a generalist approach, more deals are taking place in sectors such as energy, financial markets, retail and light manufacturing.