What will 2013 hold for private equity investments in Africa?


Private equity funds completed around $1.2 billion worth of deals in sub-Saharan Africa in 2012. But are we going in the wrong or right direction? Figures of EMPEA and Preqin paint different pictures.

Last week the Emerging Markets Private Equity Association (EMPEA) released the 2012 Emerging Markets Private Equity industry Statistics. According to EMPEA’s database of private equity activity, private equity funds raised US$1.4 billion for Africa in 2012, around 8% more than in 2011, when $1.3 billion was raised.

When we compare these numbers with the total of all emerging market funds of EMPEA, we see that investments in Africa are still a small share of all emerging markets investments. In 2012, emerging market funds raised US$40.3 billion, slightly more than the US$38.5 billion that was raised in 2011. Within all global commitments, the share of emerging markets private equity fundraising continues to grow, accounting for 20% of all capital raised in 2012, up from 12% in 2007 and 5% in 2003.


Source: EMPEA

Investment

On the investment side, private equity firms committed US$1.16 billion in disclosed value to companies in Sub-Saharan Africa through 61 deals in 2012. According to EMPEA, this was almost 10% more than in 2011, when $1.06 billion was committed. In all emerging markets private equity firms committed US$23.7 billion through 819 deals in 2012, compared with US$26.9 billion through 876 deals in 2011 in all emerging markets.


Source: EMPEA

EMPEA and Preqin paint different pictures

All the above figures are from the Emerging Markets Private Equity Association (EMPEA), but EMPEA is not the only one publishing data. Preqin, the research and consultancy firm formarly known as Private Equity Intelligence, also published data recently, which paint a different picture than EMPEA’s.

While the coverage following the EMPEA figures was predominantly optimistic (see the Reuters article “Africa private equity deals grow to $1.2 bln in 2012-report”), the coverage following the Preqin data was not (see Private Equity Africa’s article “Fundraising falls flat at $1.3bn”). The reason: according to preliminary Preqin data, private equity players raised “the lowest African commitments for four years” in 2012.

Lowest African commitments for four years?

Preqin: According to Preqin data, general partners raised $5.4bn for Africa in 2007, fundraising dropped to $1.2bn in 2008, went up to $2.4bn again in 2009, rose to $2.8bn in 2010, rose to $3bn in 2011, and then fell to less than half in 2012: to $1.3 billion in 2012.

EMPEA: According to EMPEA data, fundraising was only around $2.2bn in 2007, and after a drop to less than $1bn in 2008, rose only slowly: to $1.5bn in 2009, dropped again to $1.3bn in 2010 and 2011, to rise again in 2012 with around 8%: to $1.4 billion in 2012.

What will 2013 hold for private equity investments in Africa?

Many observers foresee an interesting year in 2013 for Africa’s fundraising scene, starting with a number of big fund announcements. At VC4Africa we’ve interviewed for example Jacana Partners’ CEO Simon Merchant on Jacana’s new $75 million SMEs fund. But there are many more. According to Preqin’s databases, there are currently 57 exclusively Africa-focused private equity funds collectively seeking to raise $13.1bn in capital commitments in 2013, of which a total of $1.6bn has been raised so far.

Conferences

Many interesting conferences are coming up. Today is the Private Equity in Southern Africa conference in Johannesburg, organized by EMPEA, SAVCA and FT Live. On March 20-21th the Private Equity World Africa conference will be held in London. On April 8th-10th is AVCA’s 10th Annual Conference in Cape Town, South Africa. And of course there are many more.

What will 2013 hold for private equity investments in Africa? At VC4Africa, the largest online community connecting African entrepreneurs and investors, we will obviously watch developments closely. What are your thoughts? We invite you to share your insights and opinion below!