Private Equity Investment Opportunities in Africa: Evaluation of the Growth Opportunities and Risks in a Global Context

Abstract

Private investment in Africa represents access to a different source of growth and investment returns than is typically included in institutional portfolios. Investment risk and returns available in Africa must be considered in the context of differences with global developed markets, including leverage at the portfolio and fund level, prevalence of portfolio company ESG program implementation, access to the full universe of opportunities, and underlying drivers of growth. Investors often overlook this region due to a lack of familiarity with these differences and common concerns, including political risk, currency exposure, corporate governance, and ultimate generation of competitive returns with the required scale. Private investment in Africa can benefit from economic growth opportunities and underlying trends, including population growth, urbanization, and increasing regional trade, specific to the region. An investment strategy appropriate to the region is essential to realize the potential of private investment opportunities in a risk-controlled manner.

TOPICS: Private equity, frontier markets, risk management, performance measurement

Key Findings

• ▪ Private investment in Africa can benefit from economic growth opportunities and underlying trends, including population growth, urbanization, and increasing regional trade, specific to the region.

• ▪ Investment risk and returns available in Africa must be considered in the context of differences with global developed markets, including leverage at the portfolio and fund level, prevalence of portfolio company ESG program implementation, access to the full universe of opportunities, and underlying drivers of growth. An investment strategy appropriate to the region is essential to realize the potential of private investment opportunities in a risk-controlled manner.

• ▪ Private investment in Africa can be made at attractive absolute and relative (to developed markets) valuations in a risk-controlled manner and is worth serious consideration by institutional investors.