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Private equity in Sub-Saharan Africa

Private equity in Sub-Saharan Africa






The private equity industry in Sub-Saharan Africa is climbing to unprecedented levels. The core reason for this is rapid economic growth in many African nations, but also of significance are the facts that there is presently little or no commercial and consumer lending markets in the subcontinent, banks perceiving the risks as too high, and interest rates from lending institutions tend to be cripplingly inflated.

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Nigeria-Ghana trade connection to increase

Private equity investment in Mozambique: a time for dramatic growth











Mozambique continues to experience dramatic economic growth rates, with gross domestic product (GDP) growth in 2012 estimated at 7.5%, and projected growth in 2013 and 2014 estimated at over 8%. Nevertheless, Mozambique remains extremely poor and underdeveloped, struggling to translate that robust economic growth into prosperity for its populace.

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Venture Capital and Private Equity Industry Performance Survey of South Africa covering the 2014 calendar year

Private Equity in Africa: A Private Passion











As African nations march towards more formal, regulated economies, private equity is determined to play more than just a walk-on part. But there is still much to learn about doing business in this diverse region.

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Venture Capital and Private Equity Industry Performance Survey of South Africa covering the 2014 calendar year

Africa leads the way in private equity investment






  Private equity offers investors the chance to get a firm foothold in Africa’s economy. […]

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Africa Brief

How To Get Private Equity Exits in Africa Right











Private equity (PE) as an asset class has received reasonable prominence in Africa in recent times. New records are being set both at the levels of fund raising and sector diversity of investments. Africa is becoming increasingly investor-friendly!

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Africa Brief: Timing vital for African success, Zambian telecoms, campaign begins in divided Mali and more











Timing is crucial for both companies and investors, seen in a recent report produced by Avior. Wrong execution or timing could damage investor confidence and destroy capital. For instance, Altech operations in Nigeria and Kenya have been generating significant losses until disposal thereof in January 2013. Altech’s net cash re­sources have dwindled from Rl.6bn to a net debt position of around R800 million over the past four years. The researchers concluded that the best time to buy into a company depended on the differential between growth in South Africa and growth across its borders, as well as the extent of the company’s exposure to the rest of Africa.

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The promise and obstacles facing private equity investment in Africa











Private equity investment might provide some exciting opportunities for your business, but it also comes with a number of challenges. Private equity is capital that is put into a new or growing business in return for part ownership of the business and a share of its profits. Private equity investors don’t typically want to be permanently involved in a business – they will step in for a few years and then exit by selling back their shares to the business, along with a return investment.

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Attracting Private Equity and Venture Capital: Growth, Performance & Succession Policy











Growth, whether organic or inorganic (expansion by mergers and acquisitions), is often the most important driver of value. The main challenge management face in achieving ambitious targets is to assess the most optimal funding structure suitable for their company. There are several funding options available in our markets, these can be primarily categorized into debt and equity.

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What does it take to attract Private Equity and Venture Capital for growth?











Seven of the world’s ten fastest growing economies are in Africa, 52 African cities have populations of over 1 million people and by 2040 it is expected that 1.1 billion Africans will be of working age. Africa has 60% of the world’s uncultivated, arable land; 56.7% of the world’s diamond (gemstone) production, 66% of the worlds’ cocoa production, 10% of the world’s oil reserves, 80-90% of the world’s platinum group metal reserves and 40% of the world’s gold reserves.

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Investing in Africa: Part Two











Investment in Africa, and developing the perception of Africa as a promising investment destination, is key to the continued growth, development and success of the region …

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Investing in Africa: Part One











Sub-Saharan Africa is expecting a 5% annual growth rate in 2012-2013, and World Bank data show that almost half of Africa’s countries have reached middle-income status. As this growth trend continues, the continent is a potentially attractive destination for domestic and foreign private capital, including private equity investments, which will further boost growth rates.

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Africa Brief: Kenya’s KCB banks, Burundi, Zimbabwe, World Bank’s Africa growth and more











It took Kenyan lender KCB Group less than a year to break even after opening in tiny Burundi, a country better known for explosive violence than explosive growth. KCB’s success highlights the hunger for financial services that the biggest local banks are turning regional to tap. While there is an average of pretty much one deposit ac¬count for every South African, according to the latest World Bank data that falls to fewer than 220 accounts per thousand people in Burundi, a 2012 survey showed.

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African demographics are a boon for retail industry

African private equity funds outperformed US venture capital over last decade











A new index of institutional-quality private equity funds in Africa posted an 11.2% annualised return for the 10 years ending 30 September 2012.

This is the first quarterly report of a new African private equity and venture capital index, a collaboration between the African Venture Capital Association (AVCA) and Cambridge Associates.

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Growing Entrepreneurship in Africa

Africa boasts alpha returns for private equity investments











Africa’s private equity (PE) landscape is uncharted and at an early stage of development, however, it is growing steadily and giving good returns. In fact, according to a KPMG survey, a record amount of 25.7 billion rand ($3.03 billion) in PE money from Africa was returned to investors in 2011, up from R18.1 billion in 2010.

According to Dapo Okubadejo, the partner in charge of Corporate Finance & Financial Advisory Services at KPMG Nigeria:

“Africa is now viewed by PE houses and fund managers as a priority investment destination. As growth in other economies have slowed in recent years due to the 2008/9 recession and current crisis in the Eurozone, investors have been looking to emerging markets and economies that will provide higher return rates and Africa is continuously proving its business case for investment.”

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Regulation

Invest Africa: Regulation











A supportive regulatory framework is essential in ensuring that business in Africa can be done with ease. According to recent World Bank report there are 10 areas of business regulation that determine the ease of doing business in a country.

Key areas include: Establishing a business, resolving insolvencies, cross border trading and access to electricity.

South Africa, Rwanda and Mauritius are the top ranking countries in Africa to do business in based on their regulatory frameworks, while countries like Angola, Chad and Congo are still playing catch-up in establishing business friendly environments.

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High Growth Markets magazine – Unleashing Africa’s potential

Ways private equity firms can genuinely add value











As previously highlighted, private equity returns continue to outstrip quoted shares and it is certain that operational improvement in portfolio companies is a key component of value creation. Of our sample, 63% had been involved with a private equity-backed business which was subsequently sold and, of these, 77% had been sold for a profit.

According to the survey, the most important contributors to the value uplift were operational improvements and sales growth. Leverage and growth through acquisitions were much less important; highlighting perhaps the reality of the more difficult funding climate.

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Incredible growth of Kenya’s beer market

When the going gets tough: Managing underperforming investments











Most of the seasoned executives and non-executives interviewed for the survey had experienced situations where a business underperformed against plan. When the going gets tough, the relationship between management and private equity backers can come under strain.

When this happens, private equity directors naturally become concerned at the potential threat to the value of their investment and need to be very aware of how their skills can help, rather than make things worse. The non-executives and executives interviewed for this research suggested constructive actions that private equity directors could take to help address underperformance.

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ICT in Africa – Innovation and emerging technologies to beat the technology gap

The seven deadly sins of portfolio management











rivate equity firms’ core competency is doing deals, so their skill levels for the deal process are high. But their real understanding of, and strategy for, the businesses they acquire, is usually much weaker.” – Chairman, Electronics sector

Private equity directors vary widely in the way they interact with portfolio companies; some actions are helpful while others not. Respondents were very clear on the latter and from their experience gave advice on how to avoid common pitfalls.

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Africa Brief: Taste for pizza takes off in Africa and more...

The role of operating partners in private equity-backed companies











As you would expect, operating partners need to have relevant senior managerial and sector expertise as well as strong interpersonal skills. Further, if they are really plugged into the private equity firm and have built up a mutual understanding through working together over time, this can make a real difference in the efficiency of how decisions are made.

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private equity

Private equity executives and operational or industry sector experience











The results of our research show a high degree of consensus on this topic, with private equity directors’ lack of operational or management experience seen as a weakness in the way they interact with portfolio companies. Over 70% of those interviewed said that having managerial, operational or sector experience would give private equity executives more insight into the reality of running a business and a greater empathy with management.

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ICT in Africa – Innovation and emerging technologies to beat the technology gap

Managing portfolio companies most effectively











The Working with Private Equity portfolio companies survey was carried out with more than 300 non-executive directors and senior management who had experience of working with private equity firms. The survey analysed how private equity executives interact with their portfolio companies and the different private equity approaches.

The majority of those surveyed rated the quality of the private equity director’s involvement in the business as good or excellent.

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Working effectively with portfolio companies and creating value

Working effectively with portfolio companies and creating value











In 2012, a comprehensive survey was carried out with more than 300 non-executive directors and senior management who had experience of working with private equity firms.The survey analysed how private equity executives interact with their portfolio companies and revealed the strengths of the private equity approach, as well as the weaknesses, in order to contribute to the development of best practice.

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Africa Brief

Working with Private Equity portfolio companies: A survey











In mid-2012, KPMG and Directorbank commissioned independent research consultancy Private Equity Research Limited to undertake a comprehensive survey of more than 300 non-executive directors and senior management who had experience of working with private equity firms.The purpose was to look in depth at how private equity executives interact with their portfolio companies and reveal the strengths of the private equity approach, as well as the weaknesses.

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High Growth Markets magazine – Unleashing Africa’s potential

Private Equity remains steady











SA’s private equity sector last year shrugged off the global economic uncertainty with funds under management topping a record R115bn, including uncommitted funds of more than R34bn, KPMG said yesterday.

While the sector attracted investors seeking exposure to emerging markets, an executive at KPMG said other sub-Saharan African markets besides SA were drawing global private equity funds to regional opportunities.

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Using Nigeria’s oil to diversify the national economy

SKA won as science ranking dips











NOT a single rand was raised in this country for investment in early-stage or venture capital-type investments last year. These are the investments that spawn new technologies out of which, if they are successful, new industries are grown and thousands of new jobs created. So why is there such a truly astonishing lack of investment? Speaking at the launch of the KPMG/ South African Venture Capital Association annual Private Equity Industry Performance Survey, KPMG director Warren Watkins told a meagre audience it wasn’t so much a lack of ideas and effort, since there is a more than adequate supply of these, but rather the comparative absence of incentives similar to those applied in other countries.

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Managing portfolio companies most effectively

Follow-on deals exceed new private equity investments – survey











While the number of private equity deals declined from 547 to 521 last year, the value of investments increased by 32.2% to R15.6-billion, the latest KPMG and Southern African Venture Capital Association (Savca) venture capital and private equity industry performance survey showed on Tuesday. Of the R15.6-billion invested, R8.6-billion went into follow-on investments, with the remaining R7-billion targeting new investments.

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91270023

Private equity in SA tops R115bn











SA’s private equity sector last year shrugged off the global economic uncertainty with funds under management topping a record R115bn, including uncommitted funds of more than R34bn, KPMG said yesterday.

While the sector attracted investors seeking exposure to emerging markets, an executive at KPMG said other sub-Saharan African markets besides SA were drawing global private equity funds to regional opportunities.

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