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Sub-Saharan Africa: Investments from private equity has grown five-fold since 2008

16.10.2015

Private equity is the fastest growing source of investment in sub-Saharan Africa.

Investments from international private equity in sub-Saharan Africa has grown five-fold since 2008 to reach $12 billion, according to a new study from the Overseas Development Institute (ODI) seen by Reuters.

However, investors wanting to put their money in the region are still struggling with a lack of investment opportunities, the institute found.

"The region is suffering from an 'overhang' of unused capital because of the lack of suitable companies for investment," it said.

"Firms are too small, lack human capital and are often within underdeveloped sectors that lack the economic 'eco-system' that supports the growth of individual firms," the ODI added.

The report recommends setting up development agencies to approach sectors and industry as a whole rather than piecemeal.

It adds that development finance institutions must come up with ways to create more medium-size businesses, while also providing investors with risk insurance tools that are more flexible and less costly.

Unlisted investment funds are expected to raise as much as $5.4 billion earmarked for the region over the whole of 2015, well above the $4.1 billion raised last year, the report said.

This year, Helios Investment Partners, a private equity fund focused on Africa, has for the first time raised more than $1billion. The London-based group said the record size of the fund reflects the growing appetite for the continent. 

"The biggest challenge global institutional investors see when they approach Africa is the lack of established fund managers," he said.

Although more institutional investors are pouring money into private equity funds for Africa, some remain worried about their exit strategy as many capital markets in the region are still in their infancy, according to the Financial Times.ADNFCR-2976-ID-801803249-ADNFCR