- The African private equity (PE) industry, continues to prove itself and is once again on a growth trajectory
- Even though growth forecasts remained muted at the beginning of 2021, this was due to several African countries understandably grappling with persistent outbreaks of COVID-19
- North Africa and West Africa jointly attracted the largest share of PE deals by volume
Private equity fundraising in Africa managed to reach US$1.3bn in the first half of 2021 when including final and interim closes, a new report has revealed.
The 2021 H1 African Private Equity Data Tracker released by the African Private Equity and Venture Capital Association (AVCA) indicates that this is despite widespread decline felt by most economies across the globe, owing to the impact of the coronavirus pandemic.
The report noted that the African private equity (PE) industry, continues to prove itself and is once again on a growth trajectory, mirroring the gradual stabilisation of Africa’s macroeconomic environment.
It also revealed that North Africa and West Africa jointly attracted the largest share of PE deals by volume, at 23% each. Multi-region deals attracted 50% of deal value for the first half of the year.
The data tracker provides a provisional look at half-year PE activity in Africa, which AVCA CEO, Abi Mustapha-Maduakor, believes is particularly salient in these times of economic uncertainty and focused recovery.
“Private capital remains fundamental towards sustained economic recovery in Africa. Although the first half results still show the lingering effects of the pandemic, we are pleased to see such levels of deal activity which is testament to investors’ resolve and commitment to supporting growth and scaling of businesses in Africa.”
Even though growth forecasts remained muted at the beginning of 2021, this was due to several African countries understandably grappling with persistent outbreaks of COVID-19, along with the cascading healthcare crisis and resulting socio-economic restrictions.
AVCA Head of Research, Nadia Kouassi Coulibaly, says Africa’s economic recovery is exceeding expectations. “Although the IMF predicted sub-Saharan African growth would be moderate to average at around three percent in 2021, the current numbers prove the resilience of African economies, which has been demonstrated during the pandemic.”
The first half of 2021 saw 120 reported deals to the value of US$2.1 billion concluded on the continent. Financials, Consumer Discretionary, Industrials and Information Technology rose to the top, attracting the greatest investment and accounting for more than half (72%) of the total deal volume in the first half of 2021.
Financials demonstrated a marginal increase accounting for 24% of the total deal volume and value reported in 2021 H1, from 20% and 21% in 2020 H1 respectively. Within Industrials, the majority of deals in terms of volume and value were in Transportation with 37% and 77% respectively.
According to Nadia Kouassi Coulibaly, investment activity has also regained momentum. As an example, she points to a large deal within the Industrials sector which saw US$250mn invested into drone delivery startup, Zipline, by a consortium of investors including Emerging Capital Partners.
AVCA CEO, Abi Mustapha-Maduakor, believes this growth and the almost unexpected flourishing of PE activity solidifies the need for AVCA, as the authoritative voice for private investment in Africa, to provide accurate industry activity data.
“We will continue to provide the vital data to support investors’ decision making as they drive more capital into Africa. The findings in this report tell a positive story about private investment in Africa, and we are proud to play an important role in supporting businesses driving Africa’s long-term economic growth,” she said.
This comes at a time when UK-based private equity firm Development Partners International (DPI) revealed that it has raised USD 900 million in its third round of funding.
According to the company, the ADP III fund will invest in established and growing companies in industries that benefit from Africa’s fast-growing middle class and the increasing digital transformation of the continent.
The company further revealed that ADP III secured capital from a broad range of leading pension and sovereign wealth funds, development finance institutions, endowment and foundations, insurance companies, fund-of-funds, asset managers, and impact investors.
As reported by Business Day, the firm exceeded its initial target of raising $800m for its African Development Partners III Fund (ADP III) by $100m.
The firm also secured an additional $250m of capital from co-investors who will invest alongside this, its third Africa-focused fund, taking the total firepower of the ADP III to $1.15bn.