Good returns outweigh high risk in African private equity investment

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Region provides opportunities to those with a long-term view that will outlast current economic shocks

African private equity investment has always been riskier than investment in other regions, but for those willing to invest long term and sustainably, the region provides opportunities that will outlast current economic shocks.

They will study policy and regulation, location, infrastructure and pricing. They will look at the impact of Covid-19 and government responses. In the short term, country-specific restrictions such as those on movement and travel may affect transactions and the ability to conduct on-the-ground due diligence and site visits.

Few sectors will not be affected by the pandemic, and many will produce good opportunities for fast-moving private investors who have done their homework and have the right approach to sustainability. In Sub-Saharan Africa the total value of M&A deals fell 56% to $6.8bn in the first half of 2020, compared with $15.3bn in the first half of 2019, says Refinitiv.

African pension funds also have a key role to play as an additional pool of capital in Africa. New and better access to African savings pools have been identified for a while now as something that could act as a catalyst for further private equity investment in Africa. Pension reforms to encourage investment in specific asset classes have recently been mooted, or in some cases enacted, for example in SA, Nigeria, Kenya and Namibia.

 

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