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Deal Dialogue June 2019: Opportunity in Africa

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May 30, 2019

Our new series, Deal Dialogue, provides insights into different areas of impact investing within the private equity space, either by geography or industry, from Glenmede’s impact research analyst, Jennifer Wong. Come back each month to learn more about the depth and breadth of this growing industry.

Home to 54 countries and over 1.2 billion inhabitants, Africa is the world’s second largest continent. It’s also a place that’s drawing the attention of impact investors. Bolstered by favorable demographic trends—a burgeoning middle class, increasing internet connectivity, high technology adoption rates—investors are beginning to see the return potential. Here’s a look at the numbers behind the opportunity in Africa.

Fundraising Final Closes

According to Prequin data, only 11 funds focused on the African continent have reached a final close over the last six months. Of these 11 funds, five had been in the market since 2016 or earlier, suggesting a longer than average fundraising cycle. While six of the funds raised their target amount or more, five did not reach their target. Four funds raised less than $100 million, five funds raised between $100 and $500 million, and two funds raised over $500 million.

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At $982 million, the largest fund raised was by AP Møller’s Africa Infrastructure Fund I, which will emphasize energy, aerospace, infrastructure, and renewable energy. South African firm Ethos raised a $177 million midmarket buyout fund with a Black Economic Empowerment (BEE) fund team to invest in underappreciated companies and related BEE opportunities. Smaller venture firms came from US-based Oui Capital, Tanzanian Match Maker Group, French I&P Fund, and Kenyan Fanisi Capital.

Fundraising in the Market

The story of growing investment opportunity in Africa has certainly garnered significant interest as 100 funds are currently in the market, raising capital for strategies that focus on investments in the space. Collectively, they target over $15 billion of capital, with an average fund size of $155 million.

Strategies vary by sector and geography focus. Some firms emphasize a specific country, like Ethos with South Africa, or a group of countries, as Catalyst Principal Partners does in East Africa. Other firms’ approaches are sector specific, for example Apis Partners focusing solely on financial services and financial technology or Actis developing renewable energy assets on the continent.

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