Private equity (PE) firms raised Ksh114 billion ($1.1 billion) for East African investments between 2015 and 2016, a 41 per cent increase on the amount raised in the preceding seven years.
A sector survey by consultancy KPMG and the East Africa Venture Capital Association (EAVCA) shows that the 16 Africa focused funds have already deployed Ksh62 billion ($600 million) from these funds, with Kenya getting the lion’s share at Ksh50 billion ($483.5 million).
The amount coming to the region, however, remains only a small percentage of the global and African totals, at 0.6 and 0.06 per cent respectively.
“There is increased focus by PE funds on East Africa because of the downturn in commodities and currency devaluation in southern Africa. EA countries do not have exposure to commodities and their currencies have seen less devaluation,” said KPMG East Africa head of deal advisory Sheel Gill.
“Financial services is the most attractive sector when you look at the disclosed volume, followed by manufacturing, Fast Moving Consumer Goods and renewable energy in off-grid power.”
In Kenya, PE funds carried out 23 deals last year, accounting for two thirds of total in the region.
Drop from 2015
This was a drop from the total in 2015, when there were a total of 47 deals in the region, out of which 26 were in Kenya.
There were also 13 PE’s exiting investments in the region in the last two years, six of which were in the financial sector.
These exits were mainly through sales to a strategic investors and fellow PE funds, such as the sale of the 24.9 per cent stake held in Equity Bank by Helios Investment Partners in 2015 to long-term investors who included Norfund and NorFinance, NSSF Kenya, NSSF Uganda and Genesis Investment LLP.
EAVCA estimates that there are 72 PE funds actively investing in East Africa, having gone up from 36 in 2014. The average PE fund invests between Ksh1 billion ($10 million) and Ksh15.5 billion ($15 million) a deal.
The main source of investment funds for PE firms are European development finance institutions (DFIs), high net worth individuals or families and sovereign wealth funds.