Kenya takes the lion’s share of East Africa’s $2.4b private equity deals

Tuesday April 09 2019

Artcaffe at the Lavington Mall in Nairobi. The acquisition of a majority stake of the hospitality chain by Emerging Capital Partners was among the major deals in 2018. PHOTO | JOHN FOX


Kenya led Uganda, Tanzania and Rwanda in the number of private equity deals in East Africa in the period 2013-2018, snapping up 59 per cent of the 194 deals, valued at $2.4 billion, that East Africa received.

According to a report by the African Private Equity and Venture Capital Association (AVCA), Kenya’s performance is attributed to a liberalised, diversified and advanced economy, “supported by a fast-growing middle class and strong demand for high-value goods and services,” making it an attractive investment hub for global investors.

Uganda took 11 per cent of the deals, Tanzania nine per cent and Rwanda three per cent.

Pan-African, sub-Saharan and country-specific funds are increasingly raising and deploying capital in Kenya, where they are also using their offices as bases from which to spread to the East African region.

Among the major PE deals in the region in 2018 was the acquisition of the majority stake of Nairobi-based hospitality chain Artcaffé Group by Emerging Capital Partners, in a deal estimated to be worth $34.4 million.

Business confidence


Analysts expect more deals in the future, with Kenya’s GDP expected to grow by 5.9 per cent in 2018, underpinned by stronger business confidence and private consumption, a calmer political environment, and growth in industry, services and agriculture.


Share of number and value of PE deals in East Africa, by country, 2013-2018. SOURCE | AVCA

According to the World Bank’s Ease of Doing Business 2019 report, Kenya jumped 19 places up, to 61; Rwanda moved up 12 places, from 41 to 29.

Political initiatives over the past decade have helped to boost development and investor confidence in Nairobi.

The Kenya Vision 2030 Initiative, launched in 2008, aims to create a globally competitive middle-income country with a high quality of life in a clean and secure environment.

The Big Four Agenda for economic growth introduced in 2017 by President Uhuru Kenyatta, is aligned with the Vision 2030, and aims to ensure food security and universal healthcare coverage, as well as boost manufacturing and investment in affordable housing.

The average growth rate in East Africa was about six per cent between 2010 and 2018, with Djibouti, Ethiopia, Rwanda and Tanzania recording above-average growth rates.

Ethiopia has the potential to be a key market for PE investment, given the size of its population (at 108 million, it is the second most populous country on the continent) and its relatively high economic growth rate (estimated by the World Bank at 7.7 per cent in 2018).

Economic growth

Africa’s economic growth is projected to accelerate from an estimated 3.5 per cent in 2018 to four per cent this year and 4.1 per cent in 2020, as the drivers of the continent’s economic growth continue to gradually rebalance.

The continent is also witnessing a positive economic outlook characterised by political stability, growth in investment and net exports, fiscal consolidation, a modest recovery in commodity prices and decreasing inflation. These factors are attractive for PE investors.

“Investors remain bullish about Africa’s prospects and we are proud to continue educating and informing local and international investors about opportunities on the continent,” said Enitan Obasanjo-Adeleye, AVCA head of research.

In 2018, the value of PE deals on the continent dropped marginally to $3.5 billion from the $3.9 billion recorded in 2017, but the number of deals reached a six-year peak of 186.

During the year, PE investors continued to direct investments in consumer and technology-related sectors, which accounted for almost half the deals. The financial sector and industries also recorded significant interest.

Information technology’s share of deals has significantly grown in recent years, nearly doubling to 19 per cent in 2018, from 10 per cent two years before.

PE deals

Between 2013 and 2018, Africa recorded some 1,022 PE deals worth $25.7 billion. West Africa dominated the value of PE investments in the period under review at $10.8 billion, with Nigeria attracting 73 per cent of the value.

The value of PE deals in Northern Africa stood at $3.7 billion while Southern Africa took $3.5 billion.

At the same time, data from AVCA shows the number of PE exits recorded in 2018 dropped to 46 from 52 in 2017.

South Africa accounted for 20 per cent of exit volume in 2018, compared with 42 per cent from 2013 to 2017, against a backdrop of heightened macroeconomic uncertainty in the country.

The growing trend of exits to PE and other financial buyers, which emerged in 2016, persisted in 2018, but the year also saw a relative rebound in the share of exits to trade buyers to 39 per cent from 25 per cent the previous year.

“This led to trade buyers representing the largest volume of exit routes in 2018, followed by PE and other financial buyers at 37 per cent, according to the report. Initial public offerings and capital market exits continued to represent the lowest share of recorded exits.