SA Private Equity gains confidence

Africa’s biggest economy accounted for more than 70 percent of the sub-Saharan region’s $2.9 billion of private equity deals in 2008, but this share is falling, said Warren Watkins, head of private equity at the accountancy firm’s South African unit.

“More than 50 percent of total private equity activity is anticipated to come out of South Africa. However, the levels of interest in sub-Saharan Africa are bigger than at any time in the past,” he said.

Citing a KPMG survey of more than 100 South African industry players at a conference last month, Watkins said 46 percent of private equity managers saw “Africa excluding South Africa” as the “next meaningful opportunity”. Conversely, only 42 percent saw South Africa as the future.

“If you had asked that question five years ago you would have got 90-10,” Watkins said.

Similarly, 58 percent of respondents said they planned to invest in Africa outside South Africa in the next year, and 59 percent said they were planning on raising both local and overseas cash specifically for frontier Africa investments.

“Frontier Africa” is loosely defined as anywhere from Senegal in the west to Kenya in the east and the border of South Africa, a relatively developed emerging market, in the south.

In investment terms, it tends to be dominated by Nigeria, the region’s most populous nation and biggest oil producer, but countries as diverse as Uganda, Rwanda, Ghana and Zambia are drawing attention due to economic growth of five percent or more and willing acceptance of foreign capital.

Watkins said the change in attitude stemmed from the success of South African firms such as retailer Shoprite and mobile phone giant MTN in expanding across a continent that will be home to 2 billion people by 2050.

“These guys have gone into Africa and they’re doing quite well. People are saying ‘Hey, there’s a market there’,” he said.

Sectors most likely to attract interest were retail and healthcare, manufacturing, banking and telecommunications, he added.

South African private equity firms had 29.2 billion rand of ‘dry powder’ waiting to be invested at the end of 2008 and were likely to be sitting on a similar pile of cash now because of a dismal 2009, Watkins said.

Deals executed last year would be worth about half 2008’s total, he estimated.

One Comment on "SA Private Equity gains confidence"

Retail South Africa on Thu, 4th Mar 2010 1:20 pm

bearing capital Total of equity, minority interests, shareholder’s loans and deferred tax liability divided by total assets. Retail South Africa

SA Private Equity gains confidence

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