Diverse insights into Africa

In line with global trends, most retirement income in Africa is funded by its governments, but pension coverage on the continent remains low compared to the rest of the world.

The African insurance industry is largely underdeveloped when comparing it to the rest of the world, with its gross premiums written (GPW) accounting for 1.56% of global GPW.

Development finance is critical to meeting Africa’s needs, and a slowdown in the global economy is making it increasingly difficult for the continent to access international financial markets.

Africa’s considerable economic and demographic variations have translated into vastly different banking sectors per country.

Apart from the Stock Exchange of Mauritius (MUSE) that experienced a 57% increase in daily turnover, all other exchanges saw a decline in their daily turnovers for 2019 when compared to 2018.

In this section, the market conditions that influence private equity pricing in Africa are covered.

The overarching driving factor for the increase in cost of equity for the different African regions is the potential shift in investor sentiment, away from emerging and frontier markets to safer, developed markets.

Africa’s PE fundraising activity remains stable.

The continent’s growing population and middle class drives sector investment activity and in 2018, East Africa surpasses South Africa as the region with the highest level of PE transactions

African countries experienced a decline in EV/EBITDA multiples reflecting the challenging investment and growth outlook as the commodity cycle starts to turn again.

There was a convergence of private equity and listed equity multiples at around 8x EV/EBITDA in 2018.

The total value of the debt outstanding is concentrated in five countries, making up 81% of the total bonds outstanding

The analysis covers the two countries with the largest sovereign debt balances. In both countries, local investors exceed foreign investors.

Africa will have to overcome challenges to gain more private sector investment to meet its infrastructure development funding deficit.

Alternative structures and avenues are opening, allowing investors to access this asset class more readily.

Several road infrastructure development projects are in progress in West Africa and East Africa that could set a precedent for other projects on the continent.

Southern Africa still has the continent’s largest rail network, but East Africa and West Africa have substantial rail expansion projects on the go that could see rail connectivity increase, linking several countries.

Although conventional thermal power makes up the bulk of capacity in South and North Africa, there is good potential for growth in the use of renewable energy on the continent.

Despite the majority of all African trade being through imports and exports at its largest regional ports, the continent’s ports handle only 6% of global water borne traffic and only 3% of global container traffic (Source: World Atlas).

The property market has long received attention from Africa’s institutional investors, especially in countries with relatively small and under-developed capital markets.

New developments in the retail sector over the past ten years have increased the supply of A-grade shopping centres and contributed to increased rental rates in local currency over this time.