Geographic focus

Total private equity (PE*) transaction activity has increased by 10% from 2017 to 2018 as fund managers continue to deploy the significant amount of dry powder created in the market during the 2013 and 2015 fundraising years.

While South Africa historically has made up a large proportion of PE transaction activity, its concentration has reduced significantly from 50% in 2009 to 22% in 2018. From 2017 to 2018 alone, transaction activity in South Africa has decreased by 26% and East Africa has surpassed South Africa as having the most substantial proportion of PE transactions. The proportion of transaction activity has increased in East Africa from 18% in 2017 to 25% in 2018.

In South Africa, limited growth opportunities are the catalyst for the downward trend in investment activity. In 2018, the South African economy was plagued by sluggish GDP growth, mismanaged state-owned enterprises, increasing unemployment, structural economic bottlenecks, and political and policy uncertainty. In East Africa, the IMF predicts the region to have the highest GDP growth rates (above 6%) for the periods 2018-2023. Kenya accounts for 69% of East Africa’s 2018 investment activity. It continues to dominate the region’s PE investment landscape because of the country’s large and diversified economy, probusiness government policies, and relatively low dependence on extractive commodities.

Following the trend seen in 2017, there was a significant uptick in deal activity in Egypt in 2018. Deal activity in Egypt has increased from 9% in 2017 to 15% in 2018. Egypt maintains its ranking as the number one investment destination in Africa by RMB’s Where to invest in Africa 2019 report.

Investor sentiment has improved in Egypt due to its large and diversified economy and improved business environment stemming from recent investment-related legal reforms. Deal activity in Nigeria has increased slightly from 14% in 2017 to 15% in 2018. The increase in Nigeria is driven by improved investor sentiment, which results from higher than expected GDP growth, recovery of the oil price, government incentives and improved foreign exchange liquidity.

[*Note: The definition of PE when looking at the number of transactions taking place include transactions in venture capital, real estate and private equity sectors.]