Sector focus

Investment activity in consumer discretionary has increased from 15% in FY17 to 17% in FY18 and investment activity in consumer staples has increased from 10% in FY17 to 12% in FY18.

Consumer products have historically been the focus of private equity in Africa, due to the perceived opportunities resulting from the continent’s growing middle-class. Within consumer discretionary, investor interest has moved toward online retail, education services, advertising, and publishing; possibly showing a shift from a lower to a higher income group.

The increases in the above mentioned sectors are predominantly driven by the continent’s increasing population and middle class.

The other two traditionally large sectors for investment, Financials and Industrials, have also attracted similar levels of investment in the current year when compared to the prior year. The above mentioned sectors have contributed a total of 11% and 12% of the total investment activity, respectively.

Information Technology (IT) has been the most attractive PE investment sector in Africa over the past three years. In 2018, 30% of all African PE transactions were in the IT sector, up from 27% in 2017. Investment in IT in Africa mostly consists of payment processors and integrated software and services.

South Africa, Nigeria, and Kenya attract the highest level of IT investment on the continent.

These investments are positioned to take advantage of the continued increase in internet usage due to growing smartphone penetration.

Africa’s large and growing youthful population is expected to continue to drive demand for internet software and services due to their affinity for technology.

Industrials remains another popular sector for investment, including the construction, engineering, transport, logistics, equipment and machinery industries. Investment is mostly in the light industrial sector with a focus on import substitution.