Private equity (PE) fundraising activity on the continent remained relatively stable. The total value of PE fundraising in 2018 reached USD 2.7bn, up from USD 2.3bn in 2017 and USD 2.6bn in 2016.
Development Finance Institutions (DFIs) make up the largest share of investment in African PE, while PE fund of funds are also making substantial commitments.
A total of seven funds raised capital in 2018, the largest being Africa Infrastructure Fund, ECP Fund IV, Frontier Energy II and Maghreb Private Equity Fund IV.
Africa Infrastructure Fund closed at USD 982m and will have a Pan-African focus.
ECP Fund IV closed at USD 640m and will have a Pan-African focus.
Frontier Energy II closed at USD 227m and will have a sub-Saharan Africa focus.
Maghreb Private Equity Fund IV will cover North Africa and reached a final close of USD 221m.
In global terms, the largest commitments into private equity funds were made by pension funds and endowment funds. The long-term time horizon of a private equity investment makes it an ideal vehicle for pension funds and endowment funds to deploy capital. Development Finance Institutions (DFIs) make up the largest share of investment in African PE, while PE fund of funds are also making substantial commitments.
Fundraising activity on the continent remained relatively stable, most regions showed an increase in cost of equity, transaction activity is up since 2017, the upward trend in multiples continues and Information Technology and Consumer Discretionary remain the two sectors with the highest investment activity.
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.