Private equity bets in Africa over the past decade have paid off

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Political uncertainty, weak currencies and the slowdown in growth of Africa’s largest economies did not hurt the pace of private equity exits in 2017, new data show.

Last year, 49 private equity exits were recorded across the continent by the African Private Equity and Venture Capital Association (AVCA), only one less than 2016, and the highest year on record since 2007. However, most of those exits, around 37% were to other financial buyers, mainly other larger private equity firms. Insiders see that as a necessary step in a region where financial market options such as initial public offerings are limited due to the small size of the public equity markets. Overall, the activity, combined with relatively strong returns – AVCA says its members remain optimistic despite the continent’s challenges.

The new report draws from a pool of data on exits between 2007 and 2017 by over 100 private equity firms. It focused on full exits, through secondary private equity buyouts, IPOs, and capital markets, with a minimum total value of $1 million.

Private equity exits in Africa have steadily increased year on year for much of the past decade, following strong bets on the promise of economic growth on the continent. In 2016 alone, private-equity players invested $3.8 billion in 145 deals across Africa. In total, private equity invested across Africa since 2011 has surpassed $20 billion.

South Africa dominates as the market with the most exits over the past decade, although exit activity in North Africa in particular has increased in the last two years. South Africa saw more exit activity than Kenya, Nigeria, Egypt, and Ghana combined – between 2007 and 2017. The utilities sector saw the most exits between 2007 and 2017. AVCA expects investors to look to the areas of fintech, education, healthcare, consumer products, and energy for their next bets.

And there’s good reason to stay bullish: Between 2007 and 2017, private equity investment across the continent – outperformed public market returns by 70%.

Source: African Strategic-Ventures (ASV) & Quartz Africa.