PE-Investors favour Kenya for Deal Inflows

Kenya attracted private equity (PE) investments of $1.2 billion (Sh120 billion) in the two years, ended December. This development has secured the country as the favoured deal inflow destination in East Africa – by PE-investors.

This outlook has marked a sharp increase from the Sh480 million that investors had invested in the country, during the preceding period (2015 and 2016).

A new report tracking PE investments shows that Kenya accounted for 87% of the total $1.4 billion (Sh140 billion) investments made in the region in 2017 and 2018.

Highest deal values were recorded in Kenya at $1.2 billion, in part due to the high number of deals, as well as the size of businesses, reads the report by consultancy KPMG and the East Africa Private Equity and Venture Capital Association (EAVCA).

Kenya remains the most popular investment destination in East Africa, with agribusiness, financial services and fast-moving consumer goods (FMCG) being the dominant sectors, – state the report by KPMG and EAVCA.

Deal volumes in Kenya in the review period stood at 61, accounting for 73% of total valued transactions. Uganda came second, followed by Ethiopia – according to the report.

The top deals in Kenya over the past two years include Actis’ $300 million (Sh30bn) equity investment in Kipeto Energy, in which it took an 88% stake.

Moringa Fund also made a $100 million (Sh10 billion) equity investment in Asante Capital EPZ, a Kenyan company developing tree plantations and tropical crops (mainly ginger, moringa and eucalyptus).

Digital lender Branch International attracted a total investment of $70 million (Sh7 billion) from a consortium of institutional investors, including Victoria Park Capital, IFC Ventures and Andreessen Horowitz.

Abraaj Group, which is currently facing liquidation after defaulting on loans, spent $171 million (Sh17 billion) to acquire Avenue Hospitals.

AfricInvest made its initial Sh5.7 billion investment in insurance group Britam Holdings, in which it has subsequently built up its stake to 17.5%, after buying more shares on the Nairobi Securities Exchange (NSE).

Investment into Kenya is diversified through 10 sectors, attracting PE funding, the report says. It identifies the top industries as comprising financial services, FMCG, telecommunications, manufacturing, agribusiness and transport among others.

Local pension funds are becoming a significant source of capital for PE-firms that seek to raise their exposure to alternative investments that transcend traditional investment instruments, such as bonds, listed stocks and property.

Source: ASV & Business Daily Africa.