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Gladys Makumi, director of corporate finance services at Deloitte. PHOTO | DIANA NGILA
By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com
Posted Tuesday, June 28 2016 at 18:59
IN SUMMARY
- Nine out of 10 private equity firms planning to invest in East Africa in the next one year prefer to put their money in Kenya citing a vibrant private sector and ease of doing deals.
- The survey polled 101 PE firms across East, West and Southern Africa where only 50 per cent of those looking to make East African investments said they would consider Uganda or Tanzania and 38 per cent Ethiopia despite all the economies growing at a rate above five per cent.
- Analysis by Burbidge Capital shows that the region completed 19 PE deals in the four months to April 2016 compared to 12 over a similar period in 2015.
Nine out of 10 private equity firms planning to invest in East Africa in the next one year prefer to put their money in Kenya citing a vibrant private sector and ease of doing deals.
A survey by consultancy Deloitte on the private equity sector found that the firms looking to invest in Kenya also plan to ride on a growing middle class, which makes investment in the fast moving consumer goods (FMCG) segment attractive.
The survey polled 101 PE firms across East, West and Southern Africa where only 50 per cent of those looking to make East African investments said they would consider Uganda or Tanzania and 38 per cent Ethiopia despite all the economies growing at a rate above five per cent.
“Part of the reason why Kenya was considered attractive is that deal activity is high and entrepreneurs are considered more approachable, while most of the East Africa-focused funds have their head office in the country. Some favour local expertise in deploying capital and so they feel comfortable investing where they have a physical presence,” said Deloitte director for corporate finance services Gladys Makumi.
“This is interesting considering Kenya is going into an election period.”
Kenya has also managed to avoid some of the huge currency devaluations that have blighted a number of competing destinations such as Nigeria, which means that investors are not looking at heavy exchange losses when they exit their investments.
The region has been receiving new attention from investors as the respective economies continue to outperform the sub-Sahara Africa economic growth projected by the International Monetary Fund (IMF) to average three per cent this year.
According to the IMF, Kenya is expected to grow by six per cent this year, with Ethiopia at 10.2 per cent, Tanzania at 6.9 per cent, Rwanda at 6.3 per cent and Uganda at 5.3 per cent. The IMF projects the SSA growth will average three per cent this year.
Analysis by Burbidge Capital shows that the region completed 19 PE deals in the four months to April 2016 compared to 12 over a similar period in 2015.
READ: PE deals in East Africa up 50pc but value lags behind
According to the Deloitte survey, investing firms are expected to continue to put in capital in asset-backed industries such as manufacturing, healthcare and retail as well as in the financial services sector.
Most of the PE firms are looking to deploy new capital having done some significant fund raising in the past year — such as Helios Partners and Actis — which bodes well for East Africa investments.
Ms Makumi said although over 95 per cent of those looking to raise new funds are looking to source it from Europe, Britain’s exit from the EU is unlikely to hamper their effort since they source funding from DFIs which are usually resistant to short-term shocks.
Nine out of 10 private equity firms eyeing East Africa prefer Kenya
