AfricaBusiness+, a Jeune Afrique Media Group outlet that extensively covers business deals in Africa, recently presented a ground-breaking ranking of private equity firms operating on the continent. The “Private Equity Powerlist” is designed as a critical investment decision-making tool, with the aim of identifying leading private equity players in Africa and assessing their operational capabilities.
The introduction of the Powerlist is particularly timely given the current economic climate in Africa. The continent faces many challenges such as rising interest rates, inflation, devaluations and political instability. In addition, the impact of the global energy crisis adds to the complexity of the business environment. After a surge in activity during the post-Covid recovery phase in 2021 and 2022, where transactions topped $7 billion each year, 2023 sees a return to more typical levels of activity. This change is reflected in the Powerlist results, which show a marked drop in activity, with only a few of the top 35 asset managers making more than ten trades over the year.
One of the key takeaways from the Powerlist is the emerging trends and geographic focus of investments. The average deal size is shrinking and large-scale deals are becoming rarer. The slow start of the African Continental Free Trade Area (AfCFTA) and the lack of integration among African economies are major factors affecting business activities. Consequently, the majority of capital remains concentrated in leading jurisdictions such as Nigeria, Kenya, Morocco, South Africa and Egypt. This geographic concentration extends to the location of general partners (GPs), with a significant presence in South Africa and Nigeria, as well as financial centers such as Mauritius and London. Interestingly, London’s attractiveness to venture capital interests in Africa appears to be unaffected by Brexit.
The Powerlist also sheds light on industry investment trends. The consumer goods sector, driven by Africa’s demographic growth and the rise of the middle class, remained robust, accounting for a significant share of investment. Despite global economic headwinds, this sector continues to attract attention, although private equity firms are increasingly wary of inflation and local currency weaknesses affecting dollar revenues. Similarly, the healthcare sector is experiencing capital movement, characterized by major deals and a consolidation trend. Prominent examples include transactions in Morocco’s medical equipment distribution industry.
The financial sector, however, stands out as the most attractive sector for investment, drawing almost 23% of investments since early 2023. The pace of deals in this sector remains brisk, with notable transactions such as Enko Capital’s exit from Imperial Holdings in Nigeria.
Despite these sector-specific successes, Africa’s private equity landscape faces broader challenges. The continent, projected to raise about $3 billion in capital by 2023, remains a fringe player in the global private equity industry, which is expected to raise $1.1 trillion. The reluctance of international private investors and the withdrawal of major firms such as Carlyle and KKR highlight Africa’s isolation in this sector. Key issues include difficulties in achieving
exits, the relatively small size of the companies and the lack of comprehensive data. These challenges must be addressed to meet Africa’s significant financing requirements.
The methodology behind the Powerlist is rigorous and comprehensive, focusing on a specific category of PE firms to ensure comparability. It excludes companies primarily involved in infrastructure or venture capital and assesses the number of investments and exit transactions in the past year, along with total assets under management. Data was meticulously collected over three months from a variety of sources, including direct company contacts, open source reports and industry databases, ensuring the reliability and accuracy of the Powerlist.