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New report highlights African PE sector’s resilience

Africa Global Funds
March 30, 2021, 11:13 a.m.

Word count: 559

As a result of the economic fallout precipitated by the Covid-19 crisis, the value of PE deals marginally declined to $3.3bn in 2020, from $3.8bn in 2019, according to the new AVCA report.

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As a result of the economic fallout precipitated by the Covid-19 crisis, the value of PE deals marginally declined to $3.3bn in 2020, from $3.8bn in 2019, according to the new AVCA report.

However, the number of deals within the same period rose from 230 in 2019 to 255 in 2020.

This is according to the African Private Equity and Venture Capital Association (AVCA)’s 2020 Annual African Private Equity Data Tracker report.

Although the PE fundraising dropped to $1.2bn in final closes in 2020 from $3.9bn in 2019, the Association’s overview of industry activity and capital-raised indicates that investor appetite in African PE has remained robust with $18.1bn of fundraising between 2015-2020.

The report shows that 1257 reported deals worth a total of $21.7bn occurred between 2015 and 2020.

In terms of sectors, Financials, Information Technology and Consumer Discretionary reported the most activity in 2020 attracting 47% of deals by volume.

Deals in technology-enabled companies represented more than half (55%) of the investments recorded in Africa in 2020.

These findings are testament to the disruptive and rapidly evolving industries and services that are accelerating Africa’s digital transformation – mobilising both local and international investment as a result.

The report also provides key learnings from doing business in Southern, West, North and East Africa, detailing the median deal size, in addition to the number and value of reported PE transactions, in each region and nuanced insight into the political, economic and regulatory environments for key markets with illuminating case studies for each region.

Over the 2015 to 2020 period, Southern Africa attracted the most significant number of deals - 364, totalling up to $4.4bn in value.

West Africa came second with 313 deals but attracted the highest value of deals at $5.4bn.

North and East Africa followed with 220 deals at $3.6bn and 237 at $2.8bn respectively.

In total, 270 African PE exits were reported between the 2015-2020 cycle.

The number of PE exits decreased to 33 in 2020, down from 44 in 2019, reflecting the global economic downturn spurred by the global healthcare crisis.

Mirroring trends identified by AVCA in 2019, exits to trade buyers were the most common exit route in 2020 (46%), followed by exits to PE and other financial buyers, representing 33% of the total number of exits last year.

Notable exits announced in 2020 include African Infrastructure Investment Managers' exit from Cookhouse Wind Farm in South Africa; Actis' exit from GHL Bank, a full-scale commercial bank in Ghana; Helios Investment Partners' exit from Africatel (Unitel), a sub-Saharan African telecommunications services provider; and AfricInvest's exit from Esprit, the leading private university in Tunisia.

Africa's PE industry continues to stand by its fundamental principles: providing capital to maximise companies' growth and progress Africa's economies, especially as the continent recovers from the impact of the Covid-19 pandemic.

Abi Mustapha-Maduakor, CEO at AVCA, said: "GPs and investors continue to find new ways to succeed in a challenging fundraising environment. As the report finds, geographic and sectoral expansion creates new opportunities to align impact with yields. Digital innovation in healthtech, fintech, edtech, cleantech and agritech are engineering Africa's economic transformation.”
“Against these evolving trends, Africa's PE industry remains robust, with 255 deals reported on the continent throughout 2020, totalling $3.3bn in value. Overall, we anticipate an increase in PE and VC firms actively investing across the continent throughout 2021."

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