The emergence and position of Africa as a modern deal-making haven is one of the most talked about trends in the financial and private equity (PE) sectors so far in 2014. It is something we have covered ourselves in recent weeks, including here, where we looked at how PE is now positioned as the key economic driver across all of Africa, and in this report where we looked at why Private Equity is so in love with Africa in the first place.
Stories of global PE firms targeting the continent continue to emerge, and one of the latest, as reported by Private Equity News, is that Kohlberg Kravis Roberts (KKR) and Carlyle Group are currently in the process of growing their African-based teams.
This move appears to be in recognition of the knowledge that managing investments remotely is no longer sustainable when it comes to Africa. A local presence and being “where the action is” has not only been shown to lead to more successful investments, but it also increases the opportunities these PE giants will have to find leads in the first place and secure the deals that will be increasingly available, both across the continent and in specific locations.
The most notable appointments reported by Private Equity News demonstrate the extent that these PE giants are now pursuing opportunities in Africa.
These appointments are:
• Fola Aiyesimoju, who currently works for Stanbic IBTC Bank, joins KKR in May as a principal.
• Braam Verster and Steve Burn-Murdoch, of Helios Investment Partners and Actis respectively, join Carlyle’s growing African team. Africa continues to grow as a huge PE opportunity. What is notable and perhaps the biggest positive about the continent is that the current surge in activity does not appear to be leading to a plateau.
The current trend can be expected to remain strong for a number of years. PE houses, such as Blackstone Group, and other businesses that have been present in Africa for a number of years are perhaps best positioned to take advantage of the deals that are now increasingly becoming available, although it cannot be said that KKR, Carlyle, and others who are relatively new to the continent have missed the boat.
Why is Africa Such an Opportunity?
Nearly all of the economic indicators and growth projections related to Africa are positive. PricewaterhouseCoopers said in March 2014 that Africa’s workforce will eventually be bigger than China’s.
Given that Africa is a continent and China a country, this might not appear impressive on the surface, but considering where Africa currently is and the size of the Chinese economy at present – while still classed as a developing country – demonstrate clearly the size of the opportunity.
Education standards are improving, the workforce is young and willing to learn, and the overall standard of living is rising in-line with increased wealth and the emergence of a true middle class across the continent. In the coming weeks and months, we expect a number of other PE houses to visibly increase their African presence.