Private equity comes out of the closet: private equity is becoming an increasingly important source of finance in East Africa. Wanjohi Kabukuru reports on some important private equity deals struck over the last few years in Kenya.

Author:Kabukuru, Wanjohi
Position::COUNTRYFILE
 
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As a rule, private equity (PE) has not played as important a part in the commercial life of East Africa as it has in advanced economies but it is rapidly moving into fashion as Africa's capital markets continue to expand and diversify.

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There was considerable buzz around the SuperReturn Africa conference in Nairobi as the major players in the continent's PE sector discussed the rapidly emerging prospects available in Africa today.

"Africa is among the last great frontiers for private equity," said Stephen Murphy, managing director at Citadel Capital. "This simple fact often leads to the assumption that African private equity investments are too risky, too commodity focused and too difficult to exit, to say nothing of the view that it is too difficult to find an established general partner with whom to invest."

Murphy said the assumptions were wrong. Africa, he insisted was ripe for greater volumes of private equity. There have been comprehensive political and financial reforms across the continent, it has a population of around one billion, some of the world's fastest-growing economies and contains the some of the most essential commodities and minerals that the global industry requires.

In addition, it has strong sovereign credits worth around $450bn, the growing presence of some of the world's largest corporates and, surprisingly, a neglected PE sector just waiting to be exploited.

Citadel Capital is one of the leading PE firms in Africa and the Middle East with footprints in 15 countries and encapsulating 15 industries estimated to cost $8.7bn.

"Africa is about opportunity, the opportunity to do better because of brighter macroeconomic fundamentals, and on a micro level because of its natural resources; the opportunity to create and grow new businesses and the opportunity to improve existing businesses," said Murphy.

Ten years ago, only one African country offered viable prospects for private investors. Today there are at least 21 nations out of Africa's total of 54 offering massive openings for PE - and the number is growing.

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Africa's consumer market, value added exports, high yielding agricultural sector, profitable extractive industries and high impact infrastructure...

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