PRIVATE EQUITY

Steady rise in deal volume indicates Africa’s economic resilience

1257 reported deals worth a total of $21.7billion occurred between 2015 and 2020 in Africa

In Summary
  • A report by the African Private Equity and Venture Capital Association revealed that despite the economic fallout the number of private equity deals rose from 230 in 2019 to 255 in 2020.
  • The value of the deals on the other hand marginally declined to $3.3billion in 2020, from $3.8billion in 2019.
Image: STAR ILLUSTRATED

The private sector in Africa remained resilient in 2020 during the time of global uncertainty facing a less severe down turn compared to other regions in the world, a new report has revealed.

The report by the African Private Equity and Venture Capital Association(AVCA) revealed that despite the economic fallout precipitated by the Covid-19 crisis the number of private equity deals rose from 230 in 2019 to 255 in 2020

The value of the deals on the other hand marginally declined to $3.3billion in 2020, from $3.8billion in 2019.

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

According to the African Development Bank’s 2020 African Economic Outlook, Africa's economy is projected to grow by 3 per cent in 2021, with the shift by businesses from survival mode to rebuild offering sizable gains and new opportunities for Africa's companies and investors.

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

In terms of sectors, financials, information technology and consumer discretionary reported the most activity in 2020 attracting 47 per cent of deals by volume.

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

AVCA said that 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.

Over the 2015 to 2020 period, Southern Africa attracted the most significant number of deals - 364, totalling up to US$4.4bn in value. West Africa came second with 313 deals but attracted the highest value of deals at $5.4billion.

North and East Africa followed with 220 deals at $3.6billion and 237 at $2.8billion 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 per cent), followed by exits to PE and other financial buyers, representing 33 per cent of the total number of exits last year.

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.