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Africa: The New Private Equity Frontier

Investing in Africa probably doesn’t sound too lucrative to your average fund manager. The thought of investing in Africa probably seems too risky to most investors with its inadequate infrastructure, corruption, and weak rule of law, the negatives seem to outweigh the positives. Despite these concerns, though, investment in Africa is becoming much more popular, especially among private equity firms.

Although the BRIC countries continue to be a top choice for investors looking to invest overseas, investment in these countries have fallen in the past few years.1 This has not been the case in Africa though.2 On the other hand, investments in Africa have continued to increase since 2010.3

Historically, smaller domestic investors consisted of the majority of investors in Africa, and still for the most part do consist of smaller domestic investors.4 However, the composition of investors in Africa is changing.5 Large global PE firms are looking to take advantage of the investment opportunities in Africa.6

Investments in Africa are increasing for a variety of reasons.7 One big reason is that the middle class is growing at a rapid rate in those countries.8 More than a third of the countries in Africa expect to see economic growth greater than seven percent in upcoming years.9 The big Private equity firms are hoping to capitalize on Africa’s rapid growth.10PE firms are looking to invest in sectors such as telecom, banking and natural resources, and other industries that will benefit from Africa’s growth.11

Some critics may argue that Africa is not quite a practical place for investment. One reason for this would be their infrastructure or lack thereof. The prevailing notion of Africa’s infrastructure is that it is far outdated. However, Africa has taken great strides to improve their infrastructure.12 Over the past five years Africa has improved their infrastructure with new roads, airports, power plants, and communication networks.13 In addition, Africa has launched a number of programs aimed at improving infrastructure including the programme for infrastructure development in Africa, New Partnership for Africa’s Development, and the African Development Bank.14

Despite this promising economic outlook for Africa, Africa still has a long way to go. Access to funding in Africa is still very scarce. Consumer and commercial lending markets in Africa are almost non-existent because the risks are perceived as being too high.15 In addition, interest rates are also very high for investors.16

Although investing in Africa undoubtedly comes with great risks, it may also come with great rewards. This is especially true considering the global economy as a whole. While the other emerging markets seem to be shrinking, Africa has steadily continued to grow.17 This should make every fund manager at least consider investing in Africa.


  1. Kathleen Caulderwood, Private Equity Investments in Africa are Up 136% This Year and Here’s Why:, International Business Times, February 19, 2014, http://www.ibtimes.com/private-equity-investments-africa-are-136-year-heres-why-ernst-young-1556635

  2. See id. 

  3. See id. 

  4. Id. 

  5. Id. 

  6. Id. 

  7. Kathleen Caulderwood, Private Equity Investments in Africa are Up 136% This Year and Here’s Why:, International Business Times, February 19, 2014, http://www.ibtimes.com/private-equity-investments-africa-are-136-year-heres-why-ernst-young-1556635

  8. Id. 

  9. Id. 

  10. Id. 

  11. Id. 

  12. 9 Reasons to Invest in African ICT, IT News Africa, August 2, 2011, http://www.itnewsafrica.com/2011/08/9-tech-investment-opportunities-in-africa/

  13. Id. 

  14. Id. 

  15. Id. 

  16. Id. 

  17. Supra at Note 1. 

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Bryan Card

Vol. 3 Associate Editor