Africa GDP growth woes belie private equity optimism

Subject

Outlook for private equity in sub-Saharan Africa.

Significance

Private equity (PE) firm Actis on June 6 announced that it has raised 500 million dollars for its third African property fund, exceeding its 400-million-dollar target. The fund will invest in office, retail and industrial projects. The region's PE scene is buoyant, despite market jitters caused by the economic downturn. Last year, PE firms raised a record 4.3 billion dollars, up from 2.0 billion dollars in 2014 and 3.5 billion in 2013.

Impacts

• South Africa's share of PE investment will decrease owing to adverse sentiment linked to an expected credit rating downgrade.
• State-backed UK investor CDC's 140-million-dollar investment in ARM Cement will boost East Africa's regional cement industry.
• Spurred by low domestic growth, Nigerian and South African investors will seek higher returns in neighbouring states.
• Efforts to cut costs in PE investors' portfolio firms by dismissing employees will face resistance in states with strong labour unions.