Trends That Will Drive Africa’s Private Equity Market In 2018

According to Quantum Global’s Africa Investment Index, the leading African investment destinations

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When growth rates of private equity market are declining around the world, Africa is witnessing an ever-greater significance, and is now a key driver of the market trends. According to Quantum Global’s Africa Investment Index, the leading African investment destinations – including Morocco, South Africa, Botswana, and Zambia – together marked Foreign Direct Investment (FDI) of $13.6 billion in 2015. This indicates a growing interest of global investors in the continent.

Private equity involves a significant share of public sector financing in developing markets, such as Africa. Jean-Claude Bastos de Morais, African entrepreneur, highlights the major trends that are expected to take the Africa’s private equity space by storm in 2018.

1. Enhanced Deal Flow

Despite political ambiguity in countries like Zimbabwe and South Africa, there is major deal appetite and drift in quality assets in Africa. Further north and west, democratic elections have passed in several countries, including Angola, which witnessed its first reassigning of power to the opposition party since peacetime in 2002. This will provide investors greater confidence as compared to the previous years. Deal flow remains strong and, provided  the region’s economic growth, is probable to remain so in 2018.

2. Economic Revival in West Africa

Enhancement in commodity prices, together with the region’s projected economic recovery will impel more investments in West Africa. Nigeria and Angola will gain from analysts’ projections that oil prices will rise to over $58 per barrel in 2018, lessening public expenditure pressures. Private equity investors, along with other state players, such as China, will also gain from a budding uptick in public sector spending on imperative infrastructure works. A greater demand for PPPs and general private capital in governmental projects are also trending.

3. Nigeria Attracting More Investments

With Nigeria’s economy expected to grow to $650 billion by 2022, medium to long-term prospects seem positive, with strong fundamentals reinforcing growth expectations, mainly in the non-oil sectors of the economy.

4. Enhanced Global Liquidity Conditions

With greater oil production and oil prices to rise throughout 2018, the foreign exchange liquidity rates are expected to surge across the world. Africa’s private equity will hence offer a much higher rate of return, juxtaposed with cash and fixed income assets.

Some of the continents’ major economies, including Angola and Nigeria, have reined in spending and demonstrated fiscal moderation, such as introducing currency controls. These measures have resulted in enhanced liquidity.

Progressing in 2018, Africa witnesses a year of growth, and will continue to be a potential destination for private equity investors.