Deloitte releases the 2024 Deloitte Africa Private Equity Confidence Survey

Key highlights of the 2024 Deloitte Africa Private Equity Confidence Survey (PECS):

Economic climate:

• Africa’s economic climate is expected to improve across all regions.
• The top regional focus of funds is on Kenya in East Africa, Tunisia in North Africa, South Africa in Southern Africa, and Nigeria in West Africa.

Investment landscape:

• In light of an expected uptick in the growth outlook in the next 12 to 24 months, exit activity is expected to pick up across all regions, with secondary sales to PE and sales to strategic investors expected to dominate exit routes.

Fundraising environment

• Respondents highlight Governments/DFIs (sub-Saharan Africa) or fund of funds (North Africa) as the most preferred third-party sources in the next 12 months.

Sector focus

• Agriculture/Agribusiness and Financial Services remain the key investment sectors in most regions. Manufacturing, Healthcare, and Green Energy are also expected to receive increased investor focus in the next 12 months.

Nairobi, Kenya, 28 August 2024 – Deloitte has released the 2024 Deloitte Africa Private Equity Confidence Survey (PECS) report, which provides insights into how private equity (PE) practitioners view the African PE landscape, specifically their future expectations over the next 12 months, as well as regional macroeconomic perspectives across East, North, Southern, and West Africa. The report features expert insights on market dynamics, investment strategies, value creation and protection, exit strategies, and governance and ESG considerations.

The 2024 Deloitte Africa PECS report underscores a continued positive trajectory for PE activity even though deal sizes are expected to remain moderate, with investors navigating challenging conditions and anticipating increased exit activity, primarily through secondary sales. Despite economic uncertainties, PE’s resilience, and ability to identify opportunities have been instrumental in sustaining businesses and driving economic recovery. Kenya, Nigeria, South Africa, and Tunisia continue being Africa’s investment hotspots. This coupled with a favourable fundraising environment in East and West Africa presents compelling opportunities for investors.

In the first half of 2024, Deloitte Africa surveyed general partners (GPs) and limited partners (LPs) to understand their views on the economic climate, the country focus of funds, the investment landscape, the fundraising environment, and the sector focus in East, North, Southern and West Africa over the next 12 months. In East Africa, 62% of respondents believe the economic climate will improve in the next 12 months, with 34% expecting it to remain the same. This contrasts with respondents’ views from last year when most respondents expected the economic climate to remain the same. Kenya continues to be the most attractive economy to investors, with most respondents expecting to focus their funds on East Africa’s largest economy over the next 12 months. Like last year, the next largest focus of funds is expected to be on Kenya, Uganda and Tanzania.

“Timely policy reforms and regulatory changes across East Africa have created an unparalleled opportunity for PE investment. Together, these strategic initiatives craft a landscape offering diverse opportunities for robust returns and sustainable economic development. For PE firms, this convergence of favorable conditions across East Africa is not merely an opportunity for profitable exits, but a significant moment to shape the future of the region’s economic landscape,” said Kevin Kimotho, Deloitte East Africa Private Equity Leader.

Kimotho zeroed in on Kenya and added that despite the Kenyan government recently approving and publishing a list of 26 public institutions earmarked for privatisation, the onerous bureaucratic process, legal hurdles, and divergent
public sentiment could pose headwinds for privatization, whose strategic intent is aimed at creating a more dynamic and private-led economy. Kimotho noted that while public entities poised for privatisation offer sizable investment potential, successful privatisation, and increased investor confidence will largely be predicated on how the government streamlines the privatisation process, which includes rationalising the regulatory framework, simplifying the transaction approval process, and increasing public awareness.

For Ethiopia, Kimotho highlighted that the adoption of a competitive market-based exchange rate regime as part of its structural reforms promised greater clarity and stability for investors, ensuring easier repatriation of profits and boosting overall investment appeal. While Tanzania is expected to continue to attract foreign investment, following the recent introduction of investor and business friendly government policies, oil production in Uganda (expected to kick off in 2025) is anticipated to increase PE activity, especially in the sectors and businesses that will benefit indirectly from oil production.

According to East Africa Private Equity and Venture Capital Association (EAVCA) CEO Christine Maina, investors have recently shown increased innovation in their engagement with businesses, product offerings, and potential returns with the 2023-2024 period seeing shifts in the LP/GP relationship and the power dynamic now favouring LPs. Investors are increasingly scrutinising startups’ performance, revenue generation and profitability potential. The region is also witnessing a move towards smaller investment sizes and alternative capital deployment structures, such as private debt funds and evergreen funds, which are becoming more common alongside traditional closed-ended PE funds.

Maina noted that one challenge in East Africa’s PE landscape has been the relatively few successful exits. However, fund managers are adapting by employing innovative exit strategies and focusing on value creation to navigate macroeconomic complexities. Exit activity in the region is expected to increase as past PE investments come to maturity or fund lives come to an end.
 

For more information contact:

Rebecca Berre-Yeri

Marketing and Communications Manager

Deloitte East Africa

Mobile: +254 719 039 033

Email:   rberreyeri@deloitte.com