Private equity in Africa Is Booming & Transforming Local Economies

Introduction

From Cape Town to Cairo, African economies are growing rapidly and attracting global attention from investors. Yet, despite their potential for rapid growth, Africa’s private equity markets remain dwarfed by other emerging countries in Latin America or South East Asia. This article explores the ways that private equity investment can fuel Africa’s continued economic rise and the benefits that this booming industry offers workers across the continent.

Private equity in Africa is booming

Private equity (PE) has been on a growth spurt in Africa, with the number of PE funds in the region jumping from one in 2003 to over 100 today. The number of deals has also increased steadily: In 2010, there were just 13 transactions; by 2016 this number had more than tripled to 44.

These figures reflect a general increase in investor interest that was driven by several factors: rising economic growth and increasing private sector activity; burgeoning wealth among African households; urbanization; and a growing middle class with greater purchasing power.

Investing in African companies generates outsized returns

In a market where the average return is 20–30% over a three-year period, investors are seeing high returns on their investments. That’s a welcome change from other regions, where many companies have failed to generate such strong returns.

African companies are still undervalued compared to those in Asia and Europe. And while there are reasons that could be attributed to this phenomenon (such as lower economic growth rates), the potential for future returns is high: household consumption is increasing rapidly across Africa, with spending by households rising by 6.3% annually between 2009 and 2014 according to figures from Deloitte Touche Tohmatsu Limited. This consumer boom means that it’s important for investors looking at Africa’s private equity scene not only look at historical financial analysis but make sure they’ve done their homework when it comes time making investments themselves!

Private equity investment can boost job creation and income growth

You’re probably familiar with the benefits of private equity investment, but do you know how it can boost job creation and income growth?

Private equity can help create jobs by increasing productivity in a company. By making sure that businesses have the resources they need to grow and improve their operations, private equity investors are able to create more jobs while also increasing exports, foreign direct investment (FDI), government revenues and household incomes.

For example: Let’s say that you own a manufacturing plant in Tanzania that employs 1,000 locals. You have been struggling with production costs because your equipment is old and outdated, so you decide to seek out financing from an investor who has experience investing in Africa’s manufacturing industry. After reviewing your business plan together over the course of several months, the investor agrees to provide $1 million for new machinery so that your factory can ramp up production capabilities significantly — and hire more people as a result!

Private equity can help build a more efficient, export-oriented economy

Private equity is a great way to help companies become more efficient, export-oriented and competitive. This can be done in several ways:

• Increasing productivity by investing in production equipment or technology
• Increasing market share through sales and marketing efforts
• Improving the management team’s ability to make strategic decisions by providing specialized training

Private equity can be a win for local workers and foreign investors alike

Private equity can be a win for local workers and foreign investors alike.

As an industry, private equity is only in its infancy in Africa. But its potential to transform local economies is large and growing, as evidenced by the growing number of PE firms flocking to invest on the continent.

In addition to providing capital and technology that creates economic growth, private equity firms also bring valuable knowledge and experience from working around the world. This expertise can help local companies grow into sustainable businesses that are better positioned to compete globally.

In addition to the benefit of making your own money and taking care of your loved ones, you’ll also be contributing to supporting local businesses. You see, private equity funds often invest in local companies who want to expand their business but don’t have the capital or resources. This can be a win for everyone: the foreign investor gets a return on their investment, local workers get jobs by providing services for that company and investors get additional income from dividends.

As an added bonus, you may end up learning how to speak another language! A lot of these firms are international companies with multiple offices around the world; if you’re working in one country where English isn’t spoken as much as others (like South Africa), then this could help improve your language skills faster than trying out other methods like taking classes after work hours or simply reading books at home when there’s downtime between projects at work.

Private equity provides an engine of growth for Africa’s economy

• Private equity is a key source of capital for private companies in Africa.
• Private equity helps build an export-oriented economy by providing capital to businesses that have the potential to grow and create jobs.
• It’s not just about investing for financial returns — it’s about investing in people, ideas and places that can change lives.

Conclusion

To sum up, our findings suggest that private equity can be an important tool for creating jobs and promoting economic growth in Africa. Private equity brings new capital into the economy, which has a multiplier effect on other sectors as it flows from company to company. It also creates jobs directly by increasing the number of people working for private-equity owned firms. And finally, it helps build export-oriented companies that bring more income into the country and help spur overall economic growth. The next time you hear someone say that private equity isn’t good for developing countries because investors only care about making money quickly — think again!