Africa as an Investment Destination for Private Equity Funds

Africa as an Investment Destination for Private Equity Funds

Private equity investment in Sub Saharan African continues to improve, and one of the key beneficiaries has been the financial sector due to the high return potential, given the low penetration rates in the continent. Emerging Capital Partners, one of the largest Pan African focused private equity players which has raised USD 2bn towards investment in Africa and deployed USD 1.3 bn, this week exited La Nouvelle Societe d’Assurance Participations SA (NSIA), a West and Central African insurance group, through the sale of its 26.2% stake to the National Bank of Canada and Amethis Africa Finance for an undisclosed amount.

NSIA is a major financial services group that provides a wide range of banking and insurance products to individuals and corporate clients. It is the leading insurance group in West and Central Africa with 25 subsidiaries, 58 bank branches, 42 insurance agencies and assets totaling over 1.2 bn Euros. ECP’s initial investment was made in 2008 for USD 47.7 mn through the purchase of common shares, making it the firm’s largest investment in an African financial services firm.

ECP’s exit is among the high profile exits in the financial services sector in Africa, and this has gone a long way in alleviating the fear by private equity firms on whether they will be able to exit their investments when they want to. There are a number of possible exit opportunities in the continent, which include (i) exiting to the public markets. We have seen an in increase in the number of listed exchanges growing to 29 from 5 over the last 25 years, (ii) exit to strategic investors who want to expand into the region, and (iii) exit to other private equity funds who do not want to take a significant risk initially.

According to ECP, and something that we fully agree with, successful private equity investment in Africa requires an experienced, on the ground investment team, collaborating with investors and portfolio companies to source and deliver value. Getting an experienced team has been a challenge given the nascent nature of the industry, however we are seeing a lot of companies and individuals committed to the sector and the continent spending time to grow the required skill sets.