A survey conducted by global audit firm KPMG about the state of private equity in East Africa, highlights the distribution of investment private equity deals in the various sectors of East Africa’s economies. According to the report, real estate accounted for only 3 per cent of private equity deals in the year ended 2016. The survey was conducted on a total of 28 private equity respondents with fund sizes of between USD 10 million and USD 1 billion, most of them with investment preferences in growth and expansion (22) and impact investments (3).
Only two of the funds stated start-ups and early stage companies as their preferences while only one was for buyouts. 57% of the respondents indicated their minimum investment size is less than USD 4 million. 61% of respondents indicated their preferred investment size is above USD 11 million.
In terms of preferred investment instruments, 75% of the respondents stated direct equity investment as their preferred investment method while only 4 per cent preferred debt instruments. The remaining 11% had quasi-equity prefersnces.
As per the survey report, there was a marked decline in deals completed and disclosed in 2016, attributed to the devaluation of local currencies. In effect there where only 34 private equity deals in 2016 compared to 47 in 2015 although outlook for 2017 was more positive, having seen 14 deals in the first half of the year.
Of the 34 private equity deals reported in East Africa only one deal pertains to real estate, and that in Kenya. The financial services sector saw the highest number of deals at 25% followed by manufacturing at 22% and Renewable Energy at 17%. FMCG and Healthcare had 8%.
In Kenya, still financial services has witnessed the most deals at 42, followed by the energy and natural resources at 16 and FMCG at 12. However, private equity deal volumes in the country may shrink following the hostile political environment resulting from elections.
Between 2015 and 2016, a total of USD 1.1 billion was raised for East Africa, compared to USD 6 billion for Africa and USD 1.1 trillion globally.