Real estate, energy attract least PE

Real estate is still one of the least attractive investment options for private equity (PE) investors in Africa, a new study shows. Others are utilities and energy.

According to African Private Equity and Venture Capital Association (AVCA) report, PE deals in Africa have over the last five years been headlined by Information Technology at 19 per cent, consumer discretionary (15 per cent) and consumer staples (13 per cent).

The three categories also accounted for almost half of the total number of PE deals on the continent last year. "Information Technology’s share of PE deal volume has grown significantly in recent years, accounting for 19 per cent of PE deals in 2018, compared to only 10 per cent in 2016.

This increase was mainly driven by growing deal activity in companies involved in the development of applications for the business and consumer market,” said the report. Further, the communication and telecommunication services sector was the largest by value.

Trust issues

Real estate's performance, however, has only managed to attract nine per cent in private capital injection over the last five years.

In Kenya’s context, the low uptake of the segment among private equity investors is majorly linked to trust issues.

"Securing a strong and credible local partner is essential to successfully developing projects in Kenya, alongside a carefully selected team of local advisers,” said the report

The least preferred portfolios were utilities and energy at six per cent and three per cent, respectively.

According to the report, PE deals in Africa over the last five years stood at 1,022 valued at $25.7 billion (Sh2.6 trillion). The total value of African PE fundraising (2013-2018), on the other hand, stood at $17.8 billion (12.6 trillion).

In East Africa, Kenya led the pack on the number of PE deals concluded in the last five years at 58 per cent and 59 per cent on the value of private acquisitions over the last five years.