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East Africa outpaces South Africa as investment destination

By | March 23rd 2012 at 00:00:00 GMT +0300

By James Anyanzwa

Prospects for East Africa as an investment destination are quickly rising, according to a new survey by auditing firm Deloitte &Touche.

The findings of the second private equity confidence survey indicate that East Africa experienced a significant influx of private equity interest in 2011 and there is an increased appetite for investment in private equity (PE) ventures in the region.

According to the report, East Africa Private Equity Confidence Survey Promising 2012, new regional-focused funds are targeting high-growth small and medium enterprises (SMES) in consumer-driven sectors.

"Investors have also begun to explore deals in new markets in Ethiopia, South Sudan and the Democratic Republic of Congo," says report.

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The report notes that while investment sizes remain limited, large deals were closed in 2011, and investors expect deal size to creep up over time.

General partners (GPs) with wider African mandates are also moving into the sub-region with funds active across infrastructure, real estate, health care, agribusiness and green energy, in addition to consumer-driven sectors.

However, Venture capital (VC) funding is still scarce in the region but Kenya has begun to stand out as an ICT hub, with help from technology incubators and increasing interest from local and international firms.

According to the survey, many investors see East Africa’s strong growth potential as a driver of better investment than in South Africa.

This is a huge shift in private equity attitudes toward Africa, which have been historically focused on South Africa.

East African investment potential is seen as roughly on par with West Africa, where similar growth dynamics are at play.

Optimism, brought about by positive changes in the East African private equity landscape, has led to increased investor confidence.

The survey shows there is a dominant investment mood exhibited by GPs, and the investment appetite is growing.

East Africa investment South Africa small and medium enterprises SMES
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