US funds play catch-up in Africa
American private equity sees sub-Saharan Africa as an opportunity in an era of slow growth, but have been slow to tap in to the region’s long-term potential.
Africa is a region with a young, increasingly well-educated population, a rising middle class and growing consumer power. Comparisons with China and India 20 years ago are frequently made by fund sponsors. They point to opportunities in sectors as varied as brewing and banking, telecoms and healthcare. All it takes is an appetite for risk and some on-the-ground expertise.
Yet as Africa’s need for investment continues to grow, many US investors, even those with an emerging-market focus, remain hesitant compared with their Asian and European peers. As one New York based investor tells Euromoney: “I think this is the first time we’ve ever had a request to speak about our opinions on Africa.”
Dorothy Kelso, director, head of strategy and research at the African Private Equity and Venture Capital Association (Avca), says: “The US tends to look at Africa in the context of Africa versus other emerging markets. The opportunities to invest in Africa need to be compelling relative to other markets such as Latin America, and the evidence is that US investors are increasingly convinced by the potential investments available on the African continent and they continue to build up their activities there.”
Mara Topping, partner in White & Case’s capital markets group in Washington DC, asks: “How does the risk-reward profile in Africa compare with other emerging markets? This will be a question for US investors who will be comparing potential profit [in Africa] with that in Latin America, Asia, the Middle East and even eastern Europe.