Private Equity investments in West Africa continue to rise

West African private equity (“PE”) investments continue to demonstrate steady growth, a new report by the African Private Equity and Venture Capital Association (AVCA) shows.

The report highlights the increasingly dynamic PE market in West Africa. Investors continue to be attracted to the region’s large population and increasing consumer spending, which have opened up a number of opportunities for capital to be deployed.

AVCA’s Spotlight on West Africa Private Equity reports that the region’s share of transaction activity in Africa is rising, accounting for 28% of the total number of PE transactions in Africa from 2011 – 2015 H1, which is up from 25 percent  in the years 2007 – 2010. West Africa now accounts for the single greatest share of PE transactions in Africa by number, and the second largest share by value.

West Africa’s actual share of African deal value is even higher than this, as deals classified as ‘multi-region’ (many of which have a significant footprint in West Africa but are not exclusive to the region) are excluded from the West African numbers.

Overall, the region has recorded 311 transactions since 2007, while deal value has totaled $6.1bn over the same period. Investments have remained focused on small and medium-sized businesses with a median transaction size of US$5mn.

Nigeria and Ghana continue to attract the vast majority of PE transaction activity in West Africa, accounting for 65 percent of deal volume and 93 percent of deal value since 2007.

However, since 2011, the report reveals increasing PE investment to a wider range of West African countries including Ivory Coast, Liberia, Senegal, and Sierra Leone.

The report further reveals an improving business environment in the region. Whilst some challenges persist in the region such as an infrastructure and energy deficit, and a relatively under-developed legal framework in the context of PE, recently implemented reforms and initiatives have gone a long way to diversify economies and increase regional harmonisation.

The AVCA’s report provides illustrative case studies of how the improving investment landscape has had a positive impact on PE in the region as exit activity increased from 29 exits in 2007 – 2010, to 46 in 2011 – 2015 H1.

Looking ahead, the outlook remains very promising for West Africa in spite of the current slowdown in global economic activity. PE activity in Francophone West Africa is expected to grow (albeit from a low base) due to the emergence of regional funds. Furthermore, West Africa’s fundamentals including its young workforce, emerging middle class, rapid urbanisation, increasing political stability and improving regulatory frameworks will continue to create opportunities for PE investors in the region.

Dorothy Kelso, Director, Head of Research and Strategy at the African Private Equity and Venture Capital Association, added: “Our Spotlight on West Africa provides further evidence of the important role PE plays in the region’s development by investing in companies that expand the population’s access to a variety of goods and services, including financial products, upgraded telecommunications technology and improved infrastructure. We are confident that the PE market in West Africa will continue to grow over the coming years, and, although PE in the Francophone area of West Africa is still relatively nascent, we expect to see increasing deal activity as the introduction of a common legal framework, currency and accounting system facilitates investment in the OHADA region.”

The full report, which includes further details and statistics on exits, deals and fundraising activity in the region, will be made available exclusively to the AVCA membership.

The African Private Equity and Venture Capital Association is the pan-African industry body which promotes and enables private investment in Africa.

AVCA plays an important role as a champion and effective change agent for the industry, educating, equipping and connecting members and stakeholders with independent industry research, best practice training programmes and exceptional networking opportunities.