Corporate Data Access in Africa: Sparking private sector investment through greater transparency

Investors and corporates around the world, seeking higher yields and access to new markets, are eager to tap into Africa’s growth economies and capitalise from the strong fundamentals. Yet the high cost of access to information across African markets is a key limiting factor that constricts deal flow and business opportunities with the continent’s middle market companies.

For private investors, a lack of data often means that proprietary investment screening and preliminary due diligence are quite time and resource intensive, resulting in fewer opportunities being evaluated despite a steady appetite to invest. Capital is not the problem, but access to it is.

Between 2010-2016, Africa recorded $22.7billion in private equity transactions, reports the Financial Times (FT), representing only about 1% of global PE investments despite a contribution of roughly 3% to global GDP. Furthermore, the majority of the transaction capital came from a few big investment firms targeting a limited number of deals. Looking at 2015, for example, approximately 70% of the deals came from three leading PE players: Helios, Abraaj and Development Partners International, according to the FT.

But what about the middle market? The African Private Equity and Venture Capital Association found that less than 2% of deals between 2007-14 were of a value lower than $10million. Yet, a 2016 Boston Consulting Group report states that approximately 11,000 African companies have revenues of $10 to $100million and assets of $20 to $200million. “Look beyond the narrow cohort of Africa’s corporate elite and you’ll see that the continent offers real opportunities. Some of the most promising targets in Africa are companies that are still off the radar of most funds,” according to the report. Once you go lower than the $10million revenue threshold, that number of companies easily jumps into the tens of thousands.

The gap is clear, and private sector innovation can help narrow it. While challenges like regulatory stability and policy predictability require full government attention, better access to corporate transparency and modern due diligence tools should not wait for the public sector to catch up to investor requirements.

In that vein, Asoko Insight is profiling Africa’s middle market to assist both investors and corporates looking to identify companies that are open for business. “Asoko’s database analytics indicate a strong user preference for researching African companies with comprehensive profiles, which typically include a company’s financial performance and knowledge of its shareholders, management and board members,” according to Asoko co-founder Greg Cohen. “More clarity on these data points lead to a greater rate of direct engagement between our subscribers and source companies and, consequently, deals being made. We see what better transparency can do on a daily basis.”

 

Greg Cohen is Director, The Africa Ranking and Co-Founder, Asoko Insight