SAVCASouth African Venture Capitalists Association
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SAVCA CEO Erika van der Merwe said: "Private equity funds from various regions have been investing actively in infrastructure projects across sub-Saharan Africa, in the energy, transport and ICT sub- categories.
While as much as $50 billion allocated to private equity in Africa has yet to be invested, according to SAVCA, it seems buyout firms are increasingly targeting markets such as Kenya and Nigeria, Africa's largest economy, where expansion this year is forecast by the International Monetary Fund to be more than double that of South Africa.
The FTSE/JSE Africa All Share Index rose 18.8 per cent a year on average in the decade ended September 2014 compared with private equity's annualised rate of return of 18.5 per cent, net of fees, according to the most recent research from SAVCA. "We used to get a net IRR [internal rate of return] of 30 per cent; now it's about 18-20 per cent," Andre Roux, founder of Ethos Private Equity Ltd.
Infrastructure assets in Africa offered private-equity-style returns and enabled private equity groups to invest in scale, Savca reported.
According to SAVCA's Private Equity Industry Performance Survey, the value of the average private equity deal in Southern Africa has fallen from $585m in 2008 to $250-300m in 2016.
SAVCA CEO Erika van der Merwe said: "Statistics show a significant year-on-year increase in deal flow and a general investor philosophy that bigger is not always better." She predicted the upturn would continue in 2017, with a pipeline of deals spilling over into the first quarter.
KPMG and Southern Africa Venture Capital and Private Equity Association (SAVCA) recently revealed their latest Venture Capital and Private Equity Industry Performance Survey, which covers the 2013 calendar year, in June 2014.
They are particularly interested in the high employment and development characteristics that tend to accompany private equity investment," says Erika van der Merwe, CEO of SAVCA.
Yet a recent report produced by AVCA, RisCura and the SAVCA concluded that 80% of investors expect African private equity to outperform African listed equity over the next 10 years.