Private equity in Africa is thriving.
Private equity being an asset class of equity and debt in operating companies that is (generally) not publicly traded on a stock exchange.
At its basic, PE is about how you can use money, expertise and relationships to grow businesses – surely capitalism at its most raw. However PE has had its share of detractors.
For example, in the US, critics say that PE make money the wrong way — buying “target companies,” making people redundant, piling on debt and selling the remnants in tidied up boxes – which by then are doomed to fail.
To make matters worse, private equity firms get tax breaks, paying 15 percent on profits instead of 35 percent.
But the industry and its defenders, say it is a strong creator of jobs and value, and a vital source of outsized and diversified returns for pension funds, university endowments and other investment pools that serve ordinary people.
Africa is at a different stage of growth to the developed world and growth capital is what Africa needs and PE provides.
The Africa PE industry is still young and this youthfulness comes through in its members and their attitudes. Whilst there is obviously competition between PE houses, advisers, funders and other professionals, there is still a sense of camaraderie and cooperation with all involved. RunaAlam (DPI) hit the note on the head when she opened AVCA conference by quoting the African proverb: “If you want to go quickly go alone, if you want to go far, go together…”
Robbie Brozin (the founder of Nandos from South Africa) recently spoke about how he grew Nandos from one small restaurant to the global chicken piri-piri giant of today. An inspiring story. He had some great one-liners about doing business and the one that stuck was:
Ultimately what is driving growth and PE in Africa is that what Africa wants is what the world wants. Africans have the same aspirations as anyone else. What is needed is the investment to match these aspirations, which is where the opportunity is.
The good news from AVCA is that the overall outlook for PE in Africa is positive but the question is whether this can be sustained to match the ambitions of Africans.
