African VC investment on the rise

According to figures presented at the AVCA’s annual conference in Mombasa earlier this week, VCs active in Africa invested $1.3bn last year, up 60% on 2003.

300 delegates at the African Venture Capital Association’s (AVCA) 5th annual summit in Mombasa, Kenya, learned earlier this week that private equity and venture capital investment activity on the continent is on the increase, with South Africa accounting for the vast majority of capital invested.

According to the AVCA 2005 Activity Report, compiled by PricewaterhouseCoopers and sponsored by emerging markets investment specialist CDC, general partners active in Africa completed 677 transactions valued at a combined $1.3 billion (€1.1 billion) last year, up 59 percent on the $817 million worth of deals closed in 2003.

Foreign investment is deep-seated in the African venture capital and private equity market
AVCA 2005 Activity Report

Over 90 percent of the deals took place in South Africa, with Nigeria and Togo following as second and third most active country, respectively.

Expansion capital transactions and buyouts accounted for 93 percent of deals, with consumer related industries proving the most receptive of private equity funding.

Equity sponsors participating in the survey also reported nearly 300 realisations last year, mostly sales to other private equity firms as well as strategic investors. 

In contrast to new investment, fundraising in Africa dropped sharply last year. According to the report, African managers raised a total of $566 million, 42 percent less than the equivalent take in 2003.

Encouragingly, said the report, the contribution of African investors to new funds raised was increasing, with managers reporting that 54 percent of commitments came from sources in their own countries. Still, the report also noted that “foreign investment is deep-seated in the African venture capital and private equity market, both in terms of sources of funding and investment activity”.

Private individuals and development finance institutions are the most important providers of capital to African groups.

In addition to African GPs, fund managers based in the US, the UK, Denmark, Luxembourg and Norway participated in the survey.   

The AVCA is headquartered in Yaoundé, Cameroon. Its first annual conference was held in 2000 in Tunisia.

Speakers at this week’s Mombasa event included William Kalema, a member of the Commission for Africa; Mohamed Ibrahim, founder of Celtel International; Chris Mwebesa, CEO of the Nairobi Stock Exchange; Alan Patricof, co-founder of Apax Partners; Professor John Mullins, London Business School; Sarah Alexander of the Emerging Markets Private Equity Association; Hassan El Khatib of EFG Hermes; and Michael Calvey, co-managing partner of Russia specialist Baring Vostok.