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As foreign capital continue to look in the direction of Africa, experts at Alexander Forbes Investments has backed private equity (PE) as the best asset class for funding economic growth on the continent.
Speaking during a press conference in South Africa, David Moore, head of Alternatives at Alexander Forbes Investments, said it is important for investors to be mindful of the nuances that frame African markets. Investing in Africa requires a lot of patience given well-known challenges such as illiquidity, regulation, and political uncertainty.
“We still believe that opportunity exists, with access to some of the fastest growing regions and rapid urbanisation,” Gyongyi King, chief investment officer said. “This gives rise to untapped investment opportunity, supported by policy reform and political improvements.”
He outlined six investment opportunities on the continent that investors can leverage. One of them is the population of people on the continent, estimated at 1.216 billion as at 2016. The working population in Africa is projected to overtake that of China and India by 2034.
The infrastructural deficits across the continent also presents a viable opportunity for investors. There are opportunities in rail, road, and energy which are considered critical in driving the growth of private enterprise in Africa. In fact, investment in infrastructure tops the private markets landscape accounting for $12 billion, according to African Venture Capital Association (AVCA).
King also noted the banking gaps African corporates face compared to their peers in developed economies. Increased institutional investment in unlisted credit across the continent will enable private enterprise to grow and scale in a cost effective manner so as to better meet the needs of Africa’s growing population.
AVCA study has shown that $24 billion new funding was raised for private equity in Africa between 2012 and 2017. The largest investors in private equity on the continent are international development finance institutions.
Another opportunity is in quality retail and office which are in deficit on the continent. It is made even more acute with a rapidly growing middleclass and their insatiable demands for more urbanisation.
Technology which is improving the quality of lives of people makes up the list of opportunities for investors. Citing MPesa, King noted that it helped local communities advance from the formal banking model to transacting and making payments where large corporate customers can place orders for agricultural crops from the farmers without the intervention of agricultural traders.
“Collectively, these technological advancements have benefits which promote a cross-pollination of growth opportunities across sectors,” he said.