Carlyle goes nuts for first African Investment

In the last three weeks I have attended two conferences specifically focusing on private equity in Africa. One hosted in London and attended by many European and US organisations and the other just yesterday in Johannesburg with a more locally based audience. But everyone who attended either of these conferences pretty much had the same purpose – to try and understand more about the opportunities that exist for private equity investors in the African continent.

With exceptionally fortuitous timing, yesterday saw the announcement by Carlyle Group that it had made its first investment in an African company. Investing alongside with Standard Chartered Bank and Pemgrani Remgro Infratructure Fund, the consortium paid USD 210mn for an undisclosed minority stake in Export Trading Company, a Tanzania-based agricultural commodity company  that is one of the world’s largest cashew nut traders.

Private Equity investment in the African continent has not been at levels comparable with other emerging continents like Asia and South America over the last 10 years. Just a relatively miserly USD 34bn has been invested in Africa by private equity firms since the beginning of 2003 until today, compared with USD 214bn in the Far East and Central Asia and USD 117bn invested in Latin & South America.

On paper the African continent has a lot going for it, economic growth that is outperforming global growth levels, particularly in Sub-Saharan countries, an abundance of natural resources and a young and substantial emerging Middle class population. All factors that mean opportunities should be ripe in Africa. Yet there are draw backs, and successful investments in African companies have typically been achieved by private equity firms which have a presence on the ground in Africa and understand the need for a different approach to due diligence and the patience to hold investments for longer than perhaps say in more mature private equity markets.

That said, when a company like Carlyle makes their first investment in the region, this could be enough for others to look much more seriously at the continent rather than perhaps on the superficial level that has gone before.
 

Filed under: private equity, Investors, PE, Africa