Kenya leads East Africa in private equity deals
By John Otini, January 18, 2023East Africa’s private equity market activities rose to a record high with Kenya leading the region by number of investments and deal sizes.
A report from I&M Burbidge Capital shows that out of the 132 private equity deals in East Africa Kenya had 97 deals worth $1.35 billion (Sh167.47 billion) up from 76 in 2021 worth $820 million (Sh101.72 billion). Uganda had 21 deals worth $175 million up from 15 deals in 2021 worth $68 million, while Tanzania had six deals worth $131 million.
“Private capital markets drove activity to match and even surpass pre-Covid-19 levels of performance. A majority of this growth was driven by the continued meteoric rise in venture capital investment in East Africa,” the report titled Annual East Africa Financial Review 2022 says.
The report also says growth in activities is expected to build up in 2023 as public markets take a backstage turn due to global economic uncertainty.
Overall PE activity
“We expect that overall PE activity will be robust in 2023, principally driven by venture capital investment, increasing DFI participation in the market, and private equity exits,” the report sponsored by PKF Consulting and DLA Africa says.
The deal of the year was Amethis, IFC, DEG and MCB Private Equity’s exit from Naivas Supermarkets to Ireland Blythe Limited, from Mauritius, Proparco and DEG.
Other notable private equity and venture capital transactions recorded during the year include Leapfrog’s $70 million investment in Sun King, AfricInvest’s acquisition of Actis’ stake in AutoXpress, and Wasoko’s $125 million series B capital raise led by Tiger Global and Avenir Growth Capital.
These include VC and DFI led deals, with a disclosed value of $1.66 billion which is a 103 per cent increase over 2021 from 78 transactions that had a disclosed deal value. This comes at a time when public equity markets are at their lowest in years due to a heavy exit of foreign investors.
A closer look at the data reveals that venture capital transactions dominated investment activity with 66 transactions and 100 per cent increase over 2021 which had a total disclosed deal value of $713.1 million up 1167 per cent from 2021.
Venture Capital investments dominated investment activity accounting for 51 per cent of all private transactions and 40 per cent of the disclosed deal value.
Traditional private equity investments declined for the third year in a row and accounted for 20 per cent of all private capital transactions as well as 23 percent of the total disclosed deal value. The ICT and financial services sectors recorded the highest number of transactions in East Africa with 49 and 23 disclosed deals, respectively due to startups.
As was the case in the last two years, agri-businesses recorded the third-highest number of transactions – with 10 disclosed deals. Kenya took the lion’s share of deals with 97 transactions while Uganda was a distant second with 21 deals. Debt burden Tanzania, Rwanda and Ethiopia followed with six, five and three entries, respectively.
Risks to be vigilant on include the impact of a higher debt burden in the region, inflation, and the impact of the ongoing drought on the agriculture sector and general food security in the region.
“We also expect to see an increasing focus on recapitalisation, particularly as businesses have weathered multiple shocks in the last three years and with an increased focus on thin capitalisation,” the report added.