With sub-Saharan GDP on a strong upward growth trajectory, private equity firms wanting to deploy capital in the region may need to act fast to maximise returns.
While existing sub-Saharan investors must be licking their lips in anticipation, others may be ruing a missed opportunity to take advantage of subdued valuations. Fundo Soberano de Angola, the country’s $5.1 billion sovereign wealth fund, hopes to catch these macroeconomic tailwinds by raising its private equity deployment more than sixfold to $3 billion by 2020.
“In the case of Angola, we’ve looked at these last five years as years when the private sector should have invested,” José Filomeno dos Santos, chairman of FSDA, tells Private Equity International. “Or at least should have focused on positioning itself in specific industries… to be poised for better prospects in the future.” In September, FSDA announced it had turned a profit for the first time since it was established in 2012, with strong performances in agriculture and infrastructure. The former has already contributed to GDP growth in Ethiopia, sub-Saharan Africa’s second-most populous country, which is expected to rise to 11 percent.
More commodity-based economies, such as Nigeria, Sierra Leone and Uganda, may also see a gradual return to form as prices recover from a sharp decline in recent years, dos Santos notes. “Those which have managed to get those assets at lower prices will obviously benefit.”
And with the Southern African Venture Capital and Private Equity Association reporting 58.2 billion rand ($4.2 billion; €3.6 billion) of undrawn fund commitments in Africa last year, firms lacking exposure to the region or with high levels of undeployed capital may face a race against the clock to secure targets at attractive valuations.
“It continues to be a good time [to invest], but we believe that this time is going to run out fairly soon – over the next two to three years,” dos Santos says.