Regional breakdown: East Africa

Kenya remains the major draw in the area, but there are signs of competition on the horizon from the likes of Rwanda and Uganda.

Although East Africa attracted a smaller proportion of private equity deal activity in 2015-20 than some of its neighbours, appetite for the region remains robust. More than three-quarters of GPs in the African Private Equity and Venture Capital Association’s annual survey identify it as an attractive investment location over the next three years. Over two-thirds of LPs surveyed also take a positive view of the region, rising to 100 percent among African LPs.

GPs and LPs rank Kenya as the most attractive country for investment in Africa. It accounted for 64 percent of East African deal volume last year, per AVCA data, followed by Ethiopia and Tanzania, at 9 percent each.

“Although Kenya was by far the most popular private equity and venture capital investment destination in East Africa between 2015 and 2020, other countries in the region are becoming increasingly competitive and have strong growth potential. One such example is Rwanda,” says Alexia Alexandropoulou, research manager at AVCA. “While Rwanda does not command a large share of the PE and VC funding channelled to East Africa, entrepreneurship and innovation are one of the governments key priorities and the country’s innovation ecosystem is surging.”

Supporting start-ups

An example of encouraging innovation in the country is the Rwandan government’s 2016 partnership with US start-up Zipline to deliver medical supplies via drones. The VC and PE-backed company also began delivering covid-19 vaccines in Ghana this year.

“Investors have backed companies that improve healthcare delivery and distribution across the continent,” says Sabrina Katz, manager of research at the Global Private Capital Association. “In June, Zipline – a drone-powered medical supply delivery company that began operations in Rwanda before expanding to Ghana, Nigeria, Japan and the US – raised $250 million at a $2.75 billion valuation to pursue its ongoing African and global growth plans.”

The funding round included participation from Temasek and Emerging Capital Partners, among others.

The Rwandan government is also introducing a start-up act to support the development of the tech-based services industry. Meanwhile, the Bank of Uganda unveiled a regulatory sandbox framework in June to foster innovation in financial services and attract funding for fintech companies. Uganda represented 16 percent of East African PE deal volume in 2015-20, per AVCA, second to Kenya’s 61 percent share.