Regional guide: East Africa

Kenya remains the region’s leading deal hub.

Kenya once again drew the lion’s share of deals in the region, accounting for 43 percent of East African deal volume and 44 percent of deal value in 2019, and more than half of the 2014-19 totals. “PE investors are using Kenya as a launch pad to grow their portfolio companies across the East African region,” says Alexia Alexandropoulou, research manager at the African Private Equity and Venture Capital Association. “The country has continued to rise on the World Bank’s Ease of Doing Business ranking, facilitated by the government’s Vision 2030 programme for economic advancement.”

The African Development Bank expects Kenya’s real GDP growth to slow to between 0.6 and 1.4 percent this year as a result of the pandemic, down from pre-covid projected growth of 6 percent. “However, the Kenyan government has introduced measures that aim to stimulate growth and limit the health, social and economic impact of covid-19,” adds Alexandropoulou.

Uganda remains a promising prospect, accounting for the second-highest share of deals in the region (21 percent) in 2014-19 and growing from a 19 percent share in 2014-16 to 22 percent in 2017-19. “Regional, sub-Saharan and pan-African PE funds are all targeting investment opportunities in the country,” Alexandropoulou notes.

According to AVCA’s latest industry survey, GPs see East Africa as the most attractive region for PE investments over the next three years (89 percent), and 82 percent of LPs view it as an attractive destination. Both GPs and LPs highlight Kenya as the most attractive country in Africa for investment, and Ethiopia, Uganda and Tanzania also make the top 10.

Projected resilience

Overall, East Africa accounted for 16 percent of deal volume in 2014-19 and 8 percent of deal value. Deals in the consumer staples space are dominant in the region, accounting for 36 percent of East African deal volume last year. Yet industrials enjoyed an uptick in 2019, representing 14 percent of deal volume compared with 3 percent in 2018, according to AVCA data.

The AfDB is also slightly more bullish on East Africa’s projected performance amid the pandemic, forecasting that it will be the most resilient region on the continent, with estimated growth of between 0.2 percent and 1.2 percent in 2020.