North Africa’s share of African PE deals by volume increased slightly from 15 percent in 2013-18 to 17 percent in 2014-19. Just under half of LPs (48 percent) view North Africa as an attractive region for investment over the next three years, according to the African Private Equity and Venture Capital Association’s latest industry survey. A third (33 percent) also view Egypt as an attractive destination for capital, placing it joint third in Africa alongside Ethiopia, behind Kenya and Nigeria.
Egypt accounted for 73 percent of North African PE deal volume in 2019, according to AVCA data. The country has also gradually established itself as a venture capital hub, attracting 9 percent of early-stage VC deal volume in 2014-19, according to AVCA data.
Alexia Alexandropoulou, research manager at AVCA, says: “The steady growth in the number of VC deals recorded in the country has cemented Egypt’s position as a rising destination for VC investors in the region. The concurrent increase in the number of VC firms pursuing investment opportunities in Egypt (or in the MENA region, which includes Egypt) in recent years has contributed significantly to this emerging trend.”
The covid-19 effect
Conditions for doing business in the country are also improving – Egypt moved up six places in the World Bank’s Doing Business 2020 report. Measures to make it easier to start a new business and to strengthen protections for minority investors were among the factors that drove the improvement in its ease of doing business ranking.
Egypt’s macroeconomic stabilisation programme contributed to economic growth of 5.6 percent in 2019, up from 5.3 percent in 2018, according to World Bank data. In the African Development Bank’s worst-case covid-19 scenario estimates, real GDP growth of 0.8 percent is forecast for 2020 – the only positive growth rate in North Africa.
Meanwhile, Morocco represented 33 percent of North African PE deal volume in 2014-19 and 15 percent in 2019. Morocco ranks sixth and seventh place among the countries that LPs and GPs, respectively, view to be the most attractive locations for investment over the next three years. However, the covid-19 crisis is expected to push the country into a recession, its first since 1995. The World Bank forecasts growth of 3.4 percent in 2021 and an average of 3.8 percent over 2022-24.