More than 1,250 private equity deals have been reported in Africa between 2015 and 2020, according to African Private Equity and Venture Capital Association data, bringing total deal value to $21.7 billion. A tumultuous 2020 saw a dip in the value of private equity deals on the continent, dropping to $3.3 billion from 2019’s $3.8 billion. However, the number of deals continued to climb steadily, rising from 230 in 2019 to 255 in 2020.
Africa’s GDP shrank by 2.1 percent in 2020 as the pandemic took its toll, according to the African Development Bank. Yet a return to growth is projected for 2021, at 3.4 percent.
Alexia Alexandropoulou, research manager at AVCA, says: “Africa’s road to economic recovery has already begun, albeit with cross-regional disparities which influence future growth prospects.”
These regional disparities are not only based on how diversified a country’s economy is or the type of commodities it exports, but also on the rollout of covid-19 vaccinations, she adds.
“Africa’s future prospects are contingent on the pace and scale of national vaccine drives. As major economies deploy covid-19 vaccines to accelerate the return to normalcy and to revive global economic activity, the shortage of medical supply and health workers in Africa has once again been brought to the fore,” says Alexandropoulou.
As of June, only 2 percent of the approximately 1.3 billion people in Africa had received one dose of the vaccine and under 10 million people had been fully vaccinated, according to the World Health Organisation.
A number of countries on the continent have unveiled recovery plans to help rebuild their economies and attract international investment. “Each of these post-pandemic growth strategies endeavour to stimulate equitable, inclusive growth for their respective populations and reshape their various economic landscapes,” notes Alexandropoulou. “This cross-continental effort to reorient strategic priorities will likely boost investor confidence in the entire business ecosystem and renew optimism in the promise of Africa’s growth story in the new post-covid-19 economic context.”
And as last year’s resilient deal numbers suggest, pandemic aside, Africa offers some attractive prospects for private equity firms and their LPs, particularly for those investing behind long-term themes. Sabrina Katz, manager of research at the Global Private Capital Association, says: “Private capital investors are likely to continue to find opportunities across African markets by targeting specific themes and sectors with long-term potential regardless of near-term economic conditions.”