The sectors driving deals in Africa

The rising middle class is bolstering the consumer space, as tech turns GP and LP heads.

Deals in the consumer discretionary space accounted for the largest share of African private equity deals by volume last year (16 percent) and over the six years to 2019 (15 percent), spurred by the growth of the continent’s middle class.

In line with this, in the African Private Equity and Venture Capital Association’s latest private equity survey, LPs and GPs listed consumer goods among the top three most attractive sectors over the next three years, alongside agribusiness and financial services.

Technology also emerged as a key sector, and this sentiment is echoed in EMPEA’s Global Limited Partners Survey 2019. Around a third of respondents to EMPEA’s survey currently invest or plan to invest in technology opportunities in Africa, with fintech (46 percent) and food and agricultural technology (19 percent) viewed as the most promising areas.

Alexia Alexandropoulou, research manager at AVCA, says the need for tech-centred innovation on the continent will continue to grow in the coming decades, with technological solutions impacting the development and growth of other industries, such as education and agribusiness.

“In East Africa, countries such as Kenya and Rwanda are already deploying technology in the agricultural sector, including using aerial imagery from drones or satellites, weather forecasts and soil sensors, all of which are making it easier for farmers to manage their crops in real time,” she says. “Additionally, financial solutions are connecting small-holder farmers with credit and financial institutions. An example is the Novastar Ventures investment in iProcure, a company which provides business intelligence and data-driven stock management across the supply chains.”

Meanwhile, Sabrina Katz, manager of research at EMPEA, notes that infrastructure activity has also remained strong on the continent, with the majority of infrastructure deals completed over the past 18 months in the alternative and conventional energy sectors. “While infrastructure deal activity has been driven by established managers such as African Infrastructure Investment Managers, Inspired Evolution, Metier and Helios, relatively new entrants such as Meridiam and AP Moller have also begun deploying large funds raised for the continent,” she says.