The pandemic economy has sparked so much investment activity that it seems like a new record is set every day – whether it’s stock market gains, venture capital investments, or the number of times the word “inflation” is spoken on CNN.
One place that has not reaped the bargains is Africa. But that may be about to change. Development Partners International, an Africa-focused private equity firm, said sunday that it raised $ 900 million from a consortium of global investors.
How the funding went south
Globally, private equity has had a blockbuster year and a half. Covid has enabled companies to buy cheaply from companies hit by short-term difficulties, then watch their acquisitions appreciate rapidly as the economy recovers. The industry kicked off 2021 with its busiest six months in 40 years, closing 6,298 deals worth $ 500 billion.
But in Africa, unfortunately, things have moved in the opposite direction. Several companies – led by world leaders KKR and the Carlyle Group – have shut down their sales teams for the continent because they couldn’t find enough large companies to buy. The impact was brutal:
- Private equity funds investing in Africa raised just $ 1.2 billion in 2020, less than a third of the $ 3.9 billion raised in 2019, according to the Financial Time.
- In the first half of 2021, deals were flat at $ 500 million.
Value proposition: The argument for Africa is simple. Like China decades ago, the continent is defined by an emerging middle class, already 300 million people strong and likely to grow in the years to come.
âThere are 1.3 billion people, the youngest demographic in the world, which means that while other regions will have fewer people, Africa continues to grow,â said Runa Alam, CEO of DPI. FT. “It is a continent that cannot be ignored.”
Ignore at your own risk: DPI, which has invested in 23 companies – including a Pan-African drug maker, a Nigerian fast food chain and a West African online university – has never seen a company go bankrupt.