RisCura’s Bright Africa 2020 – private equity in tough times

Deal activity in African private equity is growing, although fundraising has been erratic, according to Bright Africa 2020, a research initiative by global investment firm, RisCura. The private equity section of their report can be found here.

Gilbert Anyetei, principal researcher and senior associate for alternative investment services at RisCura, says the report “highlights the current state of the private equity market in Africa and trends in prices paid for private equity assets over time,”


Private equity fundraising activity across Africa had been showing strong growth. The total value of 2019 private equity fundraising reached $3.8bn, up from $2.7bn in 2018, and the second-highest year of fundraising since 2010. Then came the significant contraction of 2020.

Deal activity

Anyetei says that total private equity deal activity has steadily increased over the last 2 years as fund managers continued to deploy the significant amount of capital raised in the market during earlier fundraising years. Historically South Africa has made up a large proportion of private equity transaction activity, but its contribution was 26% as at June 2020, after being fairly constant at around 27% over the last 3 years (despite South Africa’s limited growth prospects and increasing risk profile) but down significantly from 49% as at June 2010. 

Deal activity in Nigeria, Africa’s largest economy in Africa, increased moderately by 13% for the period ended June 2020, compared to the 50% increase experienced for the period ended June 2019. Kenya dominates East Africa’s private equity investment landscape because of its large and diversified economy, pro-business government policies, and relatively low dependence on extractive commodities.


For the last 2 years, private equity median EV/EBITDA multiples have exceeded those of listed companies. Anyetei comments: “Although this appears counter-intuitive because of the liquidity discount that should apply to prices in the private markets, the lack of liquidity in many African listed markets, the high cost of compliance, and the resultant lack of capital available to these markets complicate a direct comparison.”

Median private equity EV/EBITDA multiples across Africa (excluding South Africa) have steadily increased since June 2012. Meanwhile the multiples of listed equity across Africa (excluding SA) have trended downwards since the end of 2014. Anyetei says it is hard to understand the increasing multiples: “Growth prospects are currently muted when compared to earlier in the decade, and although there has been some decrease in risk in specific countries over this period, it does not appear to have driven the price increase.

“It appears that the significant amount of committed capital has had a stabilising effect on pricing, which is likely to survive short-term changes in funding levels and risk profile. However, the committed capital model can only delay the efficiency of markets, and prolonged decreases in fundraising and risk outlook are likely to filter through to pricing eventually.”

The sharp decrease in the fundraising experienced because of the pandemic and resultant economic slowdown is expected to continue for at least 18 months. If these trends do continue, prices may prove to be less buoyant going forward, warns RisCura. The Bright Africa 2020 report is on this website.


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