Background

The African continent consists of 53 countries with around one billion people and is the second largest continent next to Asia. Collectively it is the world's sixth-largest economy with GDP of around US $2.2 trillion, around 3.4% of global GDP.

The last five years have seen significant improvements in a combination of factors that make Africa an attractive marketplace for private equity investment. The global trends of strong growth in worldwide demand for natural resources and the increasing need for arable land favour Africa's vast resources.

The regional trends of growing purchasing power in the emerging middle class, young demographics, increasing liquidity in regional markets and improved corporate management and governance are leading to significant growth. These factors provide for a structural imbalance where demand for goods and services outstrips the supply.

The economic and political factors such as government commitment to the private sector, improved fiscal and monetary discipline, increased foreign reserves, stronger more stable democracies and a reduction in corruption have all converged to offer a significant opportunity to achieve outperformance with low correlation to developed markets.

The key difference between Africa and other emerging markets is the chronic shortage of capital, leading to an environment of low competition for established private equity teams on the continent. This in turn results in African assets being cheaper than their emerging market counterparts, thus helping to mitigate the higher perceived risk of investing on the continent.