Private Equity : a dynamic tool to recover from Covid
While the size of Africa’s PE industry remains modest, PE firms play a key role in fostering good governance in companies across the continent. There is a strong correlation between good governance and growth, and it is very challenging for companies that do not adopt good governance to grow over the long run. In light of the ongoing pandemic, PE will prove to be a very powerful tool for providing capital for companies that have been adversely affected by the crisis, as well as fundamentally improving underlying corporate governance.
Opportunities for investors can be anticipated across most sectors, and Africa’s demographic growth remains a key indicator that the region’s consumers and expanding middle class are where the focus should be.
To that end, we are a strong advocate for investing in the industrial sector. It is hard to imagine that a country like Côte d’Ivoire, which has a high rate of electrification and a relatively skilled workforce compared to the rest of the region, only locally processes 4000 tonnes of the 160,000 tonnes of mangoes it produces each year. PE can help to drive the necessary shift in African industry, encompassing segments other than traditionally exported goods such as cocoa.
The challenge that lies ahead will be to raise awareness among African institutional investors of the role that PE can play in Côte d’Ivoire and Frenchspeaking West Africa more broadly. Presently, PE investments in the region are low due in large part to a lack of understanding of the PE asset class, hence there is a lack of trust in equity investors as opposed to debt investors. This situation has held back industries which, for the most part, rely solely on banks for funding.
In order to offer quality food and services to African populations and foster a stronger industrial ecosystem, PE funds and banks must cooperate to a much larger extent. Together, they have the financial means and knowledge to back the industrial champions of tomorrow.