Role of private equity in driving Africa's growth

Private equity investments in Africa have been gaining significant interest from global capital markets seeking higher yields. In a recent interview, Greg Cohen, Co-Founder and Executive Director at ‎Asoko Insight, discussed the role of private equity in driving growth on the continent while highlighting key opportunities and challenges. Cohen pointed out that while there is a growing interest in private equity in Africa, the traditional private equity model faces challenges, particularly in the size of investments required. Large fund sizes and ticket sizes for investments often lead to bloated valuations and fierce competition among big private equity firms for the same deals. This trend often overlooks the middle market companies in Africa that are in need of smaller investments to fuel their growth. Cohen emphasized the importance of profiling high-growth companies in Africa to attract international investors and reduce due diligence costs. Asoko Insight aims to bridge this gap by providing visibility to growth companies across the continent, making them more accessible to private equity and venture capital firms. One of the key factors for attracting private equity investors, according to Cohen, is government policies that create clear tax and regulatory frameworks for businesses. Formalizing the informal sector and making companies more bankable and investable are essential for international investors looking to invest in Africa. Transparency and access to information are crucial for investors in Africa, as the data gap often hinders investment opportunities. Cohen highlighted the costly and time-consuming process of gathering information in African markets, making it less attractive for international investors compared to other emerging markets. Improved data availability and government response with favorable policies are key factors in increasing private equity involvement and driving economic growth in African economies. Cohen emphasized the direct correlation between clearer government policies, institutionalization, and increased private equity interest in African markets. As political risks are mitigated and policies become more investor-friendly, capital markets thrive, attracting more private equity investments and fostering economic growth.