RisCura’s Heleen Goussard unpacks private equity market trends in Africa

Private equity investors in Africa are facing significant challenges due to foreign exchange volatility and currency shortages. A recent report by RisCura highlighted concerns about the volume of exits and the quality of exit routes available in the African private equity market. Heleen Goussard, the Head of Alternative Investment Practice at RisCura, discussed these trends and more in a recent interview on CNBC Africa. Goussard explained that private equity funding differs from other forms of capital raising in that investors commit to providing capital over a period of time, which ensures a steady pool of funds for investments. This long-term commitment provides stability to the private equity market, unlike the fluctuations seen in the listed market. Despite the steady availability of capital in recent years, there has been a decrease in new commitments, leading to a lower amount of capital seeking investments. The pricing of private equity in Africa has experienced a normalization in recent years, with prices becoming more favorable for investments. Goussard noted that the amount of capital available for investments, the number of investment opportunities, and the perception of risk are key factors that determine pricing. Private equity prices in Africa have traditionally been higher compared to the listed market, but with the decrease in 'dry powder' and fundraising, prices have become more competitive. While the total committed and unallocated capital in Africa declined in recent years, Goussard highlighted that several large funds have closed or are about to close, which may boost the overall capital allocated for investments. The industry is also witnessing a rise in interest in alternative assets, which is expected to drive fundraising activities and increase 'dry powder' over time. Exit strategies for private equity investors in Africa have predominantly involved trade buyers, with a notable increase in private equity investors buying from other investors between 2015 and 2019. However, this trend has decreased in recent years due to the lower availability of 'dry powder', leading to a shift back to trade buyers. Goussard emphasized that exiting to trade buyers can help build larger companies that are more attractive to international investors. In light of the recent events surrounding Flutterwave in Nigeria, Goussard noted that such incidents can influence perceptions of risk and governance in Africa. While it may not deter investor appetite, it could lead to a higher demand for returns to compensate for perceived risks. Despite challenges, Goussard highlighted that long-term trends in Africa and internationally play a more significant role in shaping investment landscapes. Overall, private equity investors in Africa are navigating a complex environment impacted by various factors such as foreign exchange volatility, pricing dynamics, fundraising trends, and exit strategies. Despite these challenges, the industry remains resilient, with opportunities for growth and investment in the continent's private equity market.