East Africa financial outlook

In 2022, the East African economy faced a host of global macro challenges, from the Russia-Ukraine war to higher energy prices and inflation. Additionally, the region grappled with a ravaging drought, currency volatility, and hard currency shortages. Despite these hurdles, the East African economy exhibited remarkable resilience, especially within the private capital markets. Edward Burbidge, CEO of I&M Burbidge Capital, shared insights on the trends and opportunities that shaped the market in 2022 and the prospects for 2023. Reflecting on the challenges that unfolded throughout the year, Burbidge emphasized the resilience demonstrated by investors in East Africa. While the environment was characterized by uncertainties such as geopolitical tensions and economic fluctuations, the private capital markets in the region thrived. The year 2022 witnessed a significant increase in both the number and value of deals, with venture capital investments and mergers and acquisitions (M&A) driving much of the activity. International interest in acquiring stakes in East African businesses also saw a notable uptick, signaling growing confidence in the region's economic potential. One of the standout trends of 2022 was the surge in venture capital deals and M&A transactions, particularly in the IT and tech sector. As the digital landscape continues to evolve, tech-related sectors like FinTech and health tech are expected to attract substantial investment in 2023. Moreover, opportunities are likely to abound in agriculture, food production, and renewable energy, with a focus on sustainable practices and climate change mitigation. Financial services and ICT sectors emerged as key drivers of M&A activities in 2022. While traditionally the financial industry held the top spot, the surge in the tech sector's prominence reflected a shifting investor interest. Financial services remain crucial for deploying capital effectively across the region and driving social impact through investments in microfinance and banking institutions. However, the tech sector's innovation and growth potential are set to remain significant driving forces in deal-making this year. Looking ahead, Burbidge highlighted the potential rise in manufacturing investments, spurred by initiatives supporting domestic production and clean energy solutions. The looming possibility of a US recession raises questions about market dynamics, with investors weighing the prospects of sell-offs against opportunities to acquire assets at more favorable valuations. The maturing private capital markets in East Africa are expected to find a balance between realistic valuations and sustainable growth, paving the way for increased deal activity. In conclusion, the outlook for East Africa's private capital markets in 2023 appears poised for continued growth and diversification. With a keen focus on tech innovation, sustainable practices, and strategic investments across various sectors, the region remains an attractive destination for local and international investors seeking long-term opportunities amidst evolving market conditions.