Citadel Capital, an Egyptian PE firm, has planned to invest up to $400 million (Sh32 billion) in east Africa. Photo/FILE
Private equity firms are making returns of up to double the initial capital investment in east African firms, making the region a rich hunting ground.
Murray Grant, a partner at London-based private equity firm, Actis, said fast economic growth is deepening the PE firm’s interest in the region, as they seek to make higher returns than they would in their home countries.
“We typically invest in a company for five to seven years. During that period, we expect our investments to double or triple before we exit,” said Mr Grant in Nairobi.
Actis is focusing on the consumer goods market and infrastructure which offer opportunity for highest growth, said Mr Grant.
Private equity investors have increased their holdings in the region since 2007, when the economy registered its highest growth rate of 7.0 per cent in over two decades.
Among players that have set up shop in the region in recent years are Business Partners International, AfricInvest, InReturn Invest and Citadel Capital, while existing ones such as Actis are hunting for new opportunities.
Actis holds a portfolio worth $4.7 billion (Sh376 billion).
The firm invests up to $200 million in firms showing high growth potential.
Citadel Capital, an Egyptian PE firm, has planned to invest up to $400 million (Sh32 billion) in east Africa.
Emerging Capital Partners (ECP), based in Washington DC, announced last month that it had raised more than $1.8 billion to invest in companies across Africa.
The firm already has a presence in Kenya through the telecoms services provider Wananchi Group.
InReturn PE entered Kenya in 2007 and is focusing on SMEs.
It has an investment budget of up to two million Euros (Sh214 million).
Its investments range between 200,000 Euros (Sh21.4 million) to one million Euros (Sh107 million), according to data on its website.
Kenya’s economy is expected to grow by five per cent in this year and upwards of six per cent in 2011, while Tanzania and Uganda are each expected to expand by upwards of 6.0 per cent and 6.5 per cent in 2010 and 2011 respectively.
Mr Grant said succession disagreements in family-owned companies is the biggest hindrance to expansion of private equity investments in East Africa.
Many owners are unwilling to relinquish their stranglehold on shareholding because of the fear that they will have no income in the absence of business profits, he said.
