Kenya is poised to be East Africa’s top investment hotspot for private equity (PE) firms in the next 12 months, a survey shows, driven by the government's push to privatise key firms in diverse sectors such as energy, hospitality, and manufacturing.
The 2024 Deloitte Africa Private Equity Confidence Survey shows 28 percent of the polled PE funds say they will focus on Kenya in the next year, making it the most attractive followed by Tanzania and Uganda tied at 22 percent each.
Rwanda and Ethiopia close the top five attractive countries to PE firms at 18 percent and nine percent respectively.
Deloitte says the focus on privatising key firms presents compelling opportunities for investors looking to put their money in Kenya.
The government recently approved and published a list of 26 public institutions earmarked for privatisation.
“The public institutions on offer are from a range of sectors including energy, manufacturing, financial services, and hospitality, presenting an opportunity for investment from diverse PE sources,” said Kevin Kimotho, East Africa private equity leader at Deloitte.
“Public entities poised for privatisation, particularly those in the manufacturing sector, offer sizable investment potential.”
The 2023 Deal Makers Africa Annual report showed Kenya last year recorded $600.3 million (Sh77.3 billion) PE investments with 95 deals closed in this period.
Kenya beat Nigeria and Ghana which attracted $493 million (Sh63.5 billion) and $291 million (Sh37.5 billion) respectively. The Deloitte report signals that the country could see even more deals.
Some of the State-owned firms that the government wants to offer to private investors include the 33.83 percent stake in Kenya Hotel Properties Limited, which owns the building that was previously managed by the Intercontinental Hotel Group in Nairobi.
The Privatisation Authority also invited consultants to guide the sale of government stakes in five top Kenya Development Corporation-controlled hotels, including the Kenya Safari Lodges, Mt Elgon Lodge Limited, Golf Hotel, Sunset Hotel, and Kabarnet Hotel.
The government is also looking for buyers for its 43.77 percent stake in Kenya Wines Agencies Limited. It also wants to sell the Development Bank of Kenya and Consolidated Bank of Kenya.
Mr Kimotho said entities poised for privatisation, particularly those in the manufacturing sector, will offer sizable investment potential for PE firms.
“The manufacturing sector in Kenya is a key resource for the current government to achieve economic diversification and job creation goals.
PE firms can leverage their expertise to modernise operations, improve efficiency, and expand market reach, positioning these entities for robust growth and profitability,” he said.
Despite the bright outlook, Deloitte cautions that successful privatisation and increased investor confidence will largely depend on how the government streamlines the privatisation by among other interventions rationalising the regulatory framework, simplifying the transaction approval process, and increasing public awareness.
The report says Kenya’s attractiveness to PE firms is also bolstered by the capital markets reforms such as the Capital Markets (Public offers, Listings and Disclosures) Regulations, 2023, that were issued to deepen capital markets, address emerging issues and market dynamics and make initial public offers (IPOs) a viable exit route.