The number of corporate deals in East Africa in the first five months of the year went up by half compared to the corresponding period last year, helped by the deployment of new funds by venture capital and development finance institutions in the region.
Analysis by advisory firm I&M Burbidge Capital shows that 59 deals including debt and equity transactions were announced this year, up from 39 last year.
Kenya accounted for 45 of these deals owing to Nairobi’s position as the region’s financial hub.
The higher activity also reflects the continued resumption of global capital flows after a subdued two years in 2020 and 2021 when uncertainty over the Covid-19 pandemic pushed investors to adopt a conservative approach to new investments.
There is also limited concern over possible disruptions linked to Kenya’s general elections slated for August, unlike previous polls where investors would hold back capital until after the polls.
"We continue to see larger capital commitments to investment funds focussed on the region, such as AfricInvest’s recent close of a $400 million (Sh47 billion) fund and Proparco’s commitment to Maris Africa announced this month (May),” said the advisory firm in its May 2022 East Africa Financial Review report.
“We also continue to witness increased interest in the region from trade players in the Far East including China and Japan. We have not noted any impact on origination or deal closing from the upcoming Kenyan elections and at present remain cautiously optimistic of minimal impact.”
Thirty-four of the deals are in the ICT, telecommunications, and financial services sectors, which have been a favourite of new startups, while logistics and healthcare account for 10 deals between them.
Most of these investments are being driven by venture capital funds, which made 20 investments into the region in the period, while private equity firms and DFIs came up with 15 deals.
While VC funds have largely targeted young firms in the ICT, healthcare, and agribusiness sectors, DFI’s are increasingly pumping money into large financial firms, including offering tier-one lenders in Kenya foreign currency loans for on-lending to SMEs.
In May this year, Equity Group received a $165 million (Sh19.4 billion) subordinated loan from the International Finance Corporation (IFC) and other DFIs to support micro, small and medium-sized businesses.