Capital Markets
PE, venture capital firms lead East Africa deals in 2023
Tuesday January 02 2024
Private equity (PE) and venture capital investments and exits have led the way in deals activity in 2023. PHOTO | SHUTTERSTOCK
Private equity (PE) and venture capital investments and exits have led the way in deals activity in 2023, helping maintain the growth momentum seen from 2022 when capital flows improved on the end of Covid-19 pandemic-related uncertainty.
In the 10 months to October, data on deals in the East African region compiled by advisory firm I&M Burbidge Capital shows PE investments and exits had tallied 37 deals, while venture capital (VC) accounted for 33 deals.
Read: Development, PE funds team up to share investment risks
Total deals recorded by the firm across the region stood at 115 by the end of October, out of which 81 were concluded in Kenya.
After cooling down in 2020 and 2021 due to Covid-19, deals activity rebounded in 2022 and continued into 2023, riding on pent up demand for capital that is expected to continue supporting activity in 2024.
“It looks likely that the number of deals will have been roughly similar in 2023 to 2022, but the value of deals has increased a great deal. Given that 2022 was a big increase over 2021, this means it was a fairly positive year,” I&M Burbidge Capital CEO Edward Burbidge said.
“It is likely there will be more PE exits once again. Although the macro picture is challenging, which we expect to weigh a little on mergers and acquisitions, the demographic imperative of being in Africa for global companies should outweigh this and lead to an increase in M&A once again in 2024.”
He added that there is an expectation of more climate finance deals, as well as a small increase in public capital markets deals.
In terms of ticket sizes, investments by Development Finance Institutions (DFIs) have produced the largest individual deals, given the large financial muscle of these institutions.
Notable DFI deals during the year was the International Finance Corporation (IFC) loan transaction with Seacom, worth $207 million (Sh32.2 billion) and a $72 million (Sh11.2 billion) loan by the African Development Bank, Finnfund and the Eastern and Southern African Trade & Development Bank (TDB) to energy form Globelec for the construction of a geothermal power plant.
The IFC also provided a $257.4 million (Sh40.2 billion) debt and equity funding package to Safaricom’s Ethiopia venture.
In terms of value of deals, DFI transactions were valued at $975 million (Sh151.6 billion) by the end of October. This, however only accounts for deals whose participants disclosed the value.
Read: Private capital inflows to Kenya rise fastest in Africa
For PE investments, the disclosed value stood at $663 million (Sh103 billion), while PE exits were worth $1 billion (Sh155.5 billion).
Some of these are cross-transactions however, with a number of PE’s exiting via sales to fellow funds that are coming into the market, as well as to DFI’s.
