Kenya attracts highest foreign equity funds, survey indicates

A report released by Deloitte and Touche shows that Kenya attracted the highest interest from foreign private equity funds seeking to invest in the Eastern Africa region. Photo/FILE  NATION

By GRIFFINS OMWENGA 

In Summary

• South Africa and Nigeria with the three countries securing almost half of the total value of deals that come to Africa.

Small and medium enterprises in Kenya attracted the highest interest from foreign private equity funds seeking to invest in the Eastern Africa region.

The small businesses segment put Kenya in first position in securing the highest number of deals from firms in Europe and North America, netting in more than Sh6.8 billion from 58 deals closed across Sub Saharan Africa last year.

In the East Africa Private Equity Survey released by professional services firm Deloitte and Touché, Kenya beat other East Africa countries to be in the same league with South Africa and Nigeria with the three countries securing almost half of the total value of deals that come to Africa.

“Kenya has the most diversified and mature economy in the region and as such, it attracts most private funds, with most investments targeting financial services investments, real estate, healthcare, manufacturing and agriculture,” said Deloitte’s Director of Corporate Finance services Alexander Van Schie.

Tanzania and Ethiopia have been cited as the greatest competitors to Kenya while but Uganda is still in its toddler stages of attracting mega deals in terms of the value of single transactions.

Mr Schie said that most private equity funds were directed to SME’s with each deal averaging Sh400 million, owing to the fact that there were no large opportunities to invest in the region.

In total, private equity funds invested over Sh40 billion in Eastern Africa, a large increase from 2011 pushed up by three large deals in Tanzania and Ethiopia. In both countries, foreign private equities made large investments against limited local competition.

However, the picture is bound to change over the next one and a half years as more and more businesses and even corporates embrace private equity in scouring and scouting for finances.

The Kenya Investment Authority has forecasted that over Sh25 billion will be invested in the country as foreign Direct Investments.

These developments are anchored in the belief that more and more investors are developing confidence in the economy as the political jitters settle down and businesses pick momentum to drive growth.

The developments were supported by Ms Andrea Bohnstedt of Africa Assets who said that Kenya’s economy is slowly growing to be a mature market for private equity funds owing to the number of private equity providers that had successfully got into earlier deals and exited from the market last year.

She however said that the fundraising environment in the region is bound to remain active but investors maintain a rather cautious approach in the kind of deals they get into. Most of these funds are from first time entrants who are seeking better returns for their monies from the East Africa region.

“Eastern Africa continues to draw the largest number of specialist sub-regional funds in sub-Saharan Africa. The past two years have brought steadily increasing interest in the region by both local and foreign PE funds,” the Deloitte survey reads.

“However, much of the interest is coming from first time funds. We have yet to see a solid track record from specialist East African funds – this will drive the rise of more second-generation funds.”