EGYPT. Home to the world's fastest-growing working-age population and a massive untapped consumer market, Africa’s solid fundamentals promise outstanding investment opportunities to pioneering private equity investors, senior industry veteran says
A decade ago, only one African nation held opportunities for private investors, according to a recent study by the International Finance Corporation. Today, the IFC believes the continent of more than 1 billion consumers — home to some of the world’s fastest-growing economies including Ghana, Ethiopia and Tanzania — holds at least 21 countries with opportunities for private equity investors seeking superior returns, a top private equity leader told his industry peers at a conference today in Nairobi, Kenya.
“Africa is among the last great frontiers for private equity,” said Stephen Murphy, Managing Director at Citadel Capital, the leading private equity firm in the Middle East and Africa with US$ 8.7 billion in investments under control in 15 countries spanning 15 industries.
“This simple fact often leads to the assumption that African private equity investments are too risky, too commodity-focused and too difficult to exit — to say nothing of the view that it is too difficult to find an established general partner with whom to invest,” said Murphy in a keynote address headlined ‘African Private Equity: Perception vs. Reality’ at the annual SuperReturn Africa conference, which opened today.
“Do your homework, though, and a different picture emerges: Africa is about opportunity — the opportunity to do better because of brighter macroeconomic fundamentals, and on a micro level because of its natural resources; the opportunity to create and grow new businesses; and the opportunity to improve existing businesses.”
Moreover, Murphy said, “Consider that Africa has a population of more than 1 billion, 60% of whom are beginning the seismic shift from rural subsistence agriculture to urban employment. This makes not just a huge potential workforce — about 1.3 billion strong by 2040 vs. 582 million today — but a consumer market that has very little and yet which is hungry for goods and services that may previously have been out of their reach. Africa is about consumers, it is about high-impact infrastructure investing and it is certainly about value-added exports and not just commodity exports.”
African PE investments are not at all difficult to exit, Murphy added. “The simple fact is that in our eight year history, we have returned US$2.2 billion in cash to our investors. While ‘commercial’ LPs are just starting to invest, the development finance institutions have very large African portfolios and are making very substantial returns. They have proven the market for everyone else.
“Private equity investors would do well to look at what has occurred in public equities,” Murphy concluded. “In the past decade, the S&P 500 has had negative returns, while the MSCI Emerging Markets Index has returned 163%. Africa offers private equity investors strong underlying economic growth, low competition for deals (and for the businesses in which they invest), low levels of financial risk, and the ability to have a real impact on the communities in which you invest — and all of this is broadly welcomed by regional governments.”
About Citadel Capital
Citadel Capital (CCAP.CA on the Egyptian Stock Exchange) is the leading private equity firm in the Middle East and Africa. Citadel Capital focuses on building regional platforms in select industries through acquisitions, turnarounds, and greenfields executed via Opportunity-Specific Funds.
The firm’s 19 OSFs now control Platform Companies with investments worth more than US$ 8.7 billion in 15 countries spanning 15 industries, including mining, cement, transportation, food and energy. Since 2004, Citadel Capital has generated more than US$ 2.2 billion in cash returns to its co-investors and shareholders (on investments of US$ 650 million), more than any other private equity firm in the region.
Citadel Capital is the largest private equity firm in Africa by PE assets under management (2006-2011, as ranked by Private Equity International).
For more information, please visit www.citadelcapital.com.