By Edson Baraukwa | Africa Guardian
The Deloitte Africa Private Equity Confidence Survey 2024 presents a varied picture of the business fundraising landscape across the continent.
In East Africa, optimism is growing, with 52% of respondents expecting the fundraising environment to improve over the next 12 months. This positive outlook contrasts with other regions, where opinions are more divided. North and Southern Africa show a mix of expectations, ranging from improvement and stagnation to decline.
Despite the overall optimism in East Africa, respondents anticipate that deal sizes will remain modest. The survey indicates that 54% of those polled expect deals to be below $25 million, while 35% foresee deals ranging from $25 million to $50 million. Only 12% expect larger transactions between $50 million and $100 million, a decrease from previous years.
The survey highlights that East Africa’s improved fundraising outlook may be attributed to increasing Foreign Direct Investment (FDI) flows, particularly from traditional markets and Asia. Deloitte also notes that governments and Development Finance Institutions (DFIs) are preferred funding sources due to their longer exit timelines. Banks, with their significant reserves, have also emerged as crucial funders.
Respondents anticipate that Europe and the United States will be major sources of capital over the coming year, with the Middle East and Asia also playing significant roles. China’s status as East Africa’s largest trading partner and creditor under the Belt and Road Initiative further underscores Asia’s importance in the region’s capital-raising efforts.
However, concerns about market exits are prevalent. Approximately 52% of East African respondents expect an increase in exit activities in the next 12 months, driven by steady economic recovery post-pandemic, despite challenges such as currency depreciation and inflation impacting private equity (PE) fund returns. Conversely, 37% believe exit levels will remain stable.
When exiting, East African private equity firms predominantly favor secondary sales, with 56% choosing to sell to other PE firms for quicker returns. Strategic sales to investors are the second most preferred option, selected by 32% of respondents due to higher prices. IPOs remain less attractive due to low liquidity and complex listing processes in East African stock exchanges. Nonetheless, the Kenyan government is actively encouraging private equity firms to consider the stock market as a viable exit strategy to strengthen the region’s capital markets.
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