Many private equity firms are adamant that Africa is the next hot spot for the industry as its burgeoning middle class continues to bloom, but the pension and endowment funds who invest in private equity funds are more cautious.
Over the past five years, private equity firms have invested nearly $12 billion in Africa and raised almost $10 billion, according to a study by Ernst & Young and the African Private Equity & Venture Capital Association (AVCA).
It is not hard to see what has attracted them to the continent. Over the last ten years, Africa’s economic output has increased threefold to $2 trillion and six African countries have been among the fastest-growing economies in the world.
But the private equity industry in Africa is still a budding one.
Africa from a private equity perspective is new. If you take out South Africa, the rest of the continent is still in its early phase,
Daniel Schoneveld, principal at private equity firm Hamilton Lane told a conference earlier this month. And because of the uncertainty and many risks involved, many pension funds are hesitant.