Private Equity looks to East Africa for investment opportunities

Private Equity looks to East Africa for investment opportunities

Having recently become members of the AVCA, Executives in Africa were delighted to have two Consultants attending the AVCA conference in Nairobi at the beginning of April 2019.

His Excellency, President Uhuru Kenyatta was due to make the welcoming address to the assembled audience but, with his State of the Nation speech due in just a couple of days, the President was represented by his excellency Peter Munya, Cabinet Secretary, East African Community and Northern Corridor Development.

In his role representing the President, the Minister reflected on the importance for Kenya of concentrating upon President Kenyetta’s four pillars over the coming years, namely;

  • The expansion of the manufacturing sector;
  • Provision of affordable housing;
  • Provision of affordable healthcare and;
  • Food security

These were noted by the VC and PE community in the room and these themes returned in conversations over the following days, reflecting the community’s aligned interest in sustained development.

 With the opening addresses made, some 500+ delegates were treated to numerous panel discussions on a broad range of topics over the following two days.  There were too many topics covered to list them all, but we would like to draw attention to a number of key topics, the sentiment in the room and how Executives in Africa can play its part in working with the GP’s  to help find solutions to perceived obstacles.

It was noted that in the past, LP’s often had arrived in Africa having “bought with them their notebooks but leaving their chequebooks behind”.  In recent years, more and more LP’s have been arriving with both notebook and chequebook with the expectation that, by 2030, the capital available for investment by VC or PE funds will grow ten -fold.

The visible presence of several US pension funds at the conference is testament to the fact that, alongside the DFI’s, the overall investor base is broadening.  The current direction of travel, whilst not without its head-winds, is incredibly positive for the industry and therefore the community at large.

A particularly interesting panel discussion considered the emergence of the Private Debt market, how it differs from PE not only in the risk/reward parameters of where they sit on the capital stack, but also how it impacts the relationship between the GP and the management of the portfolio company.

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The panellists were very thoughtful in their responses to the moderator’s questions with excellent insights into the nuanced position of GP’s investing for example in the mezzanine piece.  In addition, the panel discussed how that interest may not bring a seat on a director’s board but does allow for them to be “more of a partner” to the executive team of a portfolio company without diluting equity than a senior debt lender would be allowed.

Since the dilution of equity interest can often be a strong hurdle for business owners to overcome (particularly where generations of a family have strived so hard to build a successful enterprise), mezzanine in some cases offers a very viable option for all concerned.

Another hurdle touched upon by panellists was the knowledge of the business owners that, by definition, VC and PE funds have an exit in mind even at the point of acquisition.  Although many African funds can rightly call themselves “patient investors”, exits are an inevitability and all stakeholders need to work together so that the journey to growth and success is aligned for all.  This is certainly something which we at Executives in Africa understand.

As members of the AVCA Community we have an aligned interest, importantly reflecting the brand of clients when entering the market to resource top talent for them which are enormously important values along with being able to identify the best business leaders for our clients today who are committed to developing the leaders of tomorrow, given that  hiring the very best readers

Other very interesting topics included gender diversity and how the VC/PE industry in Africa can be at the forefront of gender equality in finance.  We also heard how ESG (Environmental and Social Governance) is no longer an additional consideration within the investment process but has become core.  More than once we found GP’s discussing how they believe that they will need to recruit ESG specialists into their teams to work alongside the consultancies in order to be on top of best practice going forward.

Perhaps one of the most frequent topics of conversation in the course of the conference was the idea of “impact” investing and whether that is truly a separate investment class.  We may not be qualified to answer that question, but Executives in Africa certainly believes that, alongside our clients, we can assist in the growth of successful business in Africa through the leaders we identify to drive that growth and thereby have a positive and lasting impact on the continent.

The overall sentiment for the conference as one of vibrancy and a “can-do” mentality.  However, at one early panel the moderator put the question to his four panellists to offer up what they saw as their significant headwinds.  Alongside issues such as the need for improved legal structures, corporate governance etc, two of the four panellists referred to their human capital needs. “We need to support the growth of our portfolio companies and that means attracting additional talented leadership to them where needed”

As the only Executive Search firm member of the AVCA, we are ready to assist the AVCA community in overcoming those human capital challenges where our experience and expertise can deliver a positive and lasting impact.  We also look forward to building on the relationships we have made at this conference.

“Tuna Fanikiwa pamoja” – We suceed together

If you would like to discuss the topics within this article in more detail, please contact Julian Harris, Search Consultant, at

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