West Africa ranked top private equity destination

For the third time in three years, West Africa, especially Nigeria, raked in more private equity (PE) deals than Southern Africa.

According to the 2014 Deloitte’s East Africa Private Equity Confidence Survey, published this month, West Africa had the highest reported value of deals during 2013, surpassing Southern Africa and Eastern Africa.

“I think the great sectors for private equity are those where you can back an entrepreneur or a really good management team so they tend to be businesses that offer services, restaurants, shops and manufacturing perhaps,” Nicholas Plant, a Partner at Dentons, told CNBC Africa.

Nigeria is the largest economy on the African continent and the country’s Gross Domestic Product (GDP) rate is expected to grow at seven per cent, making it a highly attractive market for investors.

Nonetheless, sectors such as manufacturing have to develop further as the sector accounted for only 6.8 per cent of the country’s economy.

“Manufacturing is just about four per cent of the economy here, so that’s something that you expect to expand as the economy becomes more mature and that’s what private equity is all about. It’s about taking a small company and taking it to the next stage,” he explained.

“So, for instance, if you had a chain of restaurants that just had two shops, private equity will back it and take it to like 50 shops in the country where it originated and then ideally, expand it into countries.”

Deloitte’s statistics showed that in 2012, private equity deals in West Africa reached US$298.45 million compared to Southern Africa’s US$241.9 million.

The region also saw 24 private equity deals, against Southern Africa’s 19 compared to the 2012 numbers of West Africa (20) and Southern Africa (15). While most of the West African deals were in Nigeria, most of the Southern Africa deals were in South Africa.