Private Equity Investment in Africa

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1 Private Equity Investment in Africa East Africa is experiencing a wave of private equity (PE) flows as investor confidence in the region increases. The number of private equity deals carried out in 2013 in the region doubled to 26 compared to the previous year, according to the recent 2014 East Africa Private Equity Confidence Survey by professional services firm Deloitte. Private equity investors have long looked to four large emerging markets for big returns: Brazil, Russia, India, and China. However, with each BRIC economy in some sort of trouble, private equity firms are increasingly putting their investment dollars to work in other less-developed markets especially Southeast Asia and Sub-Saharan Africa in hopes of better returns (CNBC 2014). Based on the survey by Deloitte, 84 deals were completed in SSA in 2013, of those 46 reported total values of US$3.69bn. Private Equity funds invested more than three times as much in sub-saharan Africa in 2013 as they did in 2012, hereby indicating increased appetite for opportunities in the region which, according to the World Bank, is also one of the fastest growing in the world. Data from the survey reflects a slump in deal-making in 2012, likely linked to lack of confidence in global markets and fallout from the Eurozone crisis that depressed growth in many African countries that year. Moreover, an increasing number of funds are being closed, suggesting an improvement in the fundraising environment. Confidence for PE in Africa is certainly increasing. Track records are deepening, growth is strong, risks are manageable and Limited Partners (LPs) continue to rate the region highly amongst their emerging market options.

2 Private Equity Investment in Africa The extractive industries had the highest value of reported deals in SSA in The largest deal in this sector was US$1.53bn, involving Helios Investment Partners alongside BTG Pactual in a 50/50 joint venture with Petrobras International Braspetro B.V., a subsidiary of Petrobras, to explore and produce oil and gas in Africa, through a specialized investment vehicle. The other major deal was Warbug Pincus US$600m early-stage investment into Delonex Energy, a start-up Africa-focused resources exploration company in Central and East Africa. Nevertheless, when considering the number of deals, the manufacturing and financial sectors recorded the highest number (13 each), followed by agribusiness (12), TMT (7) and infrastructure (6). The majority of these deals values were not disclosed, though they involved Small and Medium Enterprises (SMEs). Deals in Eastern Africa were concentrated in agribusiness, healthcare and financial services, with a large deal of US$60m from Norfund s and AIIM investment in a wind power project in Kenya. Going forward, deals are expected to concentrate on SMEs in the consumer driven sectors, where an expanding middle class is seen as a key driver of future revenues. A few large deals might also be seen in the extractive or related industries, driven by the ongoing exploration activities of oil and gas in Eastern Africa. (Source: Deloitte 2014 East Africa Private Equity Confidence Survey, CNBC, EMPEA, World Bank)

3 Africa and Mauritius have enjoyed long and close cultural, business and bilateral ties for centuries. Leveraging on these strong ties as well as its strategic geographical position midway between Asia and Africa, Mauritius has successfully positioned itself as an attractive, secure and competitive location for cross-border investments and is regarded as a stepping stone for investments into and trading with Africa. Mauritius is recognised as an ideal financial centre of choice by a number of international investment funds, private equities and investment holdings largely due to its convenient time zone allowing trading with all major markets in a single business day and its developed business, banking and technological infrastructure. The strong and fast expanding presence of international law firms, corporate services providers, fund managers, global investment and wholesale banks as well as state of the art exchanges is testimony to this fact. Mauritius offers a risk mitigating and fiscally efficient financial centre for the structuring, administration and effective management of Africa related investments. While DTAAs allow for efficient tax planning by preventing the same income from being liable to double taxation in both contracting states; IPPAs help in mitigating risks by guaranteeing free repatriation of investment capital and returns to investors from the contracting states as well as shielding investors against expropriation. The fiscal certainty, investment protection as well as political and economic stability that the jurisdiction provides contribute significantly in further attracting global players to use Mauritius as their African platform. The financial services and IT sectors are geared to support private equity activity. Major international banks and accounting firms are present with various fund administrators providing fund licensing and back office support services. Technical, legal and logistical support is readily available with strong local skills in accounting, legal and fiscal matters. Private Equity Funds and other financial service firms focused on Africa are drawn by these advantages. Well-known institutions which have established funds in the jurisdiction include Standard Life, Goldman Sachs, Carlyle and BlackRock. Other funds groups include Aureos Capital, Integra Partners, Adlevo Capital, the Grofin Group and I&P Capital. The choice of jurisdiction for a private equity fund operating in Africa is influenced by many factors relating to the overall operating environment. Mauritius has established itself as one of the most successful financial centers because it has created a conducive business environment that is internationally competitive. (Source: Global Finance Mauritius, BOI, CBC-Commonwealth Trade & Investment Report 2013)

4 Despite various worldwide fiscal crises, Mauritius has maintained an excellent economic record. The island benefits from an ideal ranking in Africa from several indexes, showing that it provides a solid platform for outward investments. INDEX (2013) ORGANISATION RANK IN AFRICA Ease of doing business World Bank Top Regional Reformer World Bank Economic Freedom Heritage Foundation Easiest Country for Trade World Economic Forum Best Countries for Business Forbes Survey Most Improved Investment Climate Africa Business Awards Governance Quality MO Ibrahim Foundation Harvard University Best Governed Country (Kennedy School of Governance) JOHNSON Cornell University, Global Innovation INSEAD, WIPO Environmental Performance Yale and Columbia Universities Quality of Air World Health Organization Country Brand Index Future Brand World Economic Forum Networked Readiness Index (Global Information Technology Report 2014) Africa Competitiveness World Economic Forum 2 nd African Countries of the Future fdi Intelligence 3 rd

5 IOR-ARC COMESA AGOA Uganda Comoros Cape Verde Botswana Republic of Congo Seychelles Sierra Leone Tanzania Kenya Namibia Gabon SADC Signed MoUs with its African neighbours Why Mauritius? White listed jurisdiction recognised by OECD 19 IPPAs with African Nations South Africa Benin Tanzania Ghana Guinea Republic Mauritania Senegal Tchad Nigeria Burundi Cameroon Comoros Kenya Republic of Congo 14 DTAAs* with African states Botswana Lesotho Namibia Senegal Seychelles South Africa Tunisia Uganda Zambia