If you're looking for a financial services career in Africa, you may want to consider joining a private equity firm. Africa's private equity sector is still small compared to the US and the UK but it's growing fast and attracting considerable interest from abroad.
According to the latest Emerging Markets Private Equity Association (EMPEA) survey sub-Saharan Africa has climbed to the n.5 slot globally this year, up from n.7 in 2011 and n.8 in 2010, and it now ranks above Russia, the Middle East, North Africa or Eastern Europe.
Last year, global giant Carlyle announced the launch of its sub-Saharan fund and opened offices in Johannesburg and Lagos. Emerging markets private equity firm Actis is focusing on South Africa and Nigeria aiming for individual deals of $50m or more.
“Whether investing through traditional mutual funds or aggressively deal-by-deal, global investors are increasingly seeing Africa as the next horizon of opportunity,” says Azeem Zainulbhai, president and CEO of Crescat Excolatur, a private equity fund with investments in sub-Saharan Africa. “This year Africa’s economy is expected to grow at a rate close to 6%. For global investors, Africa’s impressive growth has made it a necessary part of their portfolio.”
South Africa, the continent’s economic powerhouse, is leading the field. Last year the number of private equity deals declined from 547 to 521 but the value of investments increased by 32.2% to R15.6 billion, while total funds under management reached the record figure of R115bn, according to the latest KPMG and Southern African Venture Capital Association (Savca) venture capital and private equity industry performance survey. This makes it three times larger than the domestic hedge fund industry, the other leading alternative investment channel.
“There is a lot of momentum in the market, it has shown good economic growth and potential that it will continue,” says Warren Watkins, KPMG private equity head. While in the past 2.5% of the funds under management in pension funds were allowed to be invested in private equity, regulations were changed late last year and the percentage has leapt to 10%, which is expected to have a significant impact.
As interest grows in opportunities in the whole of sub-Saharan Africa, South Africa is also a springboard for investment in the rest of the continent. “Increasingly, more funds will be spent north of our borders and we can expect an increase in new investments,” says Watkins. “There exists a general view in the market that Africa, with its population and urbanisation, represents great opportunities going forward.”
At present there are around 500 investment professionals employed in the private equity industry in South Africa, half of whom are white and male. Only 18.8% are women, a percentage the sector is keen to increase. The main problem is finding people with the right skills: “Talent remains one of the biggest challenges in private equity,” says Christoph Andrykowsky of Monitor, a South Africa-based business consultancy. “However, strides can be made by employing a complementary blend of skills of returning expatriates with best in class global training and local talent with local networks, experience and potential.”