INTRODUCTION -

It has been a busy few months for private equity activity in Africa. Statistics and transactions have illustrated a growing appetite for investment in the continent and, crucially, growing confidence and returns. A recent I&M Burbidge Capital/East Africa Venture Capital Association report showed that PE firms exiting East African investments are reaping returns of almost 25 percent while Nigerian tech startups secured more than US$110.9 million of investment in the first half of the year. The landmark US$1 billion initial public offering on the New York Stock Exchange of Jumia, the largest e-commerce operator in Africa, meanwhile, showed that flotations of African assets on the international capital markets are a reality. The launch of the operational phase of the African Continental Free Trade Area (AfCFTA) marks what many consider to be a potential game changer for the continent, creating the world’s largest free trade area since the formation of the World Trade Organization, which covers a market of 1.2 billion people with a combined gross domestic product of US$2.5 trillion.

It is no surprise that investors are searching for investments in Africa. It is a diverse continent with emerging commercial and technological needs, apparent healthy returns, and structurally superior investment and growth prospects. Sub-Saharan Africa has consistently been the second-fastest-growing global region after the developing Asia region since 2000. A structural demographic dividend and a growing labor force underpin higher and sustained long-term demand for goods and services. Even so, these incentives come with a warning. Doing business in Africa, like in any other emerging market, carries risks that investors perhaps need not consider in more advanced markets.