GF speaks with Nonnie Wanjihia, Executive Director at EAVCA (The East Africa Venture Capital Association) about the private equity environment in East Africa and the role of EAVCA
Africa Global Funds (AGF): Please tell us about EAVCA and your role at the organization.
Nonnie Wanjihia (NW): EAVCA was begun in 2013 by our seven founding members, Actis, Abraaj, AfricInvest, Centum, Catalyst, Fanisi Capital and TBL Mirror Fund. I was brought on as the founding Executive Director in February 2013 and see my role as leading the Association in achieving its objectives in the four areas we focus on, namely Advocacy, Intelligence, Networking and Training.
Since 2013 we have grown to 63 members across the investment ecosystem in the region from PE firms & DFIs (development finance institutions), to local asset managers and professional service providers. We have trained over 200 professionals in aspects of PE investing and will restart our training program again this year.
More recently though, we have been focusing efforts on Advocacy, primarily mobilizing local capital where we regularly engage stakeholders including the pension funds, asset managers and administrators as well as the Capital Markets Authority and Retirement Benefits Authority. We also focus on Intelligence having recently concluded a number of pieces of research, with our latest being a case study compendium profiling seven investee companies, and their financial and non-financial impacts. Lastly we are proud to have successfully hosted two PE in East Africa conferences that brought delegates from across the region and as far as the rest of Africa, which served as a platform to inform the local markets (entrepreneurs, local investors and regulators) about the sector as well as other investors interested in regional market opportunity.
AGF: Which markets in East Africa are ripe for private equity investments?
NW: Kenya has historically taken the lion’s share of deals in the region and has attracted the majority of PE transactions in East Africa, both by number and value. However, several of our investors use Kenya as a hub and base themselves here in order to access the rest of the region. Uganda, Tanzania, Rwanda and Ethiopia, however, are all seeing increased interest from PE investors particularly given the low penetration in the neighboring countries. During our conference we created a specific panel to discuss Ethiopian deal activity given the level of interest in the country.
AGF: Which sectors are hot at the moment and why?
NW: Our research with KPMG on the PE landscape in Africa showed that financial services, energy and agribusiness were the top 3 sectors for investment. Given though the demographics in Africa that are driving PE investment I would say consumer-backed sectors in general represent an attractive opportunity. We are seeing deals in healthcare and pharmaceuticals, education, TMT and of course FMCG.
AGF: What’s your view on the East African PE development in comparison to other regions?
NW: I believe East Africa provides an excellent PE opportunity. Interest in East Africa is continuing to grow backed by certain macro-economic fundamentals and economic growth, political stability and increasing infrastructure spending and of course the possibility of high returns and favorable entry prices. Furthermore, the rising middle class, rapid urbanization and youthful population also support the steady and continually increasing FDI inflows as investors seek to take advantage of this growth. The impact of oil and commodities prices on the resource-based economies and slowed down growth in South Africa is encouraging investors towards East Africa.
AGF: Do you see many East Africa-focused funds in the market? Can you comment on the fundraising environment?
NW: Yes, there are a growing number of country-focused funds, regional funds and pan-African funds with local presence. East Africa remains an attractive investment destination and private equity in the region continues to gain traction as an attractive source of risk capital amongst the local business community. From a fund raising perspective, international investors are more comfortable with the region given the economic growth and relative stability, and with added benefit of a track record of PE investments and exits. Pension funds are increasingly looking to add diversification in their portfolios in addition to traditional investments in stocks, fixed income securities and real estate. We have started to see some investment by pension funds into East African focused PE firms and although the industry is still in its nascent stages, this sends a positive signal where these local institutions can form the basis of a sustainable local pool of capital and crucial drivers of private equity in Africa.
AGF: Nonnie, could you tell us about some key challenges EAVCA is facing?
NW: Firstly, the availability of data continues to pose a challenge for members, however the Association continues to prioritize its research efforts in the medium to long term. Secondly the Association continues to advocate for key regulatory reforms to ensure doing business in the region remains attractive.
AGF: What are your expectations for the East African private equity industry going forward?
NW: I am keen to see more local institutional capital investing into private equity or alongside private equity. It’s important for the sustained growth of the industry that African capital is put to work in African companies.
AGF: What are EAVCA’s key priorities for the next 12 months?
NW: We will continue to prioritize our Advocacy efforts particularly with regard to mobilizing local capital in order to further open up the fundraising environment for our GP members. Furthermore we are excited about the reintroduction of our training program which will be launched later in the year. We have revised the modules and will include some new workshops such as Fundraising. Lastly research is important for the Association and we have received very positive feedback on our research efforts particularly the recent case study compendium. We are currently creating a video report from the interviews with investee companies which we are hoping to release in the coming days. Membership recruitment is always important as the more members we have the bigger our voice will be.
Anna Lyudvig is the Founder of Africa Global Funds.
As originally appears: https://goo.gl/fOqXwD