Nairobi — Kenya attracted six private equity deals in 2012, the highest in East Africa, according to the 2013 Deloitte East Africa Private Equity Confidence report.
Private equity is money invested in firms which have not 'gone public' and therefore are not listed on stock exchanges.
This performance was attributed to investors' perception of Kenya as the region's economic hub and excitement about the discovery of oil in the northern part of Kenya, although it is still a few years away from generating significant revenue.
Kenya was followed by Ethiopia which claimed three deals in 2012, compared to none in 2011, reflecting a growing popularity despite the strict investment regulations in the country.
However in terms of value, two private equity deals in Tanzania had the highest value of Sh23.8 billion compared to six deals in Kenya which were valued at Sh4.5 billion.
The East Africa region saw an increase in investor confidence in 2012 attracting a total of Sh39.8 billion in private equity funds which was a large increase from 2011 pushed up by three large deals in Tanzania and Ethiopia.
Deal activity in eastern Africa showed most funds were invested in manufacturing, agribusiness and financial services.
Manufacturing attracted four deals valued at Sh8.5 billion, two deals in the agricultural sector worth Sh23.7 billion while the financial sector received Sh4.5billion in two deals.
Sectors like financial services, manufacturing, real estate and healthcare continue to see activity each year, reflecting the consumer-driven focus of many private equity funds.
However the IT sector and venture capital industry in East Africa remained quiet and underdeveloped during the year.
"Going forward there is greater optimism for the East Africa region in 2013. Kenya as the hub of Eastern Africa is expected to experience increased activity, as investors who had taken a wait-and-see approach pending the outcome of Kenya's election kick-start their investment efforts," Corporate Finance Service Director at Deloitte, Alexander van Schie said while giving the analysis of the survey.
He said Kenya has also a well educated work force, optimal location and improving infrastructure which enhance its ability to attract business and global interest.
Tanzania's fast growing economy and Rwanda's post-genocide economic recovery and ease of doing business will also be a big attraction to private equity investments.
"Seventy nine percent of the respondents have faith in the growth of the overall private equity market activity across East Africa over the next twelve months," van Schie said.
In the region, 77 percent of the respondents stated that they were expecting the economic climate to improve in the next twelve to eighteen months.
Overall, expectation of high GDP growth across the regions, stable political transitions especially in East Africa and global economic recovery have led to increased investment potential in Africa.