8 June 2018

East Africa: Boost for East Africa's Private Capital Investment As Experts Meet in Nairobi

Nairobi — Kenya's capital- Nairobi will next week play host to East Africa's largest convention on Private Equity, providing a platform to unpack the opportunities in the region, while addressing common challenges and solutions in the market.

The fourth annual-Private Equity in East Africa Conference will bring together over 250 delegates from around the globe.

The conference is being facilitated by the East Africa Private Equity and Venture Capital Association (EAVCA).

"We see our role as being a facilitator to capital flow to East Africa. Our event is meant to highlight the trends and opportunities that create value in local businesses, through wealth and job creation, while offering returns to investors," the EAVCA secretariat said in an interview with the Exchange.

The forum is fronted as the largest convening of global and local institutional investors, investment professionals and professional service providers in the East and Central Africa region.

The highly interactive agenda features discussions and debates on the opportunities in East Africa, workshops on solutions to common challenges, networking sessions, and plenary with leading thinkers in the private equity and venture capital space.

"This is a thought leadership platform that is investor led, showcasing developments, trends and emerging opportunities in private capital investment in East Africa. It is also a single point of interaction for business partners from across the region to network," said Eva Warigia, EAVCA Executive Director-Research and Advocacy.

The event comes at a time when venture capital in East Africa is fast gaining momentum to bridge the funding gap that is faced by many early stage businesses in the region, which may not have the historical financials or corporate structure for other methods of funding.

The forum will also provide an insight on emerging spaces of innovation for private capital investors such as setting up debt funds within traditional equity firms, to attract new set of businesses.

According to EAVCA, the region has continued to witness an increase in capital being raised while deals have remained almost constant.

"This creates a competitive environment for investors looking to deploy capital in the region and has made the deals here more expensive. This however speaks to a positive for the business owners in the region. They are able to draw their potential investors from a considerably larger pool of investors, allowing them to match to those who would really fit in with their vision," said Warigia.

She noted that the entrepreneurship drive across East Africa provides investors with many opportunities to participate in the region, nurturing the young businesses to national scale.

Companies such as Cellulant, which at less than 10 years old managed to attract US$47.5million from international private equity investors are a testament to the opportunities that the investors are looking at in the region- dynamic entrepreneurs, EAVCA notes.

"Another opportunity is the numerous businesses with opportunity to scale, as was the case with Nairobi Java House," Warigia said.

The forum comes at a time when the Kenyan market is still grappling with effects of the interest rate capping that has locked out thousands of borrowers from accessing bank loans, especially the Small and Medium Enterprises.

"The capping did have a significant effect to businesses' access to finance. Credit remains a key component for business success due to its ability to plug short term gaps. In that regard, the capping made businesses to re-valuate their operating practice, where in some instance it meant scaling back," EAVCA affirmed.

Alternative credit from non- banks have grown in their popularity to plug the gap- particularly in the micro- and small enterprises.

The market has recorded increased activities from companies such as Asaak in Uganda and Tala in Kenya which are offering access to credit to the consumer that may have been locked out of mainstream banking due to their risk profile.

Medium and large companies are also working with non- bank entities to look at structured financing options such as mezzanine debt, which provides the patient terms of long term financing.

A market research by EAVCA done early this year, found that most of the funds raised by fin-tech companies (up to US$ 202 million in the past seven years) went to firms deploying alternative credit in East Africa.

These includes Tala, which offers small loans of between US$10-US$500, which received in April this year US$56million in venture capital funds.

Another is Jumo Africa, with a footprint that covers East Africa, which raised US$ 3million from French Lender Proparco.

This year's Nairobi forum will attract key institutional investors and local pension funds who are slowly adapting to private equity as an asset for their portfolios. Other pension funds attending include the Public Investment Corporation of South Africa (PIC) which is the largest asset manager in Africa with US$157 billion in management.

The fourth annual forum will also host the Maryland State Retirement and Pension Fund from the US.

"East Africa's maturing enterprise space will continue to be an interest for investors who are keen to provide patient capital. For most of the world, disruptive innovation is steadily replacing traditional business practice as the preferred investment space, and Africa seems well positioned to gain from this trend," Warigia said.

While 2017 was considered a difficult year for business in general in East Africa for various macro-economic and political reasons, the market is anticipating that deal activity for both Venture Capital and Private Equity will rise in 2018, according to Banker Africa.

East Africa

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