Posted by: Armel | September 4, 2008

Private Equity in Africa: A Solution


While many countries on the continent don’t do enough to promote their launched stock exchanges, some others simply do not have any. The success stories in the exchanges in Ghana, Nigeria, Kenya cannot erase the fact that there are simply way more outstanding companies still privately held.

Closely held family owned and managed companies are the norm on the continent for many reasons that I don’t find necessarily true. Worries about ownership structure shouldn’t keep people from cashing-in or profiting if there are investors willing and attracted to a steady stream of income from established profitable ventures. We can find many examples in Africa where privately held assets are underperforming because the current owners just don’t or won’t see further than their current way of doing business.

To be honest, It can be scary to attempt bigger achievements with your business on the continent if you are not prepared for all the adverse side effects.

To showcase this focus, I will later take a few shots at it by presenting examples of sectors or areas where despite well known profits over the years, everyone can benefit from fresh capital inflow, better management or integrations. (If we agree that “income perpetuity” is the long term goal)
To be continued in next posts…
Armel Njeunou




  1. I most definitely agree with your analysis of the private equity focus in Africa. I also think unless larger funds or firms start to put money in those businesses, it won’t catch fire.

    On the other hand, we should be taking advantage of this opportunity EARLY before everyone else start pouring ressources in the SSA (sub-Sahara Africa). Remember that once the west is attracted by the high returns from investment in the region, those margins are slowly going to decrease ! So let’s keep that in mind.

  2. Ok Armel! Where’s the follow up ? I guess the banking crisis is crunching your keyboard too uhn?

  3. Can only agree with Armel’s analysis. I, myself, has been calling for more private equity investments in subsaharan Africa for a long time. Subsaharan Africa has countless sucessful small and medium businesses, mostly family owned. The success of those businesses is often based on the founder’s talent and their future can be jeopardized by a sudden change in leadership (sucession planning issues). I have noticed that a large portion of the profits made by those sucessful companies, year after year, is either distributed among shareholders and/or reinvested in assets that have nothing to do with the primary business purpose of the company, such as real estate. The results is a self-limited growth which limits future opportunities to increase profits. As Armel mentioned, there seems to be a general aversion to growing companies beyond a certain size. The reason is that many SMB owners I talked to, are reluctant to grow their business beyond their own capacity, with the risk to jeopardize years of work and leave only debts to their children. Good managers are hard to find, anywhere in the world. That’s absolutely true in Africa as well. When you own a business, if you grow your business beyond your own individual capacity, you must be able to rely on a good team of managers to help you get to the next level. That’s where, in my opinion, private equity will bring tremendous value in subsaharan Africa, as source of adequate financing but also a source of adequate management oversight. Now how do you attract large pivate equity funds to Africa ? I think showing currently attractive profits is not enough. There is still a widely spread misconception that Africa is a very risky environment for investments (well, that can be true in certain countries and industries). African investors, regardless their size and level of sophistication, have to demonstrate faith in their own business environment. Private equity funds, raised from African investors (private investors as well as banks, insurance companies, savings funds, mutual funds, social security institutions), have to be created. If those funds manage to create value then their sucess will show that there are serious opportunities for profits in Africa when you take the right approach. That will progressively change the ternished image of Africa in the international investment world and hopefully attract additional funds, raised outside subsaharan Africa.

  4. @Steve,
    I appreciate and welcome your comment You absolutely expressed the feelings shared among a lot of us who are convinced that under the “dirt” in SSA, lies much more opportunities than the regularly talked about Energy and Minerals industries. The underneath value that can be found in SMB accros the region needs to be properly channeled in order to provide a sustainable model for more investors.

    PS: The promotion of local businesses thanks to organizations like yours ( is a big step forward in that direction.

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