Nairobi. East African stock markets will this year face stiff competition from private equity investments as some investors are likely to choose the later over the former.
According to Sanlam Investments East Africa, investors are shifting focus to private equity investments over listed firms amid falling corporate earnings, plummeting shareholder wealth and a surge in profit warnings.
This comes at a time when regional stock exchanges are facing a scarcity of initial public offerings, largely due to waning investor interest and the reluctance by family-owned businesses to open up their books for public inspection.
According to Sanlam, private equity investors are looking to put money in key sectors such as financial technology (FinTech), energy, education, consumer products and services.
“Investor interest in private equity suggests increasing appetite for private equity investments, considering the limited opportunity in listed equity markets,” Sanlam said its 2019 investment outlook report for East Africa.
Last week, private equity firms AfricInvest and Catalyst Principal Partners jointly acquired a significant minority stake in Prime Bank.
In the same week, Fanisi Capital signed an agreement to sell Kenya’s Hillcrest International Schools to Dubai-based GEMS Education for $26m.
Fanisi owns a 55 per cent stake in the school, with the remaining 45 per cent held by businessman Anthony Wahome.
In Tanzania’s health sector, LeapFrog Investments invested an undisclosed amount in Pyramid Group, a medical equipment and pharmaceutical distributor serving sub-Saharan Africa.
Kenya-based private equity firm Catalyst Principal Partners acquired the country’s top-tier mattress manufacturer, Superfoam.
It also bought Ugandan mattress maker Euroflex and Malawi’s Vitafoam for an undisclosed amount.
Private equity in East Africa provides growth capital for SMEs, investing in businesses with an annual turnover of less than $30m and employing fewer than 150 employees.