Africa’s Maturing Private Equity Market

Feature

The Ripening Market
Africa’s Private Equity Market is maturing quickly and growing even more crowded. According to the Boston Consulting Group’s 2016 report “Why Africa Remains Ripe for Private Equity”, around 25 years ago, only twelve African based Private Equity firms were managing a combined $1 billion. Today this figure is upwards of $ 30 billion managed by more than 200 African Private Equity firms.

We occupy a unique position in this market by specialising in both greenfield and brownfield projects, widening our range of investment opportunities. Our seven sector focused Private Equity funds in the areas of Agriculture, Healthcare, Hospitality, Infrastructure, Mining, Mezzanine and Timber, means that each investment vehicle has unique capabilities met with its own individual team of experts in the sectors in which they operate.


Standing Out and Navigating the Market
QG Africa Hotel LP is the fund that acquired the landmark asset: Mövenpick Ambassador Hotel Accra. It is a 500 million-investment vehicle, which activities include the construction, conversion, acquisition and renovation of hotel projects across the sub – Saharan Africa region. The fund’s objective is to identify and assess Africa’s hospitality market for high potential assets-in spite of the market becoming even more congested with Private Equity firms who are too looking for opportunities. We aim to navigate through this market and continue to build our investment portfolio in other countries such as Nigeria and Kenya (countries which are receiving a lot more traction for Private Equity investments) by correctly structuring deals with the right amount of leverage to ensure growth and value creation.
Corporate Social Responsibility is also a cornerstone of our value-adding model. For us, it is about creating jobs, specifically home-grown manpower that will drive further growth into the national economy. The Mövenpick Ambassador hotel Accra has created 600 (194 of which are local employees) direct jobs and supports an additional 1,500 jobs through indirect and induced channels for mostly low and mid-level qualified personnel. We recognise how positively (and especially for the long term) impacting the local population has the potential to influence how attractive the asset will be at the end of the investment lifecycle, as well as affecting a firms impending position in the market. Private Equity will be a significant contributor to Africa’s economic and social development, reflecting one of the AfDB’s (The African development Bank) strategic priorities to achieve growth on the continent through the multiplier effects of Private Equity investments such as job creation, building management skills, supporting entrepreneurship and improving environmental and social governance.
Many of Africa’s largest economies are showing remarkable progress in places such as Ghana, Zambia and Ethiopia. Private equity investors should also remember that whilst the slump in oil and commodity prices has had a hard impact on national GDPs, the market is still very much a buyers’ market, meaning that long-term-minded and targeted investors like us should continue to seize opportunities. In the short-term, it is highly likely that Africa will continue to experience a GDP growth that far outpaces the rest of the world. Private equity firms should understand the risks in this extremely complex continent of over 50 nations, yet continue to adapt their unique approaches and explore the investment ecosystem in Africa’s evolving Private Equity marketplace.


Succeeding
Africa is arguably one of the largest growth opportunities for Private Equity investors. Attached to each of these opportunities are of course challenges, specifically in order for firms to earn higher returns, and for others to successfully exit – this represents a clear maturing of Africa’s Private Equity market. The rationale behind sourcing many opportunities in Africa is to adapt to a rapidly evolving market by considering more flexible and adapted investment strategies. QG Africa Hotel LP’s acquisition of the landmark Mövenpick Ambassador Hotel Accra, did precisely this and the end-result; a leading role in the largest open-market hotel transaction in sub-Saharan Africa to date.
Hospitality investments (among other strategic sectors) have the potential to generate good returns and are less prone to market volatility. Quantum Global Group represents a unique and contemporary breed of investors in Africa, one that is dramatically changing the way private equity investments are carried out. It is anticipated that in the near future over half of African Private Equity investments will yield higher returns than in other emerging market countries and the continent remains one of the world’s most attractive markets for investors. The acquisition of the Mövenpick Ambassador Hotel Accra is a testament to our unique approach in sourcing and executing deals in a market place which is growing even more crowded, but demands a partner who is capable in navigating Africa’s complex environment whilst adapting to its changes.