Out of the 134 IPO’s recorded in the last 5-years in Africa, Kenya only managed to attract 2 IPOS.
A new report by Kenya’s real estate and investment advisory Cytonn Investments has given a positive outlook for private equity in the East African powerhouse but warns that the investors are not opting out when time gets ready.
Exits are central to the private equity investing process and a PE firm will consider a variety of different exit strategies to realize its return on investment. Four of the most common PE exit strategies are: trade sale, initial public offering, secondary buyout and leveraged recapitalization.
Despite being the most active private equity markets in terms of deal activity in the continent, Kenya still lags behind other economies in regard to Exits.
IPO’s are among the most common PE exit routes. However, out of the 134 IPO’s recorded in the last 5-years in Africa, Kenya only managed to attract 2 IPOS.
As a remedy Cyntonn notes that the Nairobi Securities Exchange has introduced Ibuka Program, an incubation and acceleration platform that will help address the listing drought at the bourse and we expect that will open up more private equity exit channels.
The report adds that Fintech lending, in particular continues to draw most interest from investors. The untapped potential in credit and credit related industries in Africa is highlighted by the significant difference in credit extension activity in Africa compared to other world regions.
“Fintech lending addresses this by providing access to credit via convenient and already established channels.
Growth in the region is projected to continue to rise to 2.7% in 2018 and an average of 3.4% in 2019-20, on the back of firming commodity prices and gradually strengthening domestic demand.
According to IMF analysis, private investment increases when GDP growth is high; a 1%-point increase in GDP growth rates leads to a 0.21% points increase in the private investment rate.
During the period 2018, Kenya recorded the highest number of private equity investments made, with 24 transactions recorded compared to 18 in 2017. Uganda was a distant second in terms of PE deals activity with a total of 6 deals recorded in 2018.
Ethiopia, whose profile has been steadily rising amongst the investing community recorded 5 PE transactions for the year.Rwanda had two while Tanzania had one.