THE economic environment for private equity investments in Africa is promising compared to a few years ago when the global economy was in a downturn, and this improvement in economic conditions is encouraging and reflects Africa’s status as the world’s fastest urbanising continent.
This is according to Romain Py, investment director and head of transactions at African Infrastructure Investment Managers (AIIM) who was at the African Utility Week currently taking place at the Cape Town Convention Centre.
The rapid urbanisation on the continent is underpinned by a strong demand for infrastructure, which the African Development Bank (AfDB) estimates to be around $170bna year for the next decade.
Py added that to ensure investments that deliver true value, however, African governments need to be educated on how to be attractive investment destinations.
On the other hand, investors need to be made aware of how to manage and reduce perceived and actual risks.
He further said that African-based institutional investors were in a much better position to understand risk perception on the continent.
‘It is, therefore, crucial that Africa-based pension funds know about the benefits of investing in infrastructure projects on their own turf.
‘African pension funds have a key role to play as an additional pool of capital. AIIM has been educating a number of African pension funds on the benefits of and great opportunity to invest in their own “story”,’ Py added.
He said he believed that unlocking African pension fund money to invest in infrastructure debt on the continent would deepen local capital markets, adding that ‘bad news stories on the continent often cloud out the opportunities, but when African pension funds, which understand the investment risks, are coupled with limited partners for investment, it can lead to outsized returns for patient, long-term investors.’