Kenya tops East African states in PE, venture capital deals
Kenya accounted for the lion’s share of private equity (PE) and venture capital (VC) transactions in East Africa over the past decade, aided by a diversified economy and talent pool that has made Nairobi a preferred base for investors seeking regional opportunities.
East Africa Venture Capital Association (EAVCA) analysis of investment activity reveals that the country accounted for 69 percent of the 478 private equity (PE) and development finance institution (DFI) investments between 2013 and the first half of this year. These transactions include both inbound investments and departures.
Uganda accounted for 12%, Tanzania and Ethiopia for 6% each, and Rwanda for 5%, with the remainder distributed across numerous nations.
Kenya has accounted for 74% of the total disclosed transaction value of $8.6 billion (Ksh1.26 trillion), surpassing Uganda, Ethiopia, and Rwanda, which accounted for 8%, 7%, and 5%, respectively.
PE funds do not always disclose the value of transactions, so the entry and exit transaction values are likely to be higher.
“Kenya is considered a central hub for economic activity in the region and has a relatively well-diversified economy less susceptible to commodity risks as compared to other large African economies,” said EAVCA.
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“A large addressable market and economy, strengthening rule of law especially as relates to commercial matters, and a large talent base are some of the factors that have set the country apart in attracting PE and DFI investments.”
In the other markets, the flow of private equity investments has been hindered by a combination of factors, such as government policy and monetary restrictions.
According to the EAVCA, Tanzania’s institutionalization of businesses has lagged behind that of its East African counterparts, which has slowed transactions and the ability of investors to create value.
However, a change in administration and government policy has increased the economy’s appeal to investors, particularly in the agriculture, natural resources, infrastructure, and tourism sectors.
In Ethiopia, where there is a large market and a rapidly expanding economy, political instability and a fixed exchange rate regime have delayed investment and made it difficult to extract dividends.
Due to its comparatively small market size, which is less suited to commercial PE investment, Rwanda is deemed attractive to venture capitalists.
Kenya tops East African states in PE, venture capital deals
