2024 will bring a raft of risks and opportunities for private equity investors, from global geopolitical shifts and environmental concerns to technological advancements that could create opportunities or challenge certain investments. In Africa, private market investors must navigate these international issues and contend with rapidly changing investment environments across the continent. 

This article looks at the top issues across Africa that private equity investors should monitor closely this year. 

Ballots and balance sheets: African elections 

Pivotal elections are scheduled for major markets in Africa this year, including South Africa and Ghana – two of the five most attractive African countries for investment, according to a recent survey by the African Private Equity and Venture Capital Association. Elections can be transformative for a country's investment landscape, ushering in fresh perspectives and spurring the development of a more favourable business climate. This kind of major change was seen recently in Zambia and, to a certain extent, Nigeria. Ghana is likely headed toward just such a moment. A change in Ghana’s ruling party may be the catalyst needed to help the country restructure its international debt and return the country to its former status as an attractive market for investors considering West Africa. 

In South Africa, elections may see the start of coalition politics at a national level, as the ruling African National Congress (ANC) is likely to lose voters frustrated by continued power cuts, corruption, and a lack of service delivery. While the ANC will likely remain in government, a drop in its vote share below or near to the 50% mark would be a watershed moment in South Africa’s electoral history and herald a new era of coalition politics at all levels of government. While major policy changes (particularly pro-business ones) are not expected after the elections, the ANC’s decline has opened up the political market and will allow other parties more chances to govern and influence policy in the future. This opening up could, in turn, increase potential opportunities for private market investors. 

Coup contagion to continue? 

With seven military takeovers in the past three years in Africa, it is easy to question whether this ‘coup contagion’ will continue. While the previous coups have been confined to smaller economies, they have had an outsized impact on investor sentiment and risk perception in the broader region. The coups have been broadly accepted by the population and both regional and international responses have been ineffective, potentially increasing the risk of more military-backed coups in the year ahead. The most vulnerable countries include Cameroon, Congo (Brazzaville), Equatorial Guinea, and Uganda – all of which have unclear succession plans and longstanding authoritarian rulers – as well as those countries already under junta rule, which include Niger, Burkina Faso, and Guinea.  

While military rulers have not focused on disrupting private businesses, investors in any country hit by a military coup can expect a long and volatile transition with a high-risk of complete government institutional revision. Such factors could impact operations and investments. 

Decreasing economies and financing options 

While the International Monetary Fund (IMF) has revised its forecast for African economic growth upwards slightly to 4%, many major African countries, including Kenya and Ethiopia, are struggling with strained public finances and increasing debt. These economic challenges will result in restructuring and possibly loan defaults. Countries that default would join Ghana and Zambia, which are both attempting to restructure their debt obligations without severally hamstringing their ability to deliver services to the electorate. The risk of default has impacted African nations’ financing options and while Cote d’Ivoire announced a Eurobond issuance in early January this year, this was the first one for a sub-Saharan nation after the pandemic. Private market financing has also decreased, with one estimate that start-up funding in Africa was down 39% year-on-year in 2023.  

Bright spots throughout the continent 

Despite these challenges, bright spots remain. The business environment in Zambia has improved drastically since the election of Hakainde Hichilema, with major opportunities for private investors looking for infrastructure and critical minerals opportunities. Similarly, Tanzania’s potential for liquefied natural gas (LNG) exploration and production, (particularly if financing is found for the East African Crude Oil Pipeline), will expand into other sectors as Tanzania looks to grow its ports and develop its southern region.  

Value is also in the eye of the beholder. For Africa-based private equity investors, there are opportunities in markets from which other investors may shy away. Recent industry surveys have indicated that General Partners (GPs) ranked West Africa as a preferred region for investment, despite the risk of coup contagion and defaults. Most GPs appear to be planning to increase their investments across the continent, particularly in impact investments.  

While investors will have much to watch out for when it comes to evaluating their investments, many opportunities remain. For those aware of Africa’s various political, economic, and security environments, the opportunity to create value and find success in these markets outweighs the risks. 

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