Volatile cur­ren­cies keep in­vestors at bay

CityPress - - Business -

Volatile cur­ren­cies and weaker com­mod­ity prices are keep­ing pri­vate eq­uity in­vestors fo­cused on sub-Sa­ha­ran Africa on the side­lines, even though buy­out firms have record amounts of cash to spend on ac­qui­si­tions.

“There’s been a dis­lo­ca­tion in the mar­ket,” said Mar­lon Chig­wende, man­ager of Car­lyle Group’s $698 mil­lion (R10.4 bil­lion) African fund.

“The dol­lar has ap­pre­ci­ated strongly against a lot of African cur­ren­cies, so it’s had the ef­fect of slow­ing down deal ac­tiv­ity,” he said.

Pri­vate eq­uity com­pa­nies amassed $4.3 bil­lion for in­vest­ment op­por­tu­ni­ties on the con­ti­nent last year, the most since at least 2010, when the Lon­don-based African Pri­vate Eq­uity and Ven­ture Cap­i­tal As­so­ci­a­tion be­gan com­pil­ing the data.

Now buy­ers are tak­ing a wai­t­and-see ap­proach from South Africa to Nige­ria to avoid writ­ing down as­sets should cur­ren­cies de­value fur­ther.

At least 17 of 23 African cur­ren­cies tracked by Bloomberg have weak­ened against the dol­lar over the past 12 months, with the ex­change rates of An­gola, Zam­bia, Mozam­bique, Nige­ria and Malawi de­clin­ing more than 25%.

Sellers are hold­ing on for bet­ter val­u­a­tions in the hopes that com­mod­ity prices will re­bound and that growth will ac­cel­er­ate.

The num­ber of an­nounced pri­vate-eq­uity deals in sub-Sa­ha­ran Africa has dropped to 29 so far this quar­ter, with trans­ac­tions worth $760 mil­lion, com­pared with 37 trans­ac­tions worth $6.1 bil­lion in the sec­ond quar­ter of 2015, which marked the high­est deal value on record, ac­cord­ing to data compiled by Bloomberg.

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