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Private Equity Firm KKR Said To Consider Investing In Africa

By on August 24, 2012

KKR & Co. (KKR), the private equity firm started by Henry Kravis and George Roberts, is hiring a dealmaker to look for investments in Africa as it tries to tap the region’s growth, said two people with knowledge of the plan.

KKR’s team in Europe, run by Johannes Huth, plans to add the executive in London after reviewing the region’s potential, said the people, who asked not to be identified because the plans are at an early stage. The New York-based firm would use its existing funds to finance investments in Africa and isn’t planning to raise a dedicated pool for the region at this point, one of the people said.

KKR follows Carlyle Group LP (CG) in turning to Africa as global buyout firms seek to diversify away from western economies to achieve higher returns. A so-called frontier market because it is perceived as riskier than more mature emerging economies such as China or Brazil, Africa is appealing to investors partly because of its steady economic growth over the past five years, its 1 billion inhabitants and growing middle class.

“That Carlyle or KKR are looking at Africa is a good sign, because it shows that investors’ appetite is growing,” said Mark Richards, Head of Financial Services at London-based Actis LLP, which has about $1 billion allocated for the region. “African private equity is going to deepen, the market is going to grow, and not everyone is going to succeed.”

Carlyle, the world’s second largest private-equity fund manager, is seeking about $500 million for its first fund targeting sub-Saharan Africa, two people with knowledge of the plans said last year. The buyout firm opened offices in South Africa and Nigeria.

Bob Geldof

An official at KKR in London declined to comment.

Helios Investment Partners LLP, a London-based fund manager, gathered $900 million for African investments last year, the largest dedicated pool raised for the continent. Irish rock star and anti-poverty campaigner Bob Geldof is helping London-based 8 Miles LLP raise money for deals in Africa too.

Credit-default swaps on South Africa, the continent’s most- developed economy, are at 145.18, while those on Morocco stand at 220.83. China’s five-year CDS are at 103.37. The measure typically rises as investor confidence deteriorates and falls as it improves.

Africa’s economy grew by 5 percent last year and is projected to grow at 5.5 percent this year, according to the International Monetary Fund.

‘More Buoyant’

“The overall picture in sub-Saharan Africa is markedly more buoyant than the outlook for some other regions in the world, notably the advanced economies of Europe and North America,” the IMF said in an April report. “Growing working- age populations, rising urbanization, and absorption of new technological advances provide strong platforms for sustained growth.”

Funds of about $1.3 billion were raised for the region last year, compared with about $1.5 billion in 2010, according data compiled by the Emerging Markets Private Equity Association. That compares with $16.6 billion raised for China in 2011, $7 billion for Brazil and $2.7 billion for India.

While the number of private equity investments in China and India declined by 8 percent and 25 percent respectively in the first half of this year, they jumped by 27 percent in sub- Saharan Africa, the EMPEA said in a survey last month.


Source: Bloomberg