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Africa is World’s Most Attractive Equity Market

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  • Africa is World’s Most Attractive Equity Market

Africa is still one of the world’s most attractive markets for private equity, Boston Consulting Group (BCG) has said.

The Financial Group, in a statement signed by Associate Director and a co-author of the report, Marc Becker, said Africa remains one of the world’s growth opportunities for private equity investors, though with some facing serious challenges of recent.

To generate the high returns that investors expect, however, funds should consider more flexible investment strategies and new types of corporate targets, the report stated.

The report, titled: Why Africa Remains Ripe for Private Equity, notes that since the early 1990s, the number of private equity funds active in Africa has swelled from about a dozen to more than 200, while funds under management have risen from some $1 billion to upwards of $30 billion. This rapid growth, combined with the recent downturn in Africa’s largest economies, has raised concerns among some analysts that a bubble is emerging, the statement said.

The report said most private equity funds and principal investors tend to invest only in minority stakes, with the goal of better managing their risks by leveraging robust local partners. While they overwhelmingly focus on a limited pool of investment targets: profitable companies with annual revenue of more than $100 million and proven track records.

The report advised that alternative investment approaches are particularly important if funds are to meet the rising expectations of their investors. It said: “Increasingly, development finance institutions are being joined by global institutional investors that are far more focused on high returns. As prices for stakes in large African companies rise, it will become more difficult for private equity funds to deliver high returns. To fully capture the opportunities in Africa and earn high returns, private equity funds must adapt to the rapidly evolving market and consider more flexible investment strategies.”

The report recommended that private equity investors consider other investment approaches, such as majority stakes, strategic partnerships, and evergreen funds, rather than only funds with timing constraints for divestiture. It also suggested that funds look at a wider range of targets, such as Africa’s growing pool of dynamic smaller companies with significant growth potential.

“Too many private equity investors are pursuing the same kind of target with the same kind of deal structure,” said Patrick Dupoux, a BCG Senior Partner and a co-author of the report who leads the firm’s activities in North Africa.

He added: “But look beyond the narrow cohort of Africa’s corporate elite and you’ll see that the continent offers real opportunities. Some of the most promising targets in Africa are companies that are still off the radar of most funds.”

On their optimism, he stated that despite the rapid growth in funds and a crash in global commodity prices that has hit a number of African economies, the following factors support a positive outlook for private equity.The factors he itemised is that the amount of private equity and principal investment capital under management in sub-Saharan Africa remains very low relative to world standards with a mere 0.1 per cent of GDP. That compares with approximately 1 per cent of GDP in western countries.

Others are that despite recent setbacks, most economists expect that GDP growth in Africa will rebound over the medium term, driven by a swelling middle class, rising foreign investment in infrastructure, and a growing skilled labor force. The statement also hinted that the pool of investment targets is growing with nearly 11,000 African companies having revenue of $10million to $100million and assets of $20 million to $200million yearly.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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