To private equity firms, Africa is no path to easy riches, but in some cases, though, firms have made good money by choosing the right investment targets, like the Mombasa-Uganda railway, Uganda’s power-distribution grid and flower and fruit farming in Kenya and Ethiopia.
The Economist tells the story of a number of successful investment choices on the continent, made by private equity firms. It concludes its story by insisting that, “in the rich world private equity is often accused of enriching investors at the expense of the firms they buy. In Africa, the reverse seems to hold.”
Rift Valley Railways
Qalaa Holdings, an Egyptian investment firm, has invested almost $200m in improving Rift Valley Railways’ line. The time to send a container from Mombasa to Uganda by rail has fallen by more than half and, for the first time in decades, the trains are running on time. Now, as much as 10% of the traffic out of Mombasa is carried by rail, which is double the share of a few years ago.
Another example is Umeme, which runs Uganda’s power-distribution grid. When Actis, a British investment firm, bought a stake, power losses consumed 40% of the electricity generated. Some fairly simple technical and managerial changes have cut those losses in half. Agri-Vie, a South African firm, is doing well after taking stakes in several agricultural and food-processing businesses, ranging from a flower grower in Kenya to an Ethiopian fruit-grower and juice-maker.
Further reading on economist.com
Image by Rift Valley Railways