Private Equity in Sub-Saharan Africa
Private equity refers to the pooling of funds from investors for investment inprivate companies, as distinguished from publicly traded companies. The termsPrivate Equity and Venture Capital are often used interchangeably. VentureCapital is in fact a subset of Private Equity and refers to investments made for thestart-up and early development of the business. Private equity as an asset classhas taken on significant importance in emerging markets and in particular Sub-Saharan Africa because of its potential to be a positive contributor to economicdevelopment and unlock value in a business.However the dynamics of doing business in Sub-Saharan Africa differ greatly froma developed market. Emerging markets are characterised by minimal shareholderrights, limited regulatory and legal framework - which impacts negatively on theenforcement of contracts, poor accounting standards which in turn affect thequality of reporting, nascent capital markets and unstable political environments.Such conditions pose a considerable challenge for private equity in emergingmarkets and Sub-Saharan Africa in particular.The aim, therefore, of the study was to establish the success factors necessary forthe establishment of a private equity fund in Sub-Saharan Africa - given thechallenges associated with emerging markets. A representative cross-section ofprivate equity firms were interviewed in order to gain an in depth understandingprivate equity in the region, its process, parties involved as well as thedeterminants of its success.The study employed the use of a small, purposely selected, non-random samplein order to achieve depth of understanding, as opposed to finding out what isgenerally true of the many, as in the positivist approach. Textual analysis wasapplied, whereby common themes were identified from the discussions andanalysed further by relating back to the research propositions and relevantliterature. Thus a set of basic heuristics can be established for private equity inSub-Saharan Africa based on the findings of the study.
Year of publication: |
2011-05-17
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Authors: | Mate, Joseph |
Subject: | Equity | Private equity | Venture capital |
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