ICT, finance drive business transactions in East Africa
Monday, September 19, 2022
The number of business transactions in East Africa has increased by 40% in the first eight months of the year compared to the corresponding period in 2021. This was facilitated by venture capital investments in the ICT and financial services sectors.
In recent years, the trading landscape has been dominated by private equity investments, mergers and acquisitions in large established companies. However, the strong performance of venture capital funds this year shows that investors are looking for new opportunities in start-ups with high growth potential.
Early-stage investors take on more risk if the business fails, but can reap huge returns if the startup succeeds and its value rises over time.
It also guides a renewed optimism by outside investors for continued economic recovery after COVID-19, especially in Kenya, where the election season has gone by without a hitch.
In the eight months to August, the region recorded 91 deals, 39 of which were venture capital investments, and 31 private equity and development deals, according to a deal analysis conducted by advisory firm I&M Burbidge Capital. More than investments in financial institutions (DFIs) and 15 mergers. Acquisition deals during the period.
By sector, ICT and telecoms dominated with a total of 33 deals this year, followed by financial services with 18 deals. Logistics, healthcare and energy have six each, and manufacturing and agribusiness have five each.
Leveraging Nairobi’s status as a regional financial hub, Kenya accounted for three-quarters of the total number of deals this year, with 68, ahead of Uganda’s 15, Tanzania’s 5 and Rwanda’s 3.
“These deals highlight the continued emergence of the IT sector in East Africa, fueled by a wave of venture capital investment,” I&M Burbage Capital said in its East Africa Financial Review report in August. increase.
“We remain optimistic about strong trading and an improved economic environment following the completion of general elections in Kenya.”
Last year, the Covid-19 pandemic dampened trading, creating economic uncertainty and caution on capital deployment.
Travel restrictions were also a factor, with many companies suspending meetings and waiting to see how the local economy recovered before making investments.
I&M Burbidge Capital says dealmakers are turning their attention to policies impacting their businesses as the pandemic subsides, but concerns remain over local currency depreciation against the dollar, hurting returns when exiting investments is affecting