The number of corporate transactions in East Africa in the first five months of the year increased by half compared to the corresponding period last year, helped by the deployment of new funds by institutions of venture capital and development finance in the region.
Analysis by consultancy I&M Burbidge Capital shows that 59 deals, including debt and equity deals, have been announced this year, compared to 39 last year.
Kenya accounted for 45 of these deals due to Nairobi’s position as the region’s financial hub.
The higher activity also reflects the continued recovery in global capital flows after two subdued years in 2020 and 2021, when uncertainty surrounding the Covid-19 pandemic caused investors to take a cautious approach to new investments.
There are also few concerns about possible disruptions related to Kenya’s general elections scheduled for August, unlike previous polls where investors would hold back their capital until after the elections.
“We continue to see larger capital commitments to investment funds focused on the region, such as AfricInvest’s recent closing of a $400m (Sh47bn) fund and Proparco’s commitment to Maris Africa announced this month (May),” the consultancy firm said in its May 2022 East Africa Financial Review Report.
“We also continue to see increased interest in the region from Far East trading players, notably China and Japan. upcoming Kenyan elections and at this time we remain cautiously optimistic about minimal impact.
Thirty-four of the deals are in the ICT, telecommunications and financial services sectors, which have been favorites for new startups, while logistics and healthcare account for 10 deals between them.
Most of these investments are led by venture capital funds, which made 20 investments in the region during the period, while private equity firms and DFIs proposed 15 deals.
While venture capital funds have largely targeted start-ups in the ICT, health and agribusiness sectors, DFIs are increasingly injecting money into large financial firms, including by offering to leading lenders in Kenya foreign currency loans to be on-lent to SMEs.
In May this year, Equity Group received a subordinated loan of $165 million (19.4 billion shillings) from the International Finance Corporation (IFC) and other DFIs to support micro, small and medium enterprises.