The most recent East Africa CEO Outlook Survey, conducted by KPMG, engaged 150 C-suite executives to unveil investment trends for the forthcoming two years. Notably, South Africa and Nigeria emerge as the focal points, collectively capturing 80% of the investment interest.
“Sub-Saharan Africa (SSA) continues to present a significant opportunity for investors. The region’s demographics and significant headroom for economic development are among the factors which will continue to spur growth over the coming years”, said Ijeoma Emezie-Ezigbo, Partner & Head, Transaction Services KPMG West Africa in the latest East Africa CEO Outlook Survey conducted by advisory firm KPMG on 150 C-suite level and senior executives in the region.“Investors that take medium-to-long-term positions in the region with careful asset exposure are primed to potentially reap better long-term returns”, she added.
Based on the survey findings, it is apparent that a significant majority of respondents, approximately 74%, express their intent to explore acquisition or investment opportunities within Sub-Saharan Africa (SSA) within the upcoming two years. Notably, this inclination is shared by 71% of international investors participating in the survey. Furthermore, a substantial 77% of all respondents demonstrate a willingness to infuse additional capital into their current acquisitions, underscoring their dedication to expanding their footprint within the region. It is expected that the more mature markets within Africa will be the primary beneficiaries of this favorable trend.
The top destinations for future investment in SSA are South Africa, favored by 50% of respondents, followed by Nigeria at 30%. These are the largest economies in Africa, offering substantial market opportunities and, in the case of Nigeria, a significant consumer base, with the country boasting a population of more than 220m. Both countries also serve as regional economic hubs, providing access to neighboring markets and regional integration initiatives. Nigeria is a prominent member of the Economic Community of West African States, while South Africa is a member of the Southern African Development Community and has strong trade ties with other African countries. Another major draw is their abundant natural resources, including oil, minerals and agricultural products; Nigeria being the continent’s biggest crude oil producer and South Africa controlling diverse mineral resources. Accordingly, this should shape deal flow in the next two years.
Tanzania is in the third position with 15% of the Ceos surveyed expecting acquisition or investment in the country over the next two years. Ghana and Kenya and Mauritius are fourth with 14%, followed by Zambia 11% and Uganda 10%.
Nearly half (48%) of respondents list oil & gas as the most attractive sector over this time horizon, followed by consumer goods (39%), mining (37%), fintech (33%).
South Africa was the source of five of the 10 largest deals by value seen in SSA in 2022. The biggest transaction was the purchase of a 55.44% stake in the private healthcare services group Mediclinic International by MSC Mediterranean Shipping, Remgro and SAS Shipping Agencies Services for US$2.6bn. The Mediclinic International deal was the only transaction in the pharmaceutical, medical and biotech sector featured in 2022’s top 10, half of which were energy and mining-related acquisitions. The five energy and mining deals were spread across the continent, with two in South Africa and one each in Tanzania, Angola and Nigeria.
Consequently, the energy, mining & utilities (EMU) sector was the biggest contributor to aggregate deal value in 2022, with US$7.8bn from 64 transactions. This was closely followed by the financial services and TMT sectors at 55 and 47 deals last year, respectively. The region’s total deal value for TMT targets in 2022 was surprisingly low compared with other sectors, although it was unlikely to match the sky-high total of US$53.6bn seen in 2021. This bumper figure was almost entirely the result of a US$46.1bn merger between South Africa internet group Naspers and Dutch investor Prosus, the companies announcing in June 2023 that the cross-shareholding would subsequently be unwound as it has impeded stock buybacks and been viewed as excessively complex by capital market investors.