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Emerging Markets Will Come Back Into View

09 Feb 2016

Africa has experienced growing private equity transaction flows

Private equity fund managers, who adopt longer term time horizons than traditional asset managers, are showing renewed interest in African investment opportunities.

Derrick Roper, chief executive of Novare Equity Partners, said that while uncertainty and market volatility have clouded the investment outlook for the continent, investors who stick with their objectives instead of being influenced by short-term noise will benefit from the inevitable rise of Africa’s consumers.

“After a tumultuous 2015, market volatility in Africa is expected to persist as economies absorb the impact of slowing growth in China and falling commodity prices. These factors present formidable challenges that are currently over-shadowing Africa’s longer term potential.

“However, this stage of the economic cycle will create opportunities for solid future investment returns. When everyone is running for the hills is usually the best time to buy,” he said.

Novare Equity Partners is a private equity fund manager focused on retail and commercial property development in sub-Saharan Africa. Its investors are mostly institutional, particularly pension funds that prefer to adopt the longer term investment horizons required with the private equity asset class.

Novare’s Africa property funds are not a commodities play, relying instead on Africa’s demographics, urbanisation and the rising middle class as the basis of their business. These three factors have not changed, and are expected to maintain their positive trajectory.

“The advantage of private equity vehicles is that they have long-term horizons. They are also able to select the best time to unlock the value that has been built up in the fund, giving investors the opportunity to exit,” Roper explained.

Novare Equity Partners is a seasoned investor in Africa, having been in the market since 2007, and having traded through various economic cycles and market crises, including the 2010/11 banking crisis in Nigeria.

The firm’s investments in real estate developments are intended to capitalise on growing demand from middle income consumers who have improving spending power but who are severely under-serviced.

Novare’s projects are in Abuja and Lagos in Nigeria, Maputu in Mozambique, and Lusaka in Zambia. The rise in urbanisation means that African cities are growing at very fast rates, Roper noted.

Novare Equity Partners launched its first fund, the $81 million Novare Africa Property Fund I, in July 2010. The fund’s first investment was in the successful Novare Apo Mall in Nigeria, which opened in June 2012 with Shoprite as the anchor tenant - alongside prominent brands like KFC, Mr Price, MTN, LG, Adidas and Samsung.

The Novare Africa Property Fund II had its first close at end June 2014 and has since attracted additional commitments with a target of $400 million. Both funds are listed on the Mauritian Stock Exchange.