Private equity discovers Africa
No surprise that fewer than 1 percent of the world's private equity deals happen in Africa, the world's poorest continent. But with the potential for higher returns, more investors may be lured to take the risk. Terry FitzPatrick has the story.
Africa political map (CIA World Factbook)
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TEXT OF STORY
SCOTT JAGOW: One place in the world that's virtually untouched by private equity is Africa. Less than 1 percent of private deals happen there. But that is changing, say leaders at the World Economic Forum on Africa. Terry Fitzpatrick reports from Cape Town.
TERRY FITZPATRICK: Analysts say last year there was a five-fold increase in the number of investors looking for African companies to buy.
Political instability and volatile economies make Africa risky, but a typical takeover here will generate 5 to 6 percent more profit than deals in the U.S.
That might not sound like much, but the South African government's pension-fund manager, Brian Molefe warned the World Economic Forum that that little something extra could lead to trouble.
Brian Molefe: When people take higher risks and they make some money, they are willing to take more and more and more risk. And that is what leads eventually a very dangerous situation. We are going to have some spectacular collapses.
A takeover failure in Africa can have a big impact because the economy here is smaller. Still, Molefe says any kind of investment in Africa is badly needed.
In Cape Town, I'm Terry FitzPatrick for Marketplace.
