As previous panels discussed, the lack of available financing in the oil, gas and power sectors in Sub-Saharan Africa specifically is a hot topic right now, and competition for funding is fierce. While private equity has been an active player in these sectors for decades globally, private equity players are beginning to look more at Africa, with their role rising drastically in the last five years.
Our expert panelists came together in the Private Equity Panel at Africa Oil & Power to look at why Africa is becoming a hotspot for private equity, what types of projects are attracting this investment. Panelists included Bandele Barade, Senior Advisor for Africa Private Equity of Carlyle Group; Sizwe Mncwango, CEO of Thebe Investment Corporation; Kenny Paton, Head of African E&P at Webber Wentzel; Nyonga Fofang, Managing Director of Bambili Group; and Claude Illy, Head of Oil & Gas Corporate Finance Advisory – SSA for Deloitte; as well as moderator Shawn Duthie, Analyst for Africa Risk Consulting.
“While there is a need for an energy mix, we also require a need for a funding mix. And private equity fits right in that space of ensuring that funding is fully diversified and people can choose different class, in terms of funding growth and that potential upside that we are seeing In Africa,” said Mncwango.
Private equity is keen to increase their portfolios in Africa, but panelists did caution that these moves are likely continue to be selective, as investors want to get the right assets into the right hands. Part of the attraction of entering Africa for private equity is Africa’s rapid growth rate, the need for infrastructure and power projects, the success of renewables on the continent and attractive exits.
Some of the most enticing projects include power projects, which greatly enable growth and are projects that typically gain momentum in financing from the development and financing institutions; and infrastructure projects, the panelists said.
Although the focus is on the midstream and downstream because of the lack of volatility, there is some interest in funding development projects. To that end, oil and gas exploration is typically not an attractive focus for private equity firms, due to the high-risk nature of the investments and the low oil price environment,
Despite a lack of interest in exploration projects, private equity is filling an important role in financing oil, gas and power projects throughout Africa.