Kohlberg Kravis Roberts (KKR) is the latest large firm to recently announce a sizeable investment into an African enterprise, Afriflora, a rose business based in Ethiopia. The $US200m investment marks the private equity firms first ever deal on the continent.
The macro story behind Africa is certainly an appealing one; the current milieu is likely to see dramatic growth over the next decade. Moreover, it appears now to be uncommon to encounter a private equity LP that hasn’t contemplated a new Africa fund, there is definite scope for potential high growth on returns.
However, Swiss asset manager and academic, Cyril Demaria, argues that there is no indication that LPs can earn the sort of upside most of them anticipate from African markets. Demaria denotes how there are gross overestimations of returns; similarly Goldmans Sachs warns investors ought to be conscious of the possibility for underperformance in the market.
Ultimately, some may argue that those who invest in African enterprises need to reconsider the inherent risks of the markets and lower their return expectations. However, a focus on returns alone and their latent capacity for volatility and the unknown does not depict the GCP story. GCP and GCP Solar’s basic focus towards Africa and African investment identifies that investments are long-term opportunities, with the early move advantage as well as a socially responsible and ethical investment.
For more information about Afriflora please press here.