190715 private equity
Private equity investors and asset managers now have reasonable visibility into what a post Covid world looks like and are directing their capital towards sectors that will outperform in a post-COVID environment. Image Credit: Supplied

Despite observing a moderate decline in activity globally due to the pandemic crisis in 2020, this year’s private equity market is rebounding - and in fact overall deal-making will likely be a record year.

Private equity investors now have reasonable visibility into what a post-Covid world looks like and directing their capital towards sectors that will outperform in a post-COVID environment. Several leading companies are also actively seeking capital from private equity investors as they are keen on capitalizing on the imminent growth opportunity and recognize the value-add offered by private equity investors.

Throughout the pandemic, the most seasoned private equity investors have worked with their portfolio companies, not only helping them successfully navigate the challenges, but also in reshaping their businesses and refining their business models to capitalize on both short-term and long-term opportunities afforded by the outbreak. Private equity managers are preparing their portfolio companies for a spell of explosive growth over the next few years.

Investments in North Africa

The private equity players outlook for the North Africa remains upbeat, driven in part by strong macroeconomic fundamentals and resilience despite the pandemic. Egypt - in particular- stood out as a rare example of an economy that recorded an impressive positive GDP growth of plus 3.6% in 2020.

Through the pandemic, sector preferences for investors have evolved markedly with capital flowing into healthcare, fintech, edtech, agriculture, e-commerce, and renewable energy. For instance, the pandemic has clearly exposed the need for good healthcare facilities and increased consumer awareness of immunity and wellbeing. As a result, we should expect to see increased investment activity in the healthcare space both into facilities and into pharmaceutical and nutraceutical companies.

Sectors such as fintech, edtech, and ecommerce have registered impressive growth as consumer preferences have shifted. It is widely expected that these trends will continue to remain in force and these sectors are likely to attract significant capital flows.

With institutional investors increasingly focused on ESG and sustainable initiatives, sectors such as renewable energy and microfinance are also likely to attract capital flows. At the same time, traditional sectors such as oil & gas and mining are likely to see reduced capital flows as investors seek to consciously diversify away from non-renewable resources.

Extend to Egypt

Private equity players expansion plans are particularly focused on established markets such as Egypt, where there is a sizeable addressable population with plenty of sectors that are presenting opportunities for investors. These include consumer, technology, financial services, manufacturing, education, healthcare and distribution.

With the government enhancing the investment environment and the country’s ongoing transformation, private investors are keen to deploy capital in Egypt. The country provides political and monetary stability with unmatched economic growth, setting a winning outlook for fund managers to diversify investment exposure in their search for resilient economies in a post-Covid world.

Investment outlook

The medium- to long-term vision for North Africa markets will see increased investor interest in resilient and fast-growing sectors such as healthcare, technology, consumer and renewable energy. A steady flow of investments from private equity is also likely for some traditional sectors such as financial services, manufacturing, and insurance.

While the pandemic had a short-term impact on activity, the investment climate has improved substantially with private equity investors - as well as prospective investee companies - looking to conclude transactions. The region is supported by strong demographic and macroeconomic fundamentals resulting in a conducive private market investment environment.

-- Taimoor Labib, Founding Partner & Head of Middle East and North Africa at Affirma Capital.