UK’s development finance institution likely largest private equity investor in Africa
New data from the African Private Equity and Venture Capital Association reveals that the UK’s development finance institution, the CDC Group, accounts for 10% of all finance raised by private equity funds in Africa. Paddy Carter, Director of Research and Development at the CDC Group, said that he believes the CDC to be the largest private equity investor in the continent. In January 2020, the CDC announced that it will invest US$2 billion in Africa over the next two years, indicating that its share of investment in the continent will likely continue to grow.
While some members of the development community are skeptical about private equity, Carter makes the case for why it matters; he argues that private equity investments can support the diversification of markets by providing high-risk capital for new entrants and that this ultimately enables greater competition, benefiting consumers. With private equity investments, companies can pause dividend payments to shareholders. In contrast, debt providers often demand repayment no matter the circumstances. Carter, therefore, notes that unlike debt finance instruments, equity investments can provide financial stability in hard times.