Private equity discovers Africa
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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.
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