Africa secondaries are years away

Few African funds are trading on the secondaries market and sources estimate the market could take between five and seven years to develop.

Africa is many years away from developing a thriving secondaries fund market, according to multiple sources who are active in the region.

“There appears to be a nascent trend towards a secondaries market in African private equity,” said Marie-France Mathes, head of investor relations at Africa private equity firm Emerging Capital Partners.

One of the region’s first secondaries transactions was led by Barclays Africa Group, which sold its 73 percent stake in Absa Capital Private Equity Fund I to a syndicate led by HarbourVest Partners. And PineBridge Investments is in negotiations to purchase two private equity fund stakes in the region.

“It’s not like you won’t see some opportunities to do secondaries,” said Steve Costabile, global head of the private funds group at PineBridge.

The funds PineBridge is trying to buy into are composted of small and mid-market South African buyouts, primarily in the consumer durables and staples sectors, Costabile explained.

Still, when it comes to a larger secondaries market, Costabile thinks Africa is at least five or six years away. “We’re simply not going to have the critical mass of mature primary investment [for several years].”

The development of a thriving secondaries fund market is more or less a question of timing. Many primary private equity deals are being done in Africa now, but investors are likely to want hang on to these growth investments for seven to 10 years, Costabile added.

Dorothy Kelso, head of strategy and research at the African Private Equity and Venture Capital Association agrees a secondaries market will take several years to emerge.

“The secondaries market took a couple of decades to evolve in the West – taking off in the early nineties. On this basis, investors will have to wait a while longer for a parallel African market,” she said.

Reporting by David Turner