Views from the Field - Reflecting on 2013 and the Outlook for EM PE in 2014
As the industry closes the books on 2013, several EMPEA Members provide their views on key trends and lessons learned in the past year for emerging markets private equity, and look to the opportunities and challenges facing the asset class in 2014.
Ethos Deputy Chairman, Andre Roux, shared his views with EMPEA:
The last ten years have indeed been a remarkable and successful period for leading emerging markets. Evidence would now seem to be building up of increasing headwinds facing these markets. These vulnerabilities have their source in falling commodity prices, slower growth in China, unfulfilled population expectations, higher inflation and the prospect of higher long rates in the United States, as Federal Reserve tapering becomes a reality.
2013 may well be defined as a sea change year in the emerging markets growth story, as questions are being asked whether these imbalances, in the absence of structural adjustment, will become meaningful obstacles to growth, value creation and, ultimately, macroeconomic stability. A major consequence of these developments for private equity in key emerging markets will undoubtedly be the need to put in place sustainable strategies for value-add at portfolio companies, and place less reliance on external growth drivers to generate returns.
Whilst private equity in South Africa has not been immune to these macro environmental challenges, the country continues to benefit from its geographic proximity to Sub-Saharan Africa and its institutional advantages, allowing it to play a significant role as a gateway to the rest of the continent.
Sub-Saharan Africa is now regarded as one of the fastest growing regions in the world, recognized by LPs and GPs with fundraising in the region increasing appreciably in 2013, and capital invested also increasing meaningfully over 2012 investment activity.
Given the early stage of the region’s renaissance, 2014 should be a similar year of positive growth for pan-Sub-Saharan African private equity.
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