ICT and finance boost business transactions in East Africa


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ICT and finance boost business transactions in East Africa

The number of business transactions in East Africa increased by 40%, boosted by the ICT and finance sectors. FILE PHOTO | NMG

The number of business transactions in East Africa increased by 40% in the first eight months of the year compared to the corresponding period of 2021, thanks to venture capital investments in the ICT and financial services.

In recent years, the deal landscape has been dominated by private equity investments in large established companies, mergers and acquisitions. The good performance of venture capital funds this year, however, indicates that investors are looking for new opportunities in startups with high growth potential.

Early-stage investors, while taking on more risk in failed ventures, are likely to earn outsized returns if the startup becomes successful and rises in value in due course.

It is also a sign of a return of optimism from external investors in the continuation of the post-Covid recovery of the economy, in particular in Kenya where the election season took place without interruption.

Analysis of deals by consultancy I&M Burbidge Capital shows that in the eight months to August, the region recorded 91 deals, 39 of which were venture capital investments, which eclipsed the 31 investments in private equity and in development finance institutions (DFIs) and 15 mergers. and acquisition transactions during the period.

In terms of sectors, ICT and telecommunications led with a total of 33 deals this year, followed by financial services with 18 deals. Logistics, healthcare and energy have six transactions each, while there are five each for manufacturing and agribusiness.

Kenya, leveraging Nairobi’s status as a regional financial hub, accounted for three-quarters of total deals this year at 68, ahead of Uganda’s 15 deals, Tanzania’s five and Rwanda’s three.

“These transactions underscore the continued emergence of the IT sector, backed by the wave of venture capital investment, in East Africa,” I&M Burbidge Capital said in its East Africa Financial Review report. ‘Is for the month of August.

“We are optimistic that robust transactions will continue and the economic environment will improve, following the conclusion of the general elections in Kenya.”

Last year, deal-making was suppressed by the Covid-19 pandemic, which caused economic uncertainty and caution in capital deployment.

Travel restrictions were also a factor, with many companies suspending meetings and waiting to see how regional economies recover before making investments.

According to I&M Burbidge Capital, since the pandemic has receded, traders have turned their attention to policies that affect businesses, while concern remains over the weakening of regional currencies against the dollar, which negatively affects yields at the exit of investments.

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