Doing Deals in Sub-Saharan Africa

Sub-Saharan Africa (SSA) continues to present a significant opportunity for investors. The region’s demographics and significant headroom for economic development are among the factors which will continue to spur growth over the coming years. Investors that take medium-to-long-term positions in the region with careful asset exposure are primed to potentially reap better long-term returns.

However, recent global and regional trends have posed challenges to investment opportunities in SSA. Tighter monetary policies and interest rate hikes in developed economies have minimised capital inflows into the region, resulting in massive currency devaluations and default in the international bond market, as seen in Ghana.

Expensive market-based funding and declining aid budgets have led to a rise in the interest burden on public debt. Approximately half of SSA countries are grappling with double-digit inflation, which negatively impacts household purchasing power and disproportionately affects the most vulnerable populations. Growth is moderating amid these challenging conditions.

Our motivation for this publication is to highlight the investment opportunities in the region, the attractive and high potential markets, and how investors are prioritising risk management strategies, including the need for local transaction advisers in the respective markets to mitigate potential downside. Above all, we sought to understand, and share, how investors are strategically approaching this region, which, despite its recent challenges, offers strong potential for superior risk-adjusted returns.