Strong correlation between private equity (PE) investments and increasing job creation across Africa has been identified in new research launched today by the African Private Equity and Venture Capital Association (AVCA). Analysis indicated that of the 199 PE-backed companies that participated in the study, representing approximately 23% of all PE-backed companies operating across the continent between 2009 to 2015, there was a net increase in jobs of 10,990, totalling overall growth of 15%.
The organisation’s first Africa Sustainability Study focuses on how PE firms in Africa are supporting companies and the communities they operate in through job creation. The report suggests that the finance sector was leader employee growth, generating 6,399 new jobs, totalling a 54% rise. Within this, there was a 62% increase in jobs attributed to women. Other industries within the top five highest performers were utilities and information technology, with 31% and 27% total job growth respectively. Companies in the energy and health care sectors also showed considerable increases. This reflects ongoing demand across Africa for the products and services of industries that are being driven by underlying demographic shifts and rising consumer demand.
Some of Africa’s largest PE markets accounted for the highest increases in new employees. Ghana experienced the highest rate, creating 2,441 new jobs during the survey period followed by Nigeria (+1,035), South Africa (+816), Morocco (+757) and Kenya (+736). Smaller PE investment markets, such as Senegal, indicated potential, with total job growth at 97%, albeit from a smaller base.
Smaller, entrepreneurial businesses across Africa are making significant contributions to stimulating job creation despite larger organisations still remaining major employers. Smaller companies (300 employees or fewer) increased their share of total jobs from 15% to 20%, compared with a decrease from 85% to 80% in larger companies.
The study highlights that PE firms are taking an instrumental role in driving growth beyond capital invested, particularly through implementing specific initiatives to improve job quality for workers and thereby contributing to an overall positive impact on portfolio companies’ performance. Some common measures included: initiating leadership and management training, strengthening HR functions, improving team cohesion, tracking workplace quality and implementing HSE training.
Dr. Ponmile Osibo, Research Analyst at the African Private Equity and Venture Capital Association commented: “Investors in PE funds are increasingly interested in how PE firms incorporate ESG policies into their investment strategies, and PE firms are increasingly collecting the necessary data to help quantify how sustainable their investments are. Job creation is an integral part of sustainable investing and the research results provide initial insight into the positive impact of private equity on job creation throughout the continent.”
Dr. Dorothy Kelso, Director, Head of Research and Strategy at the African Private Equity and Venture Capital Association added: “The study shows that private equity value creation in Africa doesn’t stop at boosting employee numbers. More PE firms are realising the value of human capital and are implementing specific workplace initiatives to enhance job quality for workers, thereby improving the wider performance of portfolio companies.”
Runa Alam, Chair, AVCA Sustainability Committee, concludes: “As the African private equity industry was started with significant help from the DFIs, sustainability and impact have always been in the lexicon of private equity discussions and go hand-in-hand with doing business in Africa. Globally, the sustainability impact of private equity is often and firstly measured by the number of jobs that an investment has created. We are pleased that AVCA has produced its inaugural Africa Sustainability Study focused on job creation and hope that this will be the first of many Sustainability Studies.”
The research was launched at the 13th Annual AVCA Conference in Addis, Ethiopia and can be accessed here.
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Notes to Editors
AVCA surveyed 25 PE fund managers in Africa between January 2016 and March 2016 via a questionnaire. The survey collated data on job creation in PE-backed companies that had a first investment between 1 January 2009 and 31 December 2015. Job data recorded both initial investment and the latest available reporting period.
General Partners (GPs) that responded to the survey were a diverse mix of pan-African, regional and country funds. Respondents ranged from organisations with less than US$20mn funds under management to those with over US$1bn.
Respondents provided data on 199 PE-backed companies operating across the continent. This accounted for 23% of all PE-backed companies invested in from 2009-2015, ensuring that a good coverage of data was obtained. However, as the sample does not include all PE-backed companies over the period, our findings may not be fully representative.
AVCA: Enabling private investment in Africa
The African Private Equity and Venture Capital Association is the pan-African industry body which promotes and enables private investment in Africa.
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