According to the Doing Deals in Sub-Saharan Africa 2024 report, Sub-Saharan Africa (SSA) has emerged as a viable investment destination, offering attractive opportunities for risk-adjusted returns despite recent challenges.
The report, published by KPMG said investment flows and transactions in SSA have remained resilient despite infrastructure challenges, political instability and macroeconomic headwinds, with market factors presenting growth opportunities.
“Investor appetite is returning with foreign direct investment (“FDI”) expected to reach 2.13% of gross domestic product (“GDP”) in 2024, up from 1.74% last year, according to the International Monetary Fund1 (“IMF”).” the report stated.
Regional performance
According to the report, East Africa emerged as the most impressive sub-region in terms of recent investment experiences.
A notable 26% of respondents who had recently closed deals in the region expressed a significantly increased likelihood of investing in Sub-Saharan Africa (SSA) again, based on their positive experience in East Africa.
This was followed by West Africa (22%) and then Southern Africa (17%).
Looking forward, it appears the more developed African nations will attract more future investment deals, indicating that these countries will remain key targets for investors seeking opportunities on the continent.
The report revealed that the top destinations for investment in the next two years are South Africa (28%) and Nigeria (26%).
These economic powerhouses were followed, at some distance, by Kenya (14%).
Notably, no other country was cited by more than 10% of the respondents.
“The lure of the region’s two largest economies ties in with investors’ motivations for future transactions. Asked to identify the most likely key drivers of their future SSA transactions, strategic investors cited physical assets/natural resources, growth capital and attractive valuations.” the report added
Sectoral performance
One particular sector that recorded significant investment activity in SSA is the mining sector.
It accounted for three of the region’s top ten transactions in 2023 involving mining companies based in Botswana, South Africa, and Zimbabwe.
The total deal value in the mining sector surged by 140% year-on-year, reaching $5 billion, with MMG’s acquisition of Khoemacau Copper Mining being a notable highlight.
The report also added that the energy sector garnered significant attention, with a 10% increase in deal volume year-on-year.
The sector also accounted for three of SSA’s top ten transactions underscoring its critical role in the region’s investment landscape.
Energy, mining, and technology are set to lead future deals in Sub-Saharan Africa. Investors see mining (71%) and oil & gas (51%) as the most promising sectors for M&A opportunities over the next two years.
