Carlyle chief sees huge potential for private equity firms

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br carlye Bloomberg David Rubenstein, the joint chief executive of the Carlyle Group, says that private equity activity "will take off" in Africa. Photo: Bloomberg

Private equity activity “will take off” in Africa, David Rubenstein, the joint chief executive of Carlyle Group, said yesterday, noting that it was not too late for US investment on the continent to catch up with spending by other nations.

During a panel discussion at the US-Africa Business Forum, Rubenstein said creating infrastructure for private equity firms in Africa would spur deals that made the continent’s firms and economies more productive.

“Opportunities there are far greater than people thought years ago and the great explosion in private equity, if it’s going to occur anywhere around the world in the next couple of years, is probably going to be in Africa,” he said.

Africa accounts for 1 percent of private equity investment worldwide, according to Rubenstein, whose Washington-based firm is the second-largest manager of alternative assets.

Carlyle and Blackstone Group, the biggest private equity firm, are investing in African energy infrastructure with Aliko Dangote, the continent’s wealthiest man, in an accord announced yesterday.

Despite the opportunities, US investment lags behind that from China, the continent’s biggest trading partner.

But Rubenstein cautioned that private equity investing in Africa was not without its difficulties. “It’s not easy to get control of assets, it’s not easy to make the changes we want.”

Yesterday’s forum gave business and national leaders an opportunity to discuss investment in the continent.

Ajay Banga, the chief executive of MasterCard, the second-largest payments network, said on the same panel that Africa was at the same development stage that Asia was at 15 years ago and that risks in the region were manageable.

He added that technology and access to financial networks would help boost consumer spending that would drive Africa’s economic growth.

“Consumption-led growth will only come by expanding the middle class and by getting people at the low end of society to participate in that growth,” Banga said.

As consumers globally replace cash and cheques with electronic payments, Banga has focused on partnering with governments in emerging economies including Africa.

Credit and debit purchase volumes on MasterCard’s network in Africa, Asia-Pacific and the Middle East rose about 18 percent to $214 billion (R2.3 trillion) in the second quarter, making it the fastest-growing region after Latin America, it said last month.

“Cash is a hugely expensive medium of exchange” as it was costly to handle and enabled tax evasion and illegal activity, Banga said. “It has no reason to exist in today’s economy.”

Mo Ibrahim, the founder of telecommunications company Celtel International, called for a pan-African stock market to help facilitate investment in the continent’s companies.

“Before any investor goes into any country he is looking for an exit,” said Ibrahim, who is also the founding chairman of Satya Capital, an investment fund focused on Africa.

“We have only six or seven liquid exchanges in Africa. That doesn’t work.” – Bloomberg

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