Among the many challenges Africa faces is hype. Global advisers, consultants, investment bankers, asset managers and others with a vested interest in getting international capital to Africa, one way or another, sold us the "Africa rising" story.
The strategy succeeded. Billions of dollars flowed in, Africa-specific investment funds mushroomed and international private equity giants rushed to secure lucrative assets on the continent. Valuations of blue-chip local companies jumped as funds competed for their attention. But the hype did not always live up to the reality. The pan-African assets fund managers sought were in short supply and local companies were not always eager to sell chunks of their companies. Local stock exchanges, despite high returns for a while, turned out to be mostly shallow and illiquid, making exits difficult. Some of the much-touted fastest-growing economies in the world turned out to have feet of clay, as the commodities downturn so harshly proved.
The billions of dollars earmarked for African assets often failed to find a home. In 2015, the Overseas Development Institute, an independent UK-based research group, warned of a bubble developing as too much money chased too few investments. The low-hanging fruit was quickly snapped up. In 2014, about 70% of funds went on buyouts of more than R250m. But in the past two years, the sizeable deals dwindled as investors found that out that there were few big-ticket items. In 2015, most deals were below $100m and in the first half of 2016, the total value of private equity deals was just $900m, according to the African Private Equity and Venture Capital Association.