How to increase the share of local institutional investors in financing African economies through private equity?

How to increase the share of local institutional investors in financing African economies through private equity?

Terms of Reference:

How to Increase the Share of Local Institutional Investors in Financing African Economies through Private Equity

1. Background

Africa’s growth potential has been widely recognized, with its young population, vast natural resources, and increasing urbanization offering promising economic prospects. However, the continent remains heavily reliant on foreign investment to meet financing needs for infrastructure, industries, and other critical sectors. While private equity (PE) has been a key driver in financing economic development, local institutional investors, such as pension funds, insurance companies, and sovereign wealth funds, contribute a relatively small share of the total PE investments in Africa.

Encouraging local institutional investors to increase their participation in financing Africa’s growth through private equity could significantly enhance capital mobilization, promote economic sovereignty, and diversify risk. This panel will explore the challenges and opportunities associated with increasing the share of local institutional investors in financing African economies through private equity and provide practical strategies for enabling their greater involvement.

2. Objectives

Overall Objective

To identify and propose strategies to increase the share of local institutional investors in financing African economies through private equity.

Specific Objectives

  • Assess the current level of involvement of local institutional investors in African private equity markets
  • Identify barriers that prevent local institutional investors from engaging in private equity
  • Explore the potential for local institutional investors to increase their share in financing African economies
  • Analyze successful case studies and best practices in other emerging markets
  • Propose actionable recommendations for policymakers, regulators, and investors

3. Scope of Work

3.1 Sectoral Focus

  • Private equity financing models
  • Asset classes: Infrastructure, energy, agriculture, manufacturing, financial services, technology, and healthcare
  • Role of development finance institutions (DFIs) and blended finance mechanisms
  • Policy and regulatory frameworks affecting local institutional investment in PE

3.2 Geographic Coverage

  • Pan-African focus with in-depth analysis of key regions:
    • East Africa
    • West Africa
    • Southern Africa
    • North Africa
  • Selected country case studies (e.g., Nigeria, South Africa, Kenya, Egypt)

3.3 Key Thematic Areas

  • Institutional Investors: Pension funds, insurance companies, sovereign wealth funds, and endowments
  • Private Equity (PE): Structure, fundraising, investment strategies, and exit mechanisms
  • Regulatory Environment: Taxation, capital market regulations, pension fund management, and local currency markets
  • Financial Literacy: Educating local institutional investors on PE opportunities and risks
  • Risk and Return: Assessing local institutional investors’ perceptions of risk, liquidity, and long-term returns
  • Blended Finance: Role of development finance institutions and international funds in de-risking investments

4. Key Research Questions

  • What is the current level of local institutional investor participation in African private equity?
  • What are the main barriers (regulatory, structural, cultural) limiting local institutional investors from engaging in PE?
  • How can local institutional investors be incentivized to participate more actively in African PE markets?
  • What are the risk-return profiles for local institutional investors in PE, and how can these be improved?
  • What role can blended finance play in mobilizing local institutional capital for private equity investments?
  • Which countries or sectors offer the most promising opportunities for local institutional investors in PE?