Editor’s Note: Jean-Michel Severino and Pierrick Baraton’s policy brief on private equity in frontier markets is the subject of this second of six blog posts from Laurence Chandy and George Ingram, previewing the 2013 Brookings Blum Roundtable.
After a number of false dawns, there is growing belief that private equity to emerging economies, including to Africa, is a phenomenon whose time has arrived. Investors are demonstrating high returns in a diverse range of sectors including retail, telecommunications, agriculture and energy. As equity flows increase, the enabling infrastructure of institutions and services to grease the wheels of investment deals is starting to emerge. Of total private equity to emerging economies, an estimated $50 billion represents impact investing, whose explicit focus on development impact makes it of particular interest.
The second session of this year’s Brookings Blum Roundtable will examine the growth of private equity in the developing world over the last decade and its potential to propel economic development in the world’s poorest regions. To inform our discussion, we commissioned Jean-Michel Severino and Pierrick Baraton of Investisseurs et Partenaires, a family of investment funds focused on Africa, to write a policy brief.
Jean-Michel and Pierrick argue that private equity is particularly well suited to address many of Africa’s development challenges—not least ushering in much-needed structure transformation for its immature industries by boosting firm competitiveness. However, they argue that the impact of private equity ultimately depends on further growth that will bring economies of scale through larger investment deals and larger investment funds. Government policy can support this growth through supportive regulation and financing channeled through Development Finance Institutions.