The management consulting firm Deloitte revealed in its macroeconomic outlook publication that foreign investors are more focused on sectors such as energy, fast–moving consumer goods, and financial services because they lack confidence in the profitability of indigenous small and medium-sized enterprises (SMEs) in East Africa.
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Private equity, venture capital, and development finance institutions (DFIs) all share the same concern of overpaying for assets in local enterprises. Foreign investors seeking to access the region are alarmed by the absence of reputable data pools from which to derive an accurate assessment.
Deloitte observed that the majority of investors seeking to deploy capital in the East African region have raised worries about the quality of assets, the reasonableness of their valuation asking prices, and the equity of market pricing.
In addition, the consulting firm outlined a number of factors that have lost the East African region billions of dollars in potential investment capital.
“Principal obstacles encountered during due diligence include tight deadlines, inadequacy in the finance function’s skills, and poor quality financial information. Inadequate due diligence carries the danger of an inaccurate estimate of the target’s ability to continue as a going concern, resulting in an uninformed merger or acquisition. Deloitte said.
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Kenya, which has become the economic centre of Africa, currently absorbs the majority of external financial investments in the region.
Kenya had 68 of the 91 business transactions documented in the region this year, or almost 75 percent. I&M Burdge Capital, an advising firm, conducted this poll. Uganda has 15, Tanzania has 5, and Rwanda has 3, according to survey data.
39 of the 91 transactions involve venture capital investments, 31 involve private equity and Development Finance Institution (DFI) investments, and 15 involve mergers and acquisitions.
ICT and telecommunications, with 33 deals this year, are the most sought–after industry in these transactions. Behind it at 18 are financial services. Logistics, healthcare, and energy each have six transactions, while manufacturing and agribusiness each have only five.Jamb Result
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