Report on the flow of private equity into Africa:

Private equity inflows into Africa look to be on the increase, an industry body said on Thursday, with investors — increasingly including those from within the continent — keen on frontier markets such as Nigeria, Ghana and Zambia.

African Venture Capital Association (AVCA) managing director Mawuli Ababio said the industry was expanding outside the more established market of South Africa, with resource-rich African states in particular likely to benefit.

He said 2007 Africa private equity funds probably came to around $2.3 billion, little changed from 2006 — when it almost trebled from a year ago, according to the Organisation For Economic Cooperation and Development — with growth slowed by global financial worries and turmoil.

But capital raised in 2008 is likely to be higher, he said, with several new funds trying to raise sums of between $500 million and $1 billion each — although it was too soon to be certain they would meet funding targets.

"From what we have seen so far this year, we should exceed that level," Ababio told Reuters in a telephone interview from Johannesburg.

"Private equity is going to the established stable economies of Ghana, Tanzania, Uganda, Zambia and until recently Kenya — although that is picking up again. Then of course you have Nigeria."

Violence after disputed elections in Kenya in December took the shine off what had until then been seen as one of Africa’s success stories — a sudden reminder of the risks of investing in the world’s poorest continent. But the Kenyan currency has recovered to gain more than 2 percent versus the U.S. dollar since the start of the year with the formation of a coalition government.

Reaping the benefits of record oil prices, Nigeria is not only attracting more private equity inflows but its central bank-backed Africa Finance Corporation is also seen as an potential investor in other countries with some $1.2 billion to spend.

Ababio said diamond-rich Botswana’s roughly $5 billion pension fund was also increasing its African private equity exposure.

With private equity already accounting for two to three percent of South African gross domestic product — well below developed economy levels but much higher than the almost negligible proportion in other African economies — players there were also moving beyond their borders.

"To my mind, it is infrastructure and utilities that should provide the next big deals," Ababio said.

"The next big thing is going to be Ghana … You have recent oil discoveries and that gives you an economy with a lot of things people are looking for."

Also in line was Zimbabwe. South Africa’s northern neighbour has long been written off as one of the world’s least appealing economies as it suffered hyperinflation and international isolation but investors are increasingly positioning themselves to take advantage if President Robert Mugabe is ousted from power.

Other players were moving into the Democratic Republic of Congo’s mining sector, taking advantage of the post-war growth in a string of West Africa’s poorest countries from Liberia to Sierra Leone or jumping into unloved economies such as Ethiopia.

While Asian investors such as China and Malaysia have ploughed significant capital into Africa in their quest for natural resources, relatively little has flowed into private equity — but that was likely to grow, Ababio said.

Global emerging private equity is also booming despite problems in developed economies, on course for a record year according to the Emerging Markets Private Equity Association — which also sees Africa growing.

"It seems the message is Africa’s moment has finally come," said EMPEA head of research Jennifer Choi from Washington, DC.