In Ethiopia, a land devastated by famine 30 years ago, western private equity firms are starting to invest in roses, wine and power plants, as the African nation opens to trade with the world.The private-equity firms are part of a historic shift: Global foreign direct investment has overtaken Western aid on the world’s poorest continent. Here’s more to know:
A musician is one of the leading investors
Bob Geldof, the musician who staged the Live Aid charity concerts 30 years ago, chairs London-based private equity firm 8 Miles, which bought Ethiopia’s Awash Winery in 2013. 8 Miles plans to double the company’s production, add nonalcoholic drinks and boost exports. A year after 8 Miles invested in Ethiopia, other deals involving big names followed.
American billionaires are getting involved
KKR, the New York-based firm run by cousins Henry Kravis and George Roberts, bought an Ethiopian rose farm last year that grows about three-quarters of a billion flowers annually. Stephen Schwarzman’s Blackstone plans to build a gasoline pipeline. Hedge fund manager Paul Tudor Jones is backing a geothermal power project.
Investment in Africa is overtaking aid
Private equity firms are scouring Africa for deals as investment in the continent finally overtakes aid. Ethiopia is still very much a frontier market. It doesn’t have a stock market and only citizens of the country can invest in its banks. Ethiopia still receives more aid than investment, but that should change in the next few years if private equity firms and other companies keep investing.