Illiquidity in African Stock Markets A Challenge for Private Equity

In the world of private equity, the success of an investor’s deployment of capital depends greatly on the investor’s ability to earn a return on investments through dividends and distributions and/or to sell the investments for a profit within a finite period of time. In a mature market such as the United States or Europe, the sale of an investment is commonly effected by private equity investors through an “exit” via the public stock markets. In Africa, however, private equity investors have largely relied upon private trade sales to realize investment returns due to the difficulty in achieving timely public placements in the African markets. The inability to exit African securities markets is largely attributable to the lack of liquidity in these markets. So, what are some of the causes of this illiquidity and what is being done about it?