Conduits of Capital

THE CURRENT STATE OF PLAY
FOR SUB-SAHARAN AFRICA-
FOCUSSED PRIVATE EQUITY
FUND DOMICILES
While private equity in Sub-Saharan Africa remains a
relatively nascent industry in comparison to other emerging
market regions, interest in the subcontinent has exploded
over the last several years. According to EMPEA data,
US$12.8 billion has been raised for Sub-Saharan Africafocussed
private equity funds between January 2010 and
March 2015, while EMPEA’s annual Global Limited Partners
Survey reveals that the region has ranked as one of the top
three most attractive emerging markets for private equity
investment over the last three years. This dynamic has
resulted in a growing number of new entrants—both local
and global—investing in the region, as well as an increase
in the number of fund
managers raising larger
vehicles (US$700+
million funds).
Where are these funds
being domiciled? The
survey asked fund
managers to identify
the location of their
largest currently active
fund. Among the 59
GPs that participated in
the survey, the majority
(nearly 75%) have chosen an offshore jurisdiction. In
particular, 30 have chosen to domicile their current fund in
Mauritius, followed by five domiciled in Jersey / Guernsey.
The balance of offshore fund domicile locations represents a
geographically disparate collection of jurisdictions. Of those
fund managers who have chosen an onshore jurisdiction,
most (13) are structured in South Africa. It is important to
note that surveyed GPs have selected jurisdictions with
extant legal and regulatory frameworks that are largely
conducive to the private funds industry.
Overall, GPs report that they are pleased with their current
fund domicile, with 90% of firms stating that they are either
satisfied or very satisfied. GPs with vehicles domiciled in
Mauritius are particularly content, with 97% of respondents
reporting that they are satisfied or very satisfied with the
jurisdiction. In addition, whilst South Africa is the most
frequently utilised onshore domicile, satisfaction is relatively
low compared to other jurisdictions.
WHAT ACCOUNTS FOR THE POPULARITY
OF, AND SATISFACTION WITH, OFFSHORE
FUND DOMICILES?
To better understand why certain fund domiciles are chosen
for Sub-Saharan Africa-focussed funds, the survey asked
respondents which factors are of greatest importance
to them when considering a jurisdiction. However, we
first sought to determine how material fund domiciles are
overall to the private equity industry by asking all GP, LP
and SP respondents to indicate how important a jurisdiction
is to their fundraising and allocation decisions. Seventy-five
survey respondents—nearly 65% of the total—believe the
location of a fund is either important or very important in
their—or their clients’—
decision to raise or
commit to a fund, while
only 10% report that a
fund’s domicile is not
important. For more
detail on how firm type,
respondent location and
experience with Sub-
Saharan African private
equity impact views on
the importance of fund
jurisdictions, please see
Spotlight: The Import of
Fund Domiciles in Fundraising and Allocation Decisions.
When asked why—in general—the location of a fund
domicile is important to their allocation / fundraising
decisions, respondents relay that tax efficiency for
distributions is the leading factor, which may explain the
preference toward offshore domiciles. Tax efficiency for
distributions was ranked as an important consideration by
47% of all respondents, followed by transparency (43%)
and tax treaties with target markets (28%).
However, LPs and GPs differ in their opinions on which
factors are most important with regard to the location of a
fund’s domicile. (SP views are generally in line with those
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