M&A in Africa - who really takes it seriously?

Many of my clients — especially institutional investors — react to potential investments in Africa with a noticeable degree of skepticism. Political instability, high inflation, recurring coups, weak legal enforcement, corruption, and persistent health and food security concerns are often cited as key risks associated with the region. As a result, institutional investors tend to apply significant discounts to African opportunities from the outset.

Of course, higher risks can bring higher rewards — and in Africa, that can be especially true. In sectors such as mining, the same operation can generate 3–5x the output achieved in Central Asia or South America. This is not only due to the richness of the ore deposits, but also because many African markets are still at an earlier stage of development, creating substantial upside for first movers.

Yet very few investors are willing to commit billions of dollars to enter the region early enough to capture that advantage.

That is why the recent acquisition of Kenya’s East African Breweries by the Japanese brewing giant Asahi looks, at first glance, somewhat surprising. What is even more striking is the reported US$3 billion valuation attached to the deal.

There is, of course, a strategic rationale behind such a move. Beer consumption across many African markets remains relatively underpenetrated compared to developed economies, leaving considerable room for long-term growth. More importantly, establishing an early foothold in a rapidly growing consumer market could allow a player like Asahi to secure a dominant position before global competition intensifies.

Still, a US$3 billion acquisition in Africa by a beer producer is not something the market sees every day.

Either Japanese corporates are preparing for a much larger strategic push into Africa — potentially competing head-on with Chinese industrial influence — or they see the continent as one of the few remaining large-scale growth frontiers capable of delivering outsized returns over the next several decades. 

Yet, it’s a very interesting development at the edge of alcohol consumption for a mixed religion and underserved population that lacks basic needs satisfaction.