Investing in Africa is a strategic opportunity, but rigorous valuation is essential to ensure success. After identifying an opportunity, the next step is to accurately measure its economic value to confirm its return potential while minimizing risks. This process allows you to better negotiate, manage risks, and ensure an optimal return on investment.
What is valuation?
Valuing an opportunity involves estimating its true economic value. It’s a key step in maximizing returns and protecting against risks. It optimizes your decision-making, strengthens your negotiating position, and anticipates the risks inherent in the African market. By understanding the valuation criteria, you lay a solid foundation for investing with confidence.

Three approaches for effective development in Africa

1. Actuarial approach: Based on future earnings, this method, which uses the Gordon-Shapiro model, is ideal for growing companies. It focuses on future dividends and their expected growth rate to estimate the company’s value.
2. The comparative approach: By comparing the company to similar companies, this method is a quick way to assess its value in homogeneous sectors and determine its market position. It relies on financial ratios and benchmark indices, such as the NSE 30 and the BRVM Composite in West Africa. However, to ensure its reliability, this approach requires access to comprehensive and comparable data on companies in the same sector.
3. Discounted cash flow (DCF) method: This is based on future cash flows and is particularly useful for developing companies. It offers a long-term perspective, essential for evaluating startups or innovative companies. In Africa, it is essential to factor in political instability, currency fluctuations, and other local risks.

Precautions for valorization in Africa

Evaluating an investment in Africa requires a detailed analysis of the context, as detailed in our previous article. Estimates must be nuanced to take into account local specificities.
Here are some practical tips for a successful valuation:

• Collaborating with incubators and accelerators like CC Hub or AfricArena allows you to follow the evolution of startups and gain valuable sector insights.
• Conduct local due diligence by surrounding yourself with market-expert advisors. Hubs like Lagos Angel Network and MEST in West Africa offer resources and support networks.
• Use local rating agencies like Bloomfield Investment Corporation or Global Credit Rating to get a risk assessment.
• Consider exit options (sale, IPO, acquisition) from the outset. Advance planning helps secure your investments.

Invest with confidence with controlled valuation

A key step in successfully investing in Africa, valuation helps reduce risks and capitalize on numerous growth opportunities. Rigorous analysis is therefore essential for navigating this evolving market. If you’d like to gain an in-depth understanding of how to estimate the value of your project or get advice on the best strategy to adopt, book a session with our Africa investment strategy experts now.