Private Equity in the Global South: Locusts? Vampires? The contagion effect Farwa Sial

The effectiveness of private equity has been a subject of ongoing debate in countries of the Global North. There is substantial evidence highlighting the extractive practices associated with private equity operations across Western nations. Examples include the decline of the British high street and the financial instability of local councils in the UK, particularly in the provision of child care. Similarly, in the United States, private equity has been linked to the attrition of an already fragile healthcare system. In France, Germany and the UK., its influence has contributed to the deterioration of care homes, raising significant concerns about its broader social and economic impact.

In a recent blog, Michael Roberts characterized private equity as “vampire capital“, encapsulating the widely recognized critique that private equity firms function through a rentier model. These firms are frequently associated with practices such as asset stripping, worker lay-offs, and opting for excess leverage that increases the debt burdens of their acquisitions, all while failing to provide compelling evidence of value creation. This perspective aligns closely with earlier criticisms of private equity. During the 2000s, private equity operations were similarly likened to a swarm of locusts, reflecting widespread disapproval of their extractive and often detrimental economic practices.

In summary, such analogies emphasize the aftermath of private equity operations, leaving behind “carcasses and barren landscapes.” Nevertheless, the evidence of a hollowed-out socio-economic landscape in the Global North has not deterred the international expansion of private equity into countries of the Global South. On the contrary, ongoing reports of American private equity capturing British markets have emerged in tandem with the globalization of Western private equity. In so-called “emerging markets,” this expansion manifests in various forms, including an enthusiasm for deploying “moral money” through international development initiatives.

This article examines the role of private equity in Global South countries, focusing on three key characteristics: the escalation of indebtedness, the weakening of public markets, and the public subsidy function of development finance in facilitating private equity investments.

What is Private Equity?

Private equity refers to a class of alternative investments comprising capital that is not listed or traded on public exchanges. It involves funds and investors who

Public markets. Most private equity capital is sourced from institutional investors and high-net-worth individuals capable of committing substantial sums of money for extended durations.

Private equity investments are typically employed to fund new technologies, expand working capital, execute acquisitions (including buyouts of publicly traded companies that are subsequently privatized), and improve balance sheets. The primary participants in a standard private equity operation include a General Partner (GP), a set of Limited Partners (LPs), and the private equity fund. The GP provides management expertise and allocates investor capital, the LPs serve as the providers and owners of private capital, and the private equity fund is the instrument for acquisition of various investments.

 Figure 1: How Private Equity Works

Private Equity in Global South

Private Equity (PE) in so-called “emerging economies,” led by countries such as Brazil, China, and India, emerged during the 1990s alongside the wave of global liberalization. By 2011, fundraising in these economies was estimated to have risen to approximately 20% of global private equity fundraising before stabilizing at around 10% (see Lerner et al., 2015). However, since 2015, growth in these markets has been marked by volatility, and the global private equity landscape has experienced significant downturns in the wake of the COVID-19 pandemic.

Estimates regarding the size, scale, and number of private equity deals in niche “emerging markets” are predominantly produced by private research firms. The empirical analyses and trend forecasts from these firms are often intertwined with the private equity business cycle, which poses a challenge to efforts to determine the true size of the market due to variations in research methodologies. Nevertheless, available empirical data offer insights into broader trends that extend beyond the economies of the Global North.

In 2023, PE fundraising in the Asia-Pacific region reached $100 billion, according to Bain & Company. In contrast, African PE fundraising totalled US$1.9bn, with an aggregate deal value of $5.9 billion, as reported by African Private Capital. In Latin America, the aggregate deal value for private equity in Q3 2023 was $6.4 billion, according to Preqin.  And, in the Middle East, private equity deals were valued at $11.60 billion in 2023 in data from S&P Global.

Private equity investors are predominantly based in the Global North, with the majority originating from the United States (Figure 2). However, regionally significant PE funds have emerged in countries such as India, Brazil, China, Kenya, and South Africa. Additionally, institutional investors in the Global South, including pension funds, high-net-worth individuals, and family offices, have also been directly investing in private equity. Globally, PE investors are primarily concentrated in the US, Europe, and Australia. Furthermore, most domestic and regional funds often include consortia involving Global North PE investors.

As countries revise domestic financial regulations to accommodate the growth of private equity and establish frameworks for alternative investment financing and non-banking financial institutions, the role of private equity is poised to evolve. This could potentially reshape financial institutions in these regions, akin to the transformative impact observed in the United States with entities such as Silicon Valley Bank. As noted in the analysis of PE in India, the potential saturation of businesses and dematerialisation of wealth in the West has a counterpart in rising PE activity in Global South countries. While the pandemic put a global halt to PE investments, there is reinvigorated interest in subsiding investments through development finance matched by an increased demand for climate and renewable energy deals.

Figure 2 Value of funds raised by largest private equity firms worldwide between 2017 and 2023 (in billion U.S. dollars)

Source: Statista 2025

Private Equity Debt: Leveraging Vulnerability and Deepening Commodification

PE inverts the capital structure of public companies by placing debt in command of equity, through a process of financial engineering. By design, PE redefines the traditional model of acquisition, transforming it into a financial instrument within a broader portfolio of investments. The ultimate goal is to derive returns from ownership for the PE fund. Debt, or indebtedness, plays a central role in this model, directly affecting the stability of acquisitions. The structural inclination of General Partners (GPs) towards leveraging significant amounts of debt inherently increases the risk of distress for acquired companies. While financial distress may represent an extreme outcome, it is nevertheless an anticipated possibility within the PE framework. Indebtedness constrains operational flexibility and heightens the exposure of acquisitions to adverse external factors.

In Global South countries, PE investments face additional challenges due to the compounded effects of structural underdevelopment, limited currency reserves, restricted access to international finance, and different operational and governance systems. These factors amplify the vulnerability of acquisitions to indebtedness. However, these challenges have not deterred PE investors. As Morgan and Nasir (2020) highlight, the failures of PE are not the result of errors in identifying struggling companies or making misguided investments. Instead, PE intentionally targets companies with inherent vulnerabilities, making them susceptible to acquisition and subsequent indebtedness. The monopolistic tendencies of PE operations, such as in the US healthcare sector, further exacerbate these extractive dynamics. In an anthropological study of private equity, David Souleles describes the role of financialisation in PE as ‘the abstraction of productive enterprises into the register and language of finance’.

The capacity of PE to exploit vulnerabilities extends beyond commercial companies seeking quick access to liquidity. In Global South countries, the privatization of public goods has been a gradual and ongoing process. Contrary to the notion of widespread privatization following the wave of liberalization in the early to mid-2000s, this period instead witnessed a combination of partial privatizations and intermittent re-nationalizations during periods of crisis. Sectors such as healthcare, education, and financial services—often driven by the World Bank’s emphasis on financial inclusion—remain primary targets for PE investments in these regions.

In this context, the vulnerabilities leveraged by PE extend to capturing provision of essential public needs. By targeting critical services necessary for citizens’ well-being, PE investments exploit the structural weaknesses of public systems in these sectors, turning basic necessities into sources of profit and deepening the dependence of these services on private capital.

Weakening Public Markets

The expansion of private investment, including in the Global North, depends heavily on the institutional infrastructure of public markets. Private equity (PE) relies on public markets for exit, often using tradable stocks as acquisition currency. This practice undermines the original purpose of public markets—to generate new capital for domestic investment. The issue is magnified in Global South countries, where underdeveloped financial markets exacerbate the challenges. Limited financing for productive capital creation within the domestic private sector constrains long-term reinvestment opportunities and stifles the potential for effective industrial policy. As a result, the increasing monetization of gains by private investors through public markets reinforces the privatized reorientation of these markets.

Moreover, PE investors often benefit at the expense of public investors and domestic private sector participants. Valuation differences between public and private companies frequently favour the latter, enabling private investors to dominate IPO markets. This trend has become even more pronounced in the post-COVID-19 era, which has been marked by weak IPO performance across several regions.

In Asia, however, PE investors have navigated IPO challenges by creating “Continuation Funds,” which serve as alternatives to traditional IPOs. These funds allow investors to sell investments directly to a fund, sidestepping conventional public market mechanisms. The legal, governance and regulatory implications of selling funds raised by investors themselves and determining pricing in such transactions remain largely unexplored. This practice underscores the capacity of PE firms to engineer profitable exits while avoiding losses and bypassing the need to demonstrate tangible public returns. Notably, China stands out as an exception, where stringent government regulations on IPOs have prevented such PE-driven trajectories.

Development Finance to the rescue? Who Pays?

Since the 2008 financial crisis, finance-based integration between developed and developing countries has intensified, driving North-based institutional investors, Multilateral Development Banks (MDBs), and International Financial Institutions (IFIs) to pursue PE investments in developing nations. Multilateral and bilateral Development Finance has increasingly been routed through private equity funds for development-oriented investments. Prominent Development Finance Institutions (DFIs) investing directly in companies include the CDC Group, International Finance Corporation (IFC), Proparco, Swedfund, DEG, FMO, and Norfund. These efforts are characterized by a growing focus on climate-focused funds, renewable energy infrastructure, Environmental, Social, and Governance (ESG) ratings, and an emphasis on supporting Small and Medium Enterprises (SMEs) and domestic businesses, which are shaping the contours of PE activity in major Global South countries.

However, the case for a potentially reformed and “stringently regulated” PE model for Global South countries through the framework of development finance has no basis, given the widely reported extractive practices. A notable example is the former prominence of the Asian and Middle Eastern private equity fund Abraaj Group, which spearheaded the marketisation of healthcare through its Growth Markets Health Fund. This fund aimed to raise $1 billion for investments in health-related companies, receiving backing from major institutions such as the IFC, Overseas Private Investment Corporation (OPIC), Proparco, CDC, African Development Bank, and the Bill and Melinda Gates Foundation.

The eventual scandalous collapse of the Abraaj Group, often cited as a glaring case of corruption and illegal extraction, is frequently portrayed as an outlier. However, its practices are not fundamentally distinct from those of other Western PE funds. The protracted legal proceedings that led to Abraaj’s downfall have not been similarly applied to other funds engaging in comparable activities. Beyond the specific case of Abraaj, the broader role of PE in development finance, often misconstrued as “patient capital,” fails to exhibit either patience or demonstrable value creation. Furthermore, it has yet to show any significant contribution to the structural transformation of Global South economies.

Why replicate failed models in the Global South?

PE, as a manifestation of private markets in Global South countries, operates as a mechanism that facilitates and normalises the pursuit of short-term yields. Extensive research from the Global North has underscored PE’s role in fragmenting and segmenting labour markets, exacerbating precarity within outsourced production networks, and hollowing out markets. These dynamics suggest that the role of PE in Global South economies must be critically examined through a financialised lens. PE’s impact on Global South economies with a predominance of the informal sector, a combination of diverse  listed and unlisted companies as well as a diversity of Global South conglomerates and rapidly changing financial markets demands attention to the dynamics of subjugation to monopoly capital in the Global North.

This is because PE does more than simply substitute the traditional role of finance as a service—it exploits the limited access to finance faced by firms in Global South markets. This structural vulnerability allows PE to entrench itself as a dominant financial force, often at the expense of long-term economic stability and development. While China provides an illustrative example of how rigorous state intervention can regulate and control PE activity, this approach addresses only the symptoms rather than the root issues. Even under stringent regulation, PE’s capacity to deliver meaningful value addition remains unproven. Furthermore, the inherent contradictions of PE, such as its reliance on indebtedness, extraction of value rather than its creation, and prioritization of investor returns over structural transformation, highlight the limitations of reformist approaches. A deeper reassessment of the structural objectives of PE entails examining its long-term socio-economic impacts, its contribution—or lack thereof—to domestic capital formation, and its influence on labour and public goods.