The African private capital industry recorded a decline in deal activity for the second consecutive year, the latest report by the African Private Capital Association has shown.
According to the report, investments on the continent have fallen by 11 per cent since the start of 2024, continuing a decline that began last year.
Private capital is an umbrella term for investment in assets not available on public markets. It includes private equity, venture capital, private debt, infrastructure, and more.
The decline was attributed to global economic challenges, including persistent inflation and high interest rates, which have made investors more cautious. As a result, large deals have become rare, with smaller, less risky transactions now taking the lead.
For the first time in five years, smaller deals; under $50m make up the majority of transactions, accounting for 66 per cent of the total while large deals have nearly vanished, with no transactions over $250 million, and deals in the $50m to $99m range have dropped by 92 per cent.
AVCA said that the trend reflects growing investor reluctance to take on high risks during uncertain times.
The report said that by the end of the third quarter, private equity had injected $1.9bn into Africa’s economy, marking a 53 per cent drop compared to the same period in 2023.
It was also revealed that the amount was well below the five-year average of $4.2bn, leading to the worst start to the year for African investments in five years. The total number of deals, while also down, saw a less severe decline, with 287 transactions recorded since January.
For venture capital, a key driver of innovation in Africa, though it still makes up a large share of activity—62 per cent by volume and 52 per cent by value, the number of deals has fallen by 21 per cent, and the value of investments has been nearly cut in half, down 49 per cent from 2023.
On the private equity market, it was a mixed picture as the number of deals has increased by 28 per cent year-on-year, driven by buyouts and growth-oriented fundraising. However, this uptick in activity has not stabilised the total amount invested, which stands at $400m, down 66 per cent from last year.
Gaining grounds has been the private debt market. Unlike other asset classes, it is attracting more and more investors., the report said. The value of private debt transactions has increased by 14 per cent.
This growth is driven by a search for more stable and flexible investments, well-suited to an economy marked by uncertainty. African lending firms, facing liquidity constraints, see private debt as a valuable source of funding to support their activities.
Despite these setbacks, the AVCA report stressed that Africa continues to hold strong potential for investors willing to adapt and commit for the long term.
