The African private capital industry has seen a notable decline in deal activity for a second consecutive year, as reported by the African Private Capital Association (AVCA). Data through the year so far reveals a dip in both deal count and investment value, reflecting broader economic caution across the continent.
So far in 2024, a total of 287 deals were recorded, down 11% from the 324 seen during the same period in 2023. More concerning is the decline in investment value, with only $1.9 billion invested across Africa by the end of Q3, a staggering 53% drop compared to 2023. This year’s figures are also well below the five-year average of $4.2 billion for the same period, marking the lowest year-to-date investment values since 2020.
Shift to Smaller Deals
For the first time in five years, the bulk of investment activity has been concentrated in smaller deals, those valued below $50 million, which now account for over two-thirds (66%) of all transactions. Larger deals, especially those exceeding $50 million, have sharply contracted by 75% year-on-year, with the $50-99 million segment alone plummeting 92%. The AVCA attributes this trend to investors’ strategic shift toward smaller, more manageable deals as they look to mitigate risk and optimize returns amid economic uncertainty.
Impact on Venture Capital and Private Equity
Venture capital still dominates Africa’s private capital landscape, making up 62% of deal volume and 52% of deal value. However, this sector has not been immune to the broader market downturn, with a 21% decline in deal volumes and a near-halving of deal values (down 49% year-on-year). As a result, many startups are adjusting their strategies, cutting back on growth and focusing on streamlining operations.
Private equity, meanwhile, saw a surprising 28% year-on-year rise in deal volume, led by an increase in buyouts and growth capital investments. Yet, this uptick didn’t result in higher investment values; only $0.4 billion was deployed in private equity deals this year, marking a 66% decline from the previous year and the lowest level in seven years. Deals under $10 million, however, displayed some resilience, with investments rising from $35 million in 2023 to $55 million in 2024.
Infrastructure investments have also been hit hard, with deal values dropping by 68% year-on-year to $0.2 billion. However, the completion of a $150 million senior loan from Africa Finance Corporation to Kamoa Copper in the Democratic Republic of Congo has provided some positive momentum.
Private Debt Emerges as a Bright Spot
In contrast to other asset classes, private debt has shown resilience, with deal values growing 14% year-on-year. This trend reflects a shift among investors toward secure, flexible options amid market volatility. Though private debt values haven’t returned to their 2022 highs, this asset class remains crucial, especially in the financial services sector, where private debt values doubled from the same period last year.
Despite these declines across most investment categories, the AVCA affirms that Africa remains a compelling destination for private capital, with numerous opportunities still available for discerning investors.
