The private capital investment in Africa in first half of the year saw a total deal volume of 338 deals with a cumulative value of $4.7 billion, the African Private Equity and Venture Capital Association (AVCA) report has shown.
The report, released at the weekend, said there are three main factors that contributed to strong deal activity: the substantial amount of fresh capital raised by fund managers last year as investors made deployments across various strategies and sectors, an increasing interest in Africa’s venture ecosystem .
This has not only attracted international investors and supported the development of domestic venture capital firms, but has also encouraged pan-African private equity firms to broaden their strategy to include a dedicated focus on venture capital, and larger ticket sizes.
It explains that given its enormous potential, the continent’s financial services industry has continued to attract investors from all over the world, with FinTech firms, in particular, comprising 89 per cent of the total number of deals within Financials.
Private capital exit also experienced notable growth in the first half of the year. Fund managers achieved 22 full exits, which represents a 29 per cent increase compared to the corresponding period last year. This was driven mainly by growth in Trade and Secondary Sales.
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However, private capital fundraisers in Africa slowed down in the first half of the year, reaching US$0.7 billion in final closes, a 20 per cent drop compared to the corresponding period last year.
This decline in the value of African private capital fundraiser, mirroring global trends, is mainly the result of a more challenging and competitive fundraising environment for fund managers globally and fears of an economic downturn.
Within the period, Africa’s Venture Capital (VC) ecosystem remained bullish despite inflation and an unfavourable macroeconomic environment. In a record-breaking start to the year, the cumulative value of VC deals reported in Africa reached US$3.5 billion, raised by 300 unique companies. This equates to a 133 per cent yearly increase from 2021.
The report predicts that the total value of VC deals will reach $7 billion by the close of the year – a 35 per cent year-on-year increase from the US$5.2 billion raised last year, if this pattern continues. Africa is the only market to register more than single-digit growth for the period.
This growth in startup funding, unlike global trends this year, demonstrates the depth of opportunity, the continent’s growth potential, and increased supportive action from governments to enable entrepreneurship in areas that were previously underserved.