Private capital slowdown in Africa mirrors global investment trends

The African Private Capital Association (AVCA) in its new report, found that Africa’s total private capital deal volume declined for the first time since 2016, falling by 28% year-over-year (YoY) to 450 deals.

The 2023 AVCA annual report provides insight into dealmaking, fundraising, exits and the key trends shaping Africa’s private capital landscape.

The report noted that amidst volatile market conditions, dealmaking in Africa was not shielded from the global slowdown in private capital, leading to reduced investment activity on the continent.

However, Africa experienced more robust performance than other regions, such as North and Latin America, which noted comparatively larger declines in deal activity.

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Despite a reduction in the number of transactions, Africa showed resilience, returning to the steady growth trajectory the region drove until 2022 when investors deployed large reserves of capital that were not allocated during the COVID-19 pandemic.

Compared with activity throughout the last decade, 2023 was the second-strongest year on record for deal volume in Africa. Notably, deal volume on the continent surpassed the annual average of 264 deals from 2012 to 2022 and the average of 387 deals from 2019 to 2022.

In a departure from previous years, Southern Africa reclaimed its dominance as one of Africa’s top investment destinations. The sub-region attracted 119 capital investments at US$2.6bn, the highest volume (together with West Africa) and the value of deals across the continent.

South Africa accounted for the majority of investments in Southern Africa, with 81% of deals in the sub-region, due to growth across the IT and industrial sector and a rise in VC investments in software and services, logistics and transportation.

Despite a 48% YoY decline in volume, Africa recorded 43 exits in 2023, which marked a return to pre-2022 averages of 42 per year. All sub-regions in Africa experienced a YoY decline.

Economic challenges were exacerbated in 2023, ending the exit rush in Africa of 2022 led by fund managers dealing with a backlog of mature portfolio companies from the COVID-19 pandemic.

Chief Executive Officer AVCA, Abi Mustapha-Maduakor said: “Despite global economic headwinds, we are pleased to see Africa-focused investors’ ongoing commitment to the continent, particularly in venture capital – the continent’s leading asset class.”