Private Capital Dynamics in Africa Slow Down
According to the latest report from the African Private Equity and Venture Capital Association (AVCA), investments on the continent have decreased by 11% since the beginning of the year, continuing the downward trend started last year. This situation is attributed to global economic turmoil, marked by persistent inflation and high interest rates, which are prompting investors to adopt a more cautious approach.
As a result, large transactions are becoming increasingly rare, giving way to smaller and less risky operations.
By the end of the third quarter, $1.9 billion had been invested in Africa by private capital, marking a 53% decrease compared to 2023. This amount, well below the five-year average of $4.2 billion, represents the worst start in five years. The total number of transactions has also decreased, albeit less significantly, with 287 operations recorded since January.
This decline in investments is forcing actors to adjust their strategy. For the first time in five years, small transactions under $50 million represent 66% of the total. Large operations are becoming increasingly rare, with no transactions exceeding $250 million and a 92% drop in the $50-99 million range. This evolution reflects the increased caution of investors in the face of uncertainty.
The venture capital sector, a key driver of innovation in Africa, is also experiencing a slowdown. Although it still represents a significant share of activity – 62% in volume and 52% in value – the number of transactions has dropped by 21% and the value of investments has almost been halved (-49%) compared to 2023. In response to this situation, African startups are adopting a more defensive approach, limiting their growth projects and focusing on optimizing their current operations.
Despite all the challenges, the AVCA insists that Africa still has undeniable attractiveness, with opportunities for investors willing to adapt and bet on the long term.
However, economic uncertainty is weighing on prospects. Fitch anticipates an increase in non-performing loans, while African banks, subject to solvency pressures, will need to strengthen their foundations to face the challenges.
