AVCA’s first half report shows a surge in private capital deployment driven across Africa, although fundraising remains a challenge
- Investment in Africa surged to $4.7bn in the first half of 2022, a 96% increase on last year, driven by a buoyant venture capital sector
- However, this was built on private capital fundraising in previous years. H1 saw a 20% decline due to “geo-political tensions”
- SGDs are on investors’ minds but main focus is on financials
- In regional terms, the bigger winner was West Africa
The first half of the year saw a huge increased in private capital being deployed across Africa, according to the latest report by the African Private Equity and Venture Capital Association (AVCA) released this week.
According to the report, private capital investment in Africa in H1 2022 saw a total of 338 deals with a cumulative deal value of $4.7bn, versus $2.4bn in the same period last year, representing a 96% increase.
AVCA’s CEO Abi Mustapaha-Maduakor told Impact Investor: “Venture capital is driving this growth. There’s a lot going on and it’s a very exciting time.” Out of the 338 deals during the period, 260 venture capital deals.
Financials was the most active sector in 2022 H1 attracting 103 private capital investment worth $1.8bn, almost twice the levels recorded in 2021 H1.
Mustapaha-Maduakor said that financials is a particular focus for investors at present. It is noteworthy FinTech comprised 89% of the total number of deals within financials.”
The second most active sector by value was industrials, with 54 deals and $800m of capital, followed by utilities ($700m) and healthcare ($400m).
Asked whether these sector choices reflected investors prioritising UN SDGs, Mustapaha-Maduakor said that “clearly the SDG goals are at the front of investors’ minds but at this stage I think other factors are more relevant. Most importantly the enormous opportunities as the African financial ecosystem develops.”
In regional terms, there was a decline in the proportion of deals done in the northern and southern regions. East Africa saw a rise in its proportion of deals from 13% to 18% of deals, but it was West Africa which was the most dominant region in this period representing some 34% of deals.
Mustapaha-Maduakor commented: “West Africa is seeing a large number of deal opportunities at present led by a buoyant venture capital investment climate in Nigeria. As I say this is an exciting time.”
It is important to note that this surge in capital deployment came from previous years fundraising. Less encouraging was the fact that private capital fundraising in Africa slowed down in the first half of 2022 reaching $0.7bn in final closes, a 20% drop compared to the corresponding period last year.
The absence of generalist funds reaching a final close in 2022 H1 contributed significantly to the decrease. Otherwise, Mustapaha-Maduakor blamed “geo-political uncertainties” and “an increasingly competitive fundraising environment. There’s a lot of competition for the mid-cap category.”
Mustapaha-Maduakor spoke of fundraising having an irregular pattern. She hopes the second half will see a steady flow of private capital but declined to make a forecast.