The African Private Capital Association (AVCA), yesterday, announced the release of the 2023 African Private Capital Activity Report, providing insight into deal-making, fundraising, exits and the key trends shaping Africa’s private capital landscape.
In 2023, the global economy faced a series of interconnected shocks, including political tensions, increasing fragmentation in trade, escalating interest rates and tightening monetary policies to address high inflation.
Deal-making 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 deals, the report said.
In the new report, AVCA found that Africa’s total private capital deal volume declined for the first time since 2016, falling by 28 per cent year-over-year (YoY) to 450 deals.
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, it noted.
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, it stated.
Continuing established trends, investors, it stated, favoured venture capital (VC) as the route to back promising African businesses with innovative, tech-enabled solutions in rapidly developing markets.
VC maintained its four-year streak as Africa’s leading asset class, accounting for 68 per cent of the total investment volume of private capital activity across the continent, the study disclosed.
The report noted that infrastructure had an impressive year for capital raising and deployment as the only asset class to benefit from increased funding in 2023, with deal value surging to $1.8 billion – a threefold YoY increase.
Investments in renewable energy largely fueled this trend, indicating a growing interest in leveraging Africa’s abundant solar, hydro, biomass, and wind potential to accelerate the clean energy transition.
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 $2.6 billion, 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 per cent 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, the report noted.
