Private capital investment in Africa in H1 2022 saw a total deal volume of 338 deals with a cumulative deal value of US$4.7 billion (Ksh568 billion), a new report has shown.
The report, 2022 H1 Annual African Private Capital and Venture Capital Activity, by the African Private Equity and Venture Capital Association (AVCA), has predicted a fruitful year ahead for the private capital sector in Africa.
The reports present an overview of the venture ecosystem, private capital fundraising, dealmaking, and exits in Africa in the first half of 2022, and set out projections for the remainder of the year.
According to AVCA, three main factors contributed to strong deal activity including the substantial amount of fresh capital raised by fund managers in 2021 as investors made deployments across various strategies and sectors, an increasing interest in Africa’s venture ecosystem which 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 overall larger ticket sizes.
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The continent’s financial services industry has continued to attract investors from all over the world, with FinTech companies, in particular, comprising 89% of the total number of deals within Financials. Financials was the most active sector in 2022 H1 by volume (attracting 103 private capital investments at almost two times levels recorded in 2021 H1), followed by the Industrials sector which also emerged as the second most active sector by value. From a regional perspective, West Africa continues to dominate private capital deals by volume (34%). Senegal now holds third place, overtaking Côte d’Ivoire, to follow Nigeria and Ghana as having the largest shares of deal volume in the region. East Africa experienced the strongest growth in its share of deal volume compared to the corresponding period last year. Kenya’s role in this was key, with early-stage venture deals in Financials and Consumer Discretionary – mainly online retailing – contributing significantly to this remarkable growth.
Private capital exit activity also experienced notable growth in the first half of 2022. Fund managers achieved 22 full exits, which represents a 29% increase compared to the corresponding period in 2021. This was driven mainly by growth in Trade and Secondary Sales.
However, private capital fundraising in Africa slowed down in the first half of 2022 reaching US$0.7 billion in final closes, a 20% drop compared to the corresponding period last year. This decline in the value of African private capital fundraising, mirroring global trends, is mainly the result of a more challenging and competitive fundraising environment for fund managers globally and fears of a global economic downturn.
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In 2022 H1, 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% YoY increase from 2021 H1. The report predicts that the total value of VC deals will reach US$7.0 billion by the close of 2022 – a 35% YoY increase from the US$5.2 billion raised in 2021 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.
The report finds that the region attracting the largest share of VC investment by deal volume remains largely unchanged with West Africa (33%) leading. Interestingly, East Africa has now surpassed North and Southern Africa, attributable to Kenya achieving the second largest share of deals by value (US$330 million). The report’s sector focus highlights that Financials remains a titan of the ecosystem as the most active sector by both volume (32%) and value (44%). Three sectors emerged from the margins to the mainstream in 2022 H1: Health Care (50% YoY growth); Education (64% YoY growth) and Utilities (23% YoY growth).
Nadia Kouassi Coulibaly, Head of Research at AVCA, commented: “Record-breaking H1 performance is a powerful demonstration of the continued growth of the African private capital and venture capital ecosystem, despite significant global headwinds. The industry is on track for stellar performance in H2 and we are working closely with members to provide the insight and support they need to grow their portfolios.”
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