The African private capital sector has seen a continued decrease in deal activity, marking a second year of decline, according to the latest report by the African Private Capital Association (AVCA). The report shows an 11% drop in investments since early 2024, following last year’s downward trend. Private capital, which includes sectors like private equity, venture capital, and private debt, has been impacted by global economic pressures, including high inflation and interest rates, leading to a cautious approach from investors.
This caution has shifted the focus to smaller, less risky deals under $50 million, now representing 66% of transactions, while deals over $250 million are virtually absent, and mid-sized deals between $50 million and $99 million have decreased by 92%.
The report highlights a 53% drop in private equity investments year-on-year, totaling $1.9 billion by the third quarter, well below the five-year average of $4.2 billion. Venture capital, although a critical driver for innovation in Africa, has also slowed, with deal numbers down 21% and investment values nearly halved, marking a 49% decrease from 2023 levels.
Private debt, however, stands out as a growing asset class, with transaction values rising by 14%. This uptick reflects investor preference for more stable and adaptable investments amidst economic uncertainty, especially as African lenders face liquidity constraints.
Despite the declines, AVCA emphasized Africa’s strong long-term investment potential, noting opportunities for investors willing to navigate the current challenges.
