Equity tops debt as Africa’s private investments attract $2.27bn

…Private investment appetite grows in SA, Kenya as Nigeria lags

Private capital investment across Africa recorded a combined value of $2.27 billion in the third quarter of 2024, out of which equity investment dominated debt, according to a report by Stears.

The ‘Stears Private Capital in Africa Report for Q3 2024’ disclosed that out of the 73 recorded private market deals, equity was the most preferred choice.

It said, “75 percent of the transactions included an equity component, with 71 percent being strictly equity-based, compared to 19 percent utilising debt.”

Investopedia, a financial research platform, defines equity private capital as the ownership or interest in a company that is not publicly traded on a stock exchange. These investments typically come in the form of private equity (PE), venture capital (VC), or other direct ownership stakes in companies.

The report shows consumer goods and technology were the sectors that led equity investments by 86 percent and 90 percent, respectively.

“An exception in the technology sector was Terrapay’s $95 million loan package aimed at expanding its African operations,” it said.

The African-focused data platform highlighted that the financing, sourced from OP Finnfund Global Impact Fund I, Belgian BIO ($30 million), International Finance Corporation ($30 million), impact investor ILX ($15 million), and the UK’s BII, reflects the growing interest in supporting digital infrastructure across the continent.

Read also: Investors favour equity over debt as private investment rises to $2.27bn

However, for debt financing, agriculture and energy topped the sectors with the most investment, which together accounted for 79 percent of recorded debt deals—more than double their contribution to all private capital transactions (33 percent).

A further breakdown of the report reveals that equity-focused deals were particularly dominant in northern and southern Africa.

“North Africa led with the highest share of deals featuring an equity component at 86 percent, while Southern Africa recorded the largest proportion of equity-only transactions at 79 percent,” it said.

Private investment appetite grows in SA, Kenya as Nigeria lags

Meanwhile, Nigeria attracted a meagre 23 percent of in the third quarter (Q3) of 2024 as private capital found its way to South Africa and Kenya.

The ‘Private Capital in Africa Report’ revealed that while Nigeria led the West African region, accounting for 71 percent of market transactions, it was lower than Egypt’s 93 percent, Kenya’s 80 percent and South Africa’s 73 percent.

“South Africa and Kenya were standout performers, each accounting for a third of all private market deals in Q3,” the report stated.

Many economists and analysts have attributed the decline in the investment appetite of private capital into the Nigerian market to the raft of policies implemented last year which have worsened inflation and put the exchange rates at its most volatile state.

Read also: Nigeria coughs out $3.5bn for debt servicing despite reforms

No fewer than 15 companies have exited the country in the past 17 months, citing fluctuation of the exchange rate and inconsistent government policies as reasons for leaving.

Nigeria embarked on some series of reforms last year, among which was the flotation of its currency, which allowed the local currency to be driven by market fundamentals.

But the reforms have led to a steep decline in the currency, which has shed over 80 percent of its value since June last year.

On the flip side, the report showed that 64 percent of recorded private market deals in Q3 2024 were single-country investments, reflecting investor attention to localised opportunities within Africa’s dynamic markets.

However, South Africa, Egypt and Kenya, which are among the top 10 economies in Africa, accounted for 60 percent of all single-country transactions during the quarter.

Single-country investments refer to investments where the target company only operates in one market.

According to the statement, South Africa led single-country transactions, contributing nearly one-thirds of all single-country deals, followed by Egypt and Kenya, parting with 17 percent each.

It also noted that agriculture was the most localised sector, with 91 percent of deals involving single-country investments, underscoring the sector’s reliance on domestic markets and its critical role in regional food security.

The report stated that the consumer goods sector also showed strong localisation, having 69 percent of its transactions focused on single-country operations. This highlights the growing relevance of domestic consumption markets.

In contrast to localised investments, multi-country transactions were more prevalent in sectors like energy and financial services, where regional scale and integration drive growth.

“Our findings emphasise the importance of single-country investments as a cornerstone of Africa’s private capital landscape,” said Michael Famoroti, head of research and co-founder at Stears.

“This trend reflects a strategy toward tapping into localised growth potential while balancing risk within defined markets.”

Stears noted that the trend in single-country investments may signal a growing appetite for targeted opportunities that cater to the unique strengths and needs of individual African markets.

This trend, it said, also aligns with the increasing ability of countries like South Africa and Kenya to attract and sustain private capital flows through enabling environments for localised growth.