Investor appetite for South African, Kenyan markets grows as Nigeria lags

Nigeria struggled to attract a meagre 23 percent of investments in the third quarter (Q3) of 2024 as private capital found its way to South Africa and Kenya, according to a latest report by Stears, a financial data and software company focused on African markets.

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.

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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 has worsened inflation and put the exchange rates at its most volatile state.

Not less than 15 companies had exited the country in the past 17 months, citing fluctuation of the exchange rate and inconsistent government policies as reasons for living.

Nigeria embarked on some series of reforms last year among which was the flotation of its currency, allowing the local unit 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 on 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-third 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.

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“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.