Private capital investment in Africa in the first half (H1) of 2022 saw a total deal volume of 338 deals with a cumulative deal value of $4.7 billion, making it one of the strongest half-year of private capital activity ever recorded, according to a report by the African Private Equity and Venture Capital Association (AVCA).
The investment in H1 2022 is nearly double the $2.4 billion staked in the first half of 2021 and over three times the $1.4 billion recorded in the same period of 2020.
The three main factors that contributed to strong deal activity include the substantial amount of fresh capital raised by fund managers in 2021, an increasing interest in Africa’s venture ecosystem and overall larger ticket sizes.
“The 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,” said Nadia Kouassi Coulibaly, Head of Research at AVCA.
“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,” Coulibaly said.
Financials was the most active sector in H1 2022 by volume, attracting 103 private capital investments, almost two times more than the investments recorded in H1 2021, followed by the Industrial sector which also emerged as the second most active sector by value.
While the total volume of reported deals in 2022 H1 already represents 79 percent of the total deal volume reported in 2021, the average deal size also increased in H1 2022 to reach $20 million from $15 million in 2021, an indication that ticket sizes in Africa are getting bigger.
From a regional perspective, West Africa dominated private capital deals by volume (34 percent) for the second straight year.
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.
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Private capital exit activity also experienced notable growth in the first half of 2022. Fund managers achieved 22 full exits, which represents a 29 percent increase compared to the corresponding period in 2021. This was driven mainly by growth in Trade and Secondary Sales.
Private capital fundraising in Africa however slowed down in the first half of 2022 reaching $0.7 billion in final closes, a 20 percent drop compared to the corresponding period last year.
The absence of generalist funds reaching a final close in 2022 H1 contributed significantly to the decrease in the fundraising value in the first half of this year. An additional of $0.7bn in interim closes was also reported through the first half of 2022.
This decline in the value of African private capital fundraising, mirroring global trend, is mainly the result of a more challenging fundraising environment for fund managers globally.
Africa’s venture capital deals set new record
In a record-breaking start to the year, the cumulative value of VC deals reported in Africa reached $3.5 billion, raised by 300 unique companies.
This equates to a 133 percent YoY increase from 2021 H1 despite inflation and an unfavourable macroeconomic environment.
The AVCA report predicts that the total value of VC deals will reach $7.0 billion by the close of 2022 – a 35 percent YoY increase from the $5.2 billion raised in 2021 if the 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 percent) leading.
Interestingly, East Africa has now surpassed North and Southern Africa, attributable to Kenya achieving the second-largest share of deals by value ($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 percent) and value (44 percent).
Three sectors emerged from the margins to the mainstream in 2022 H1: Health Care (50 percent YoY growth); Education (64 percent YoY growth) and Utilities (23 percent YoY growth).
