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(Ecofin Agency) – The substantial amount of capital that was put on hold during the pandemic along with fresh capital raised by fund managers in 2021 contributed significantly to this strong deal activity.
Private investment funds (private equity, venture capital, private debt, infrastructure, and real estate funds) invested US$4.7 billion in Africa in 338 deals in the first half of 2022, against US$2.4 billion a year earlier, a recent report by the AVCA indicates.
“The substantial amount of capital that was put on hold during the pandemic along with fresh capital raised by fund managers in 2021 contributed significantly to this strong deal activity, as investors made deployments across various strategies and sectors,” the report explains.
The average deal size was US$20 million in the first six months of 2022 compared to US$15 million during the same period in 2021.
The report also states that investors’ growing appetite for early-stage ventures led to strong growth in deal volumes on the continent. Venture capital accounts for 77% of the number of private investment deals on the continent and 56% of the overall value. This encouraged several pan-African private equity firms to expand their strategies to include a venture capital component. For instance, in May 2022, Helios Investment Partners launched its Helios Digital Ventures fund dedicated to early-stage African start-ups.
Between January 1 and June 30, 2022, venture capital funds invested US$2.7 billion on the continent, compared to US$1.2 billion for private equity funds, US$500 million for private debt funds, and US$300 million for infrastructure funds. No investments were reported from real estate funds.
Year-on-year decline in funding volume
The sectoral breakdown of investments also shows that the financial services sector attracted most of the capital injected by private equity funds into African companies in the first six months of 2022 (US$1.8 billion). It was followed by the industry (US$800 million), utilities (US$700 million), health (US$400 million), consumer goods (US$300 million), IT (US$300 million), real estate (US$200 million), commodities (US$100 million) and energy (US$100 million) sectors.
The breakdown of deals by subregion shows that West Africa recorded 116 deals (34% of the overall deals), compared to 65 deals in Southern Africa (19%), 59 in East Africa (18%), 53 in North Africa (16%), and 4 in Central Africa (1%). 41 multi-region deals (12%) were also counted.
Private capital fundraising reached US$700 million in final closes in the first half of 2022, a 20% decrease compared to the same period in 2021. That performance was aligned with the current global trend, with “global private equity fundraising saw an estimated 53% YoY decline in 2022 H1, with significant increases in the number of funds taking over 12 months to reach a final close.”
On the African continent, an additional US$700 million in interim closes were also reported in the first half of 2022. The report also reveals that private investment funds made 22 full exits during the êriod, representing a 29% increase year-over-year. The exits were made via sales to trade buyers (9 deals), sales to another private equity firm or financial institution (8 deals), management or owner buyback (3), and IPOs (2 deals).
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