Africa records 388 private equity investment deals in H1 2022 worth $4.7 billion

Today, the African Private Equity and Venture Capital Association (AVCA) announced the publication of its flagship reports, the 2022 H1 Annual African private capital and venture capital activity reports.

Main conclusions of the report:

  • Africa’s venture capital and venture capital ecosystems defy odds in one of the best half-year results yet
  • Private capital investments in Africa in the first half of 2022 saw a total deal volume of 338 deals; cumulative transaction value of US$4.7 billion
  • The cumulative value of first-half venture capital deals reported in Africa reached $3.5 billion; on track for US$7 billion by year end

The reports provide an overview of the venture capital ecosystem, private capital fundraising, deals and exits in Africa in the first half of 2022, and set out projections for the rest of the year.

Nadia Kouassi Coulibaly, Head of Research at AVCA

Private capital in Africa shows promise for the year ahead

In one of the strongest semesters of private capital activity on record, private capital investment in Africa in the first half of 2022 saw a total deal volume of 338 deals with a cumulative value of 4.7 billions of dollars.

Three main factors contributed to the strong deal activity: the substantial amount of fresh capital raised by fund managers in 2021 as investors made deployments in various strategies and sectors, a growing interest in the private equity ecosystem venture capital in Africa which has not only attracted international investors and supported the development of domestic venture capital firms, but has also encouraged pan-African private equity firms to broaden their strategy to include a particular focus on venture capital and larger note sizes.

Unsurprisingly, given its enormous potential, the continent’s financial services sector has continued to attract investors from around the world, with FinTech companies in particular accounting for 89% of the total number of transactions within finance.

Finance was the most active sector in the first half of 2022 by volume (attracting 103 private equity investments at almost twice the levels recorded in the first half of 2021), followed by the industrial sector which also became the second most active sector value.

From a regional perspective, West Africa continues to dominate private capital transactions by volume (34%).

Senegal now ranks third, overtaking Côte d’Ivoire, to follow Nigeria and Ghana as having the largest shares of deal volume in the region.

East Africa saw the highest growth in its share of transaction volume compared to the corresponding period last year.

Kenya’s role in this has been key, with early-stage venture capital deals in the financial and consumer discretionary sectors – primarily online retail – contributing significantly to this remarkable growth. .

Private capital outflow activity also saw notable growth in the first half of 2022. Fund managers achieved 22 full outflows, representing a 29% increase over the corresponding period in 2021.

This development is mainly due to the growth in trading and secondary sales.

However, private capital fundraising in Africa slowed in the first half of 2022 to US$0.7 billion at final closes, down 20% from the corresponding period last year. This decline in the value of African private equity fundraising, reflecting global trends, is primarily the result of a more challenging and competitive fundraising environment for fund managers globally and fears of a global economic slowdown.

Africa’s venture capital ecosystem is getting better and better in 2022

In the first half of 2022, the African venture capital (VC) ecosystem remained bullish despite inflation and an unfavorable macroeconomic environment. In a record start to the year, the cumulative value of reported venture capital deals in Africa reached $3.5 billion, raised by 300 unique companies. This equates to a 133% year-over-year increase from the first half of 2021.

The report projects that the total value of venture capital deals will reach $7.0 billion by the end of 2022, a 35% year-on-year increase from the $5.2 billion raised in 2021 if this trend continues. Africa is the only market to post single-digit growth over the period.

This growth in startup funding, contrary to this year’s global trends, demonstrates the depth of opportunity, the continent’s growth potential, and the increased supportive action by governments to enable entrepreneurship in areas that were previously underserved.

The report finds that the region attracting the largest share of venture capital investment by deal volume remains largely unchanged, with West Africa (33%) leading the way.

Interestingly, East Africa has now overtaken North Africa and Southern Africa, thanks to Kenya having the second largest share of deals by value ($330 million).

The report’s focus on the sector highlights that finance remains a titan of the ecosystem as the most active sector by volume (32%) and value (44%).

Three sectors emerged from the margins into the mainstream in the first half of 2022: healthcare (50% year-on-year growth); Education (64% YoY growth) and Utilities (23% YoY growth).

Nadia Kouassi Coulibaly, Head of Research at AVCA, said: “The record first half performance is a powerful demonstration of the continued growth of Africa’s private equity and venture capital ecosystem, despite significant global headwinds. The industry is on track for outstanding performance in the second half and we are working closely with members to provide them with the information and support they need to grow their portfolios.

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