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Daniel Adaji
Africa’s private equity sector closed 2024 with $10.3bn in unallocated capital, highlighting the growing demand for investment on the continent despite macroeconomic challenges.
This figure represents 36 per cent of the total capital raised between 2018 and 2024, underlining a significant reservoir of funds awaiting deployment.
While private capital fundraising in Africa more than doubled last year to $4bn, it still falls short of efficiently deploying the funds already secured.
The capital, largely held by private equity and infrastructure funds, demonstrates that investors are ready to deploy, but the pace of investment remains slower than expected.
According to a report by the African Private Capital Association (AVCA), private equity and infrastructure funds hold 35 per cent and 30 per cent of these reserves, respectively, while private debt and venture capital account for 18.per and 12 per cent.
Despite this backlog, investor confidence has surged, suggesting a positive outlook for Africa’s private equity ecosystem.
Abi Mustapha-Maduakor, CEO of AVCA, said, “The rise of African institutional investors, growing infrastructure allocation, and the rebound in exits all point to a deepening and maturing private capital market in Africa.”
Mustapha-Maduakor emphasised that private capital is now driving long-term value across a range of sectors, aided by more strategic deal sizes and co-investment models that appeal to both global and local investors.
The 2024 African Private Capital Activity Report reveals that local investors have significantly increased their commitments.
African pension funds, insurers, and corporate investors collectively raised their investment by 3.7 times, reaching $639m in 2024, compared to $171m in 2022.
Despite global uncertainties, development finance institutions (DFIs) remain the largest contributors, injecting $1.4bn, or 42 per cent, of the total fundraising for the year.
The overall deal activity in Africa’s private equity market remains robust, with 485 transactions recorded in 2024, an 8 per cent increase over the previous year. Private equity deal volume, in particular, surged by 51 per cent, reaching its highest point in over a decade.
The financial sector dominated deal flow, representing 33 per cent of total deal value, while consumer staples saw substantial growth, with deal volume increasing by 67 per cent and total value doubling.
Southern Africa led the region in the deal count with 129 transactions, followed by West Africa (105), East Africa (99), and North Africa (77), signalling a well-distributed interest across the continent.
Additionally, the exit market saw a notable recovery in 2024, with 63 exits, a 47 per cent increase from the previous year. This surge in exits aligns with improving market conditions and increasing pressure to return capital to investors after years of uncertainty.
Even with these positive trends, the unallocated capital underscores a challenge for fund managers.
The $10.3bn in dry powder is projected to last only about two years at the current deployment rate of $4.9bn per year.
This reserve suggests that while African private equity is gaining momentum, there is still untapped potential within the market that investors are keen to unlock.