The African private capital industry is facing a significant downturn, with deal activity experiencing a notable slowdown for the second consecutive year. According to a report by the African Private Capital Association (AVCA), there have been 287 deals year-to-date (YTD) in 2024, marking an 11% decrease from the 324 deals recorded during the same period in 2023.
While the drop in deal volumes is concerning, the decline in investment values has been even more dramatic. By the end of the third quarter of 2024, only $1.9 billion had been invested across Africa, representing a staggering 53% decline compared to the same period last year. This figure falls well below the five-year average of $4.2 billion for the first three quarters, making it the lowest YTD deal value since 2020.
The report highlights a shift towards smaller deals, with transactions valued below $50 million accounting for over two-thirds (66%) of all activity. Larger deals, particularly those valued above $50 million, saw a sharp contraction of 75% year-on-year. Deals in the $50-99 million range were especially impacted, plummeting by 92%, and there were no reported deals exceeding $250 million.
This shift reflects a strategic pivot among investors, who are increasingly focusing on smaller, more manageable investments in response to an uncertain economic environment. The downturn has notably affected venture capital, which continues to dominate the private capital landscape in Africa, comprising 62% of deal volume and 52% of deal value. However, venture capital deal volumes have decreased by 21%, and deal values have nearly halved, down 49% year-over-year.
Private equity has shown a 28% year-on-year increase in deal volume, driven by more buyouts and growth capital deals, but investment values in this sector remain low, with only $0.4 billion deployed YTD—66% lower than the previous year and the lowest in seven years.
On a more positive note, private debt has emerged as a bright spot in the market, with deal values increasing by 14% year-on-year. This indicates a growing investor preference for secure and flexible investments amid market volatility. Despite the challenges facing various investment classes, the AVCA emphasizes that Africa remains an attractive destination for investment, offering compelling opportunities.