2022: A prosperous year for African private equity

By Aurélie Benoit
Posted on Tuesday, 3 January 2023 10:34

Health and energy: two safe havens on the continent. Science Photo Library/AFP

History has been made. More than $7.2bn (nearly €6.8bn) was raised on the continent through the first three quarters of 2022, almost completely eclipsing 2021’s fundraising numbers. Though 2022’s fourth quarter numbers have not yet been released to the general public, 2022 is already shaping up to be one of the most prosperous years in the history of African private equity. 10 years after Africa Rising, the sector has witnessed a true growth in interest.

According to figures provided by the African Private Equity and Venture Capital Association (AVCA) – a leading organisation in this sector – the number of venture capital operations exploded over the first six months of the year, with a total of 338 deals against just 195 over the same period 12 months prior.

On the value side, some $4.2bn in transactions were completed before the end of June 2022, an increase of 55% compared to the first half of 2021. This clear upward trend has also impacted the involvement of potential investors and companies: by the end of December, there were more than 100 companies sharing the management of 260 different investment funds between Tangier, Morocco and Cape Town, South Africa.

Twenty years ago, only a handful of investment players revolved around organisations like Amethis, Emerging Capital Partners, and AIIM. Times have truly changed.

Powering up

Oddly enough, Covid-19 was a stimulating cause in the investment sector’s increased vitality. Due to the pandemic, a significant amount of liquidity and post-peak pandemic recovery resulted in investment programmes.

For the first half of 2022 alone, the number of operations ranging between $100m and $250m almost doubled compared to that same period the year prior, according to AVCA. This has demonstrated evidence that African economies have undergone a maturation process.

It must be said, however, that this rise in investment power is far from homogenous, as financial institutions are the main drivers in this investment process with one in three deals coming from their sector. Notably, investment giant Development Partners International (DPI) notably bet on Jean Luc Konan’s Cobna organisation, with Africinvest finalising its entry into MFS Africa.

The health sector has seen several significant deals in its own right. DPI, the same investor mentioned prior, injected $200m into the Kelix Bio platform, targeting pharmaceutical groups like the Moroccan Pharmaceutical Institute (PHI).

The Fantastic Four

The renewable energy sector has also served as an investment refuge in the last 12 months. This sector, today, continues to be a prime investment target on a continent where 640 million people continue to live without adequate, consistent access to electricity.

In April 2022 alone, off-grid solution development companies Sun King and PEG Africa closed deals of $260m and $200m, respectively, announcing last December the extension of its Series D investments with an additional $70m, with LeapFrog Investments securing much of these investments.

Beyond a variation in investment sectors, the geographical distribution of investment projects has revealed significant differences throughout the 54 different African markets on the continent.

Despite solid performances in Francophone lands, like the Senegalese Wave, which secured a syndicated loan of $91m from the World Bank subsidiary IFC in July, Nigeria, Kenya, South Africa, and Egypt continue to be the main beneficiaries of investments, in terms of value and volume. This Fantastic Four of sorts thus secured 209 of the 338 operations generated.

However, with the rise in interest rates and African economic contraction, there are risks to potential growth. With only $700m mobilised in the first half of 2022 (representing a decline of 50% compared to last year), the year initially began with a very clear characterisation of potential investment concerns.

What are the costs?

Africa continues to suffer from a high cost of access to debt. A premium on risk, often criticised by African leaders like Nana Akufo-Addo, President of Ghana, illustrates the persistent defiance of investors, seeking to take advantage of even the slightest opportunity in Africa.

Investors are refusing to give in to economic cynicism, however. Said a professional interviewed at the SuperReturn Conference, “it is important to be innovative in how you sell your positions with a properly constructed vision and at the right price.”

The SuperReturn Conference brought together a variety of investment sector pundits last December in Cape Town, South Africa.

With IPOs continuing to be a minority strategy in the region, some of which have succeeded (like the Akdital Group, becoming the first health company to join the Casablanca Stock Exchange), investment partners will still have a reason to rejoice.

“African companies will continue to invest in their growth projects in search of capital,” concludes Hatim Ben Ahmed, founding partner of Mediterrania Capital Partners.

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