The African Private Equity Association (AVCA) in its new report, found that Africa’s total private equity deal volume declined for the first time since 2016, falling 28% year-on-year (y-o-y) to 450 deals.
The AVCA Annual Report 2023 provides insight into dealmaking, fundraising, exits and key trends shaping Africa’s private equity landscape.
The report noted that amid volatile market conditions, transactions in Africa were not protected from the global slowdown in private capital, leading to reduced investment activity on the continent.
However, Africa performed more strongly than other regions such as North and Latin America, which saw comparatively larger declines in deal activity.
Despite the decline in the number of transactions, Africa has shown resilience, returning to the steady growth trajectory the region led until 2022, when investors deployed large stocks of capital that were not available during the COVID-19 pandemic.
Compared to activity over the past decade, 2023 was the second strongest year on record for transaction volume in Africa. Specifically, deal volume on the continent exceeded the annual average of 264 deals from 2012 to 2022 and the average of 387 deals from 2019 to 2022.
In a departure from previous years, South Africa has regained its dominance as one of Africa’s top investment destinations. The subregion attracted 119 capital investments of US$2.6 billion, the highest volume (along with West Africa) and value of deals across the continent.
South Africa accounted for the majority of investments in South Africa, with 81% of deals in the sub-region, driven by growth in IT and manufacturing and increased VC investment in software and services, logistics and transport.
Despite a 48% year-on-year volume decline, Africa recorded 43 exits in 2023, marking a return to pre-2022 averages of 42 per year. All sub-regions in Africa experienced year-on-year declines.
Economic challenges worsened in 2023, ending the 2022 exit rush from Africa, led by fund managers facing a backlog of mature portfolio companies from the COVID-19 pandemic.
AVCA CEO Abi Mustapha-Maduakor said: βDespite global economic headwinds, we are pleased to see the continued engagement of Africa-focused investors on the continent, particularly venture capital β the continent’s leading asset class Β».