TLDR:
Private capital companies in Africa raised $1.9 billion in 2023, marking a nine percent decline.
Foreign investors are retaining capital in local markets, leading to difficulties in raising fresh capital for growth and expansion on the continent.
Article Summary:
The amount of private capital companies in Africa raised declined by nine percent to $1.9 billion in 2023, the second-lowest fundraising for final closed funds in 11 years. This decline highlights the challenges that businesses are facing in raising fresh capital for growth and expansion in Africa.
The volatile macroeconomic conditions, such as rising interest rates, soaring inflation, depreciating currencies, and dwindling forex reserves, are impacting the operations of companies. This has led to foreign investors retaining capital within their local markets, discouraging commitments elsewhere, including Africa.
The report reveals that private capital deals on the continent declined by 22 percent to $5.9 billion, with exits falling by 48 percent. This decline in exits had indirect implications on the fundraising environment as investors struggled with limited liquidity.
The decrease in private capital deal count and value was the continent’s steepest decline in 12 years, driven by a slump in venture capital investments. Despite the financials sector being the most preferred for investments, venture capital deals saw a significant 34 percent contraction in 2023.
Overall, the financials, IT, and consumer discretionary sectors were the most active sectors by volume, with utilities receiving the largest investment value. However, financial technology investments saw a decline in volume and value in 2023.
