According to Deloitte Africa Private Equity Confidence Survey (PECS) 2024, Kenya remains the leading destination for investors, with a majority of respondents planning to direct their funds toward East Africa’s largest economy over the next 12 months.
Investment trends highlight Kenya, Tunisia, South Africa, and Nigeria as the focal points for regional capital flows. In East Africa, Kenya continues to attract substantial investment, while Tunisia in North Africa, South Africa in Southern Africa, and Nigeria in West Africa remain key destinations for capital.
The emphasis on these nations underscores their pivotal roles in driving regional economic progress. Kenya led with USD 600.3 million in private equity investments across 95 deals, followed by Nigeria with USD 493 million from 82 deals, and Ghana with USD 291 million from 18 deals in FY23.
Agriculture, agribusiness, and financial services stand out as the primary sectors drawing investment across Africa. These industries are expected to maintain their prominence due to their vital role in the continent’s economic fabric. Additionally, manufacturing, healthcare, and green energy are anticipated to see increased investor attention over the coming year
Africa’s economic landscape is set for a notable upswing, with real GDP growth projected to rise from 3.7% in 2023 and 2024 to 4.1% in 2025 and 2026. This anticipated acceleration positions Africa as the world’s second-fastest-growing region in 2024, trailing only Asia, according to recent forecasts.
Despite the positive outlook, the continent faces a myriad of challenges that could temper its growth trajectory. Climate change, geopolitical tensions, political instability, localized conflicts, and debt sustainability concerns present significant risks. These factors could undermine the continent’s economic stability and growth prospects.
Christine Maina Chief Executive Officer East Africa Private Equity and Venture Capital Association (EAVCA) stated, “One challenge in East Africa’s PE landscape has been the relatively few successful exits. However, fund managers are adapting by employing innovative exit strategies and focusing on value creation to navigate macroeconomic complexities.
“Exit activity in the region is expected to increase as past PE investments come to maturity or fund lives come to an end. Despite these challenges, East Africa’s economic outlook remains promising. The region’s resilience, coupled with strategic investments and reforms, positions it well for sustained growth and development in the coming years.”
As economic conditions improve in the next 12 to 24 months, exit activity is anticipated to gain momentum. Secondary sales to private equity firms and sales to strategic investors are expected to be the dominant exit strategies. This trend indicates a growing maturity in the market and an evolving landscape for investors seeking to realize returns.
“Despite economic uncertainties, PE’s resilience and ability to identify opportunities have been instrumental in sustaining businesses and driving economic recovery. While navigating challenging conditions, investors anticipate increased exit activity, primarily through secondary sales and strategic acquisitions. The focus on Kenya, Nigeria, South Africa, and Tunisia as investment hotspots, coupled with a favorable fundraising environment in East and West Africa, presents compelling opportunities for investors.” the report revealed.
Private equity (PE) activity is projected to either increase or stabilize across the continent. However, deal sizes are expected to remain modest, generally below USD 50 million. The extended investment lifecycles reflect the current economic climate’s influence on expected returns, suggesting that achieving profitable outcomes may take longer.
Although Europe and the United States continue to be leading sources of external capital, the Middle East is emerging as an increasingly significant player. Private equity’s role in bridging the capital gap remains crucial in advancing Africa’s economic goals.
Africa’s economic outlook is increasingly positive, with growth expected to accelerate despite prevailing risks. Investment focus remains on key sectors, and while private equity activity is poised to increase, deal sizes may stay modest. The fundraising environment is set for improvement in certain regions, with global capital flows continuing to play a vital role in Africa’s economic advancement.
Kenya continues to be a major hub for PE in East Africa, attracting substantial investment volumes. Uganda is enhancing its regulatory framework to improve clarity and appeal for PE and venture capital. This regulatory development is part of the Capital Markets Authority (CMA) of Uganda’s Strategic Development Plan aimed at boosting the share of non-bank financing in the economy. Ethiopia and Tanzania are also emerging as key destinations for PE investments, driven by economic reforms and rising investor confidence.
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