EIB: Africa’s private equity, venture capital flows down 3% to $6.3bn in 2022

By John Muchira in Nairobi October 3, 2023

Africa is demonstrating resilience in attracting private investment despite a marginal 3% decline in flows in 2022, a new report by the European Investment Bank (EIB) shows.

The report, titled 'Finance in Africa: Uncertain times, resilient banks: African finance at a crossroads', shows that private capital in Africa stood at $6.3bn last year, remaining close to the all-time high set in 2021.

The continent however posted a 35% plunge in total fundraising to $2.1bn as global risks like tightening by big economies, high interest rates and inflationary pressure dampened investor confidence. This was the lowest figure in nine years.

“Despite the challenging fundraising environment, private investment in Africa remained robust. This resilience was attributed to the deployment of pre-existing capital, indicating the continued strong appetite for deals in the region,” states the EIB report.

South Africa, Kenya, Egypt and Nigeria continued to dominate private capital investments on the continent, accounting for almost two-thirds of the flows, it found.

In terms of sectors, the financial services sector continued to attract the largest share of private capital, accounting for almost 40% of all investments in 2022, with the vibrancy in the fintech ecosystem generating substantial interest.

The EIB report shows that during the year, venture capital investments declined by 13% to $2.8bn while private equity investment increased by 30% to $2bn.

Private credit, which traditionally accounts for less than 5% of the market for private investment in Africa, increased to $993mn from $280mn in 2021, accounting for 16% of private capital investment. Globally, private credit rose 89%.

During the year, South Africa was the biggest recipient of private capital with $1.3bn followed by Kenya with $1.1bn. Egypt and Nigeria attracted $897mn and $722mn, respectively.

According to the report, Africa is also witnessing a rise in climate financing although its share of global climate financing remains relatively low at roughly 5% and primarily concentrated in Africa’s largest economies.

Africa’s climate financing landscape remains heavily dependent on overseas and international funding, which accounts for nearly 90% of its total climate flows.

This dependence is partly shaped by the substantial role played by multilateral development banks, which financed 45% of climate investment in 2020.

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