Stears: Africa recorded $10.1bn in private capital transactions in FY’24

The private capital landscape in Africa saw a significant boost in 2024, with disclosed transactions totaling $10.1 billion, according to data from the Stears Private Capital in Africa Activity Report. Michael Famoroti, Head of Research at Stears, emphasized the critical role of equity financing and highlighted the continued dominance of key economies like South Africa, Kenya, and Nigeria in shaping investment trends. Famoroti joined CNBC Africa to analyze the report's findings and provide insights into the trends expected in 2025. The report revealed a rise in transaction volumes and increasing transaction value compared to previous years. Despite a decrease in the share of disclosed transactions by value, the overall uptick in African capital markets over the last 18 months was evident. The fourth quarter of 2024 particularly stood out for West Africa, with strong numbers pointing towards a promising 2025, marked by stable interest rates and reduced currency depreciation. West Africa's dominance in private capital transactions can be attributed to several factors, including the presence of two of the continent's big five economies - Nigeria and Ghana. Additionally, countries like Cote d'Ivoire and Senegal have attracted substantial investments, especially in sectors such as energy and agriculture. The region's focus on enhancing digital financial services, particularly mobile money penetration, has further driven transaction volumes. Sectoral analysis showcased the importance of financial services, consumer goods, and technology in Africa's economic transformation. While payment infrastructure and lending emerged as dominant sub-sectors, reflecting challenges in buying power due to inflation and weak currencies, investments in road transport, infrastructure, and energy hinted at a future-oriented approach towards economic development. The preference for equity over debt was a notable trend in the report, with debt financing primarily prevalent in energy and agriculture sectors. Famoroti explained that the bias towards equity could be attributed to the larger number of private equity firms and investors comfortable with debt financing. The concentrated focus on debt in energy and agriculture sectors was driven by factors like working capital requirements in agriculture and the appeal of tying investments to receivables in energy projects. High-profile exits, such as those involving DPI and AIM, played a significant role in shaping the investment landscape and indicating the market's maturity. Famoroti highlighted the importance of exits like MoneyPoint, where early-stage investors like B Capital saw substantial returns, encouraging more investments in the continent. Although the presence of development finance institutions and impact investors still indicates caution from a commercial perspective, successful exits are crucial for boosting investor confidence. In conclusion, the Stears Private Capital in Africa Activity Report for 2024 underscores West Africa's dominance in private capital transactions and points towards a promising investment landscape in 2025. With a focus on equity financing, sectoral diversification, and successful exits, Africa's private capital market is poised for continued growth and development in the coming years.