Data from Stears shows 73 private market deals were conducted in the third quarter of this year Q3’2024, including 39 deals with a combined disclosed value of $2.27 billion. In a breakdown of the trends in private capital deployment in Africa in the period under review, South Africa, Kenya, Nigeria, Ghana, and Egypt together participated in 85 per cent of all deals, underscoring their investor appeal. Michael Famoroti, Head of Intelligence and Co-Founder of Stears joins CNBC Africa to unpack the report.
Data from Stears shows that 73 private market deals were conducted in the third quarter of this year, including 39 deals with a combined disclosed value of $2.27 billion. In a breakdown of the trends in private capital deployment in Africa in the period under review, South Africa, Kenya, Nigeria, Ghana, and Egypt together participated in 85 per cent of all deals, underscoring their investor appeal. Michael Famoroti, Head of Intelligence and Co-Founder of Stears joins me now to unpack this report. Thank you so much for your time today Michael and quite an interesting report you have here and I'd like you to just first give us a general overview of what we've seen in terms of private capital deployment on the continent. Yeah, thanks for that Ken. Very exciting data to look at. I think when you look at the last 18 months in a lot of Afghan countries, but especially countries like Nigeria, Ghana, Kenya, there's been a lot of negative macro news on the currency front, on the political front, it's been a tough 2024, right? So it's very encouraging to see that notwithstanding these headwinds, there's still a lot of investor appetite in the right businesses on the continent and some of the trends that we've seen are the ones you would expect. So for example, industries like financial services, agriculture, energy continue to receive the most interest and this is actually because of a combination of both the commercial potential but also the reality that now a lot of international funds especially are focused on ensuring that issues like sustainability, gender balance and digital access are addressed and you find that those tend to be centred on sectors like agriculture, financial services and energy so that's super important and then as you mentioned from a regional perspective, as we'd expect regions like southern, eastern and west Africa lead the way but it's actually interesting to see that when it comes to single country investments, South Africa and Kenya actually are the stars and larger economies like Egypt and Nigeria are probably lagging what you would expect given their size. Yeah we'll get into a lot of those dynamics a bit later but I'm curious to know how this picture, third quarter, differs or compares to the rest of the quarters in the year and what's your lay of the land for the rest of the year? Yeah so I think one thing to note is in terms of private capital activity, we tend to see a bit of a law in Q3. We call it the summer law, essentially people go on holiday, the MDs and principals aren't there to sign the deals and so on. The shows are pending. Exactly, there tends to be a bit of a law so even when you look at the month-on-month trend, for Q3, the highest deal activity was in September and the lowest was in July right so we do expect things to pick up between now and the end of the year. Already in the first six weeks of 2024, we've seen a lot of deals but we've also seen some interesting deals. I think probably for Nigeria, the most notable was the money points investment from the likes of DPI, Google and Lightrock for about $110 million but I think as we end the year, December again, we're expecting to see a bit of a law but 2024 has been a good year, again not withstanding the macro headwinds and it does show that fundamentally there is confidence in the long-term trajectory of a lot of countries in the continent. But when you look at the data now, for you, what are some of the trends that stand out and also some concerns that you have? Yes, I think one of the interesting trends when you look at it from a macro perspective is over the last 10 years, the startup ecosystem has really boomed in Africa and we have lots of positive case stories like in PESA in Kenya, Moneypoint and Paystack in Nigeria and so on but a lot of the funding and activity still has been at the earlier stages right so up until I would say series A stage, what we're beginning to see more of is involvement from larger private funds that are going to help these companies scale right so I mentioned the Moneypoint deal of course but also another notable fintech deal was M2P fintech which is a big payments company that operates in North Africa, Asia and so on. They also raised a series D funding for $100 million in I believe August and that was led by Helios Partners which is one of the largest PE funds in Africa right so it's very exciting to see that now we aren't just seeing VC money but PE money is coming in to propel the startups that have shown traction and shown that actually they can become the large entities that is expected of them so I think that that's one key thing. The second thing that I would just flag is generally within the continent a lot of private deals are still equity, the debt market is something that continues to grow but when you look deeper at the trends you actually see that in specific areas there's more debt funding right so for example in agriculture 90% of those deals were debt-based right and when you think about it it comes down to the reality that in that sector a lot of the funding is coming from impact funds who are providing working capital to farmers and so on that can't scale properly right the other sector that is seeing a lot of debt funding is energy and again when you think about it so for example there's a notable debt deal for Solar Delight in Q3 and there are an IPP right so essentially their contracts allow them a steady stream of financing that can then be matched with the debt funding right so we're seeing some interesting debt trends on the continent. Very interesting trends but thank you so much for your time on the show as always Michael they're the head of intelligence and co-founder of tiers that giving us some insight on the private capital deployment on the continent.
Theme: Private Capital Deployment Trends in Africa
Private capital deployment in Africa has been a topic of increasing interest, with the third quarter of 2024 showing promising signs of growth and resilience in the face of macroeconomic challenges. According to data from Stears, 73 private market deals were conducted during this period, with 39 deals disclosing a combined value of $2.27 billion. The breakdown of trends in private capital deployment reveals that South Africa, Kenya, Nigeria, Ghana, and Egypt collectively accounted for 85% of all deals, highlighting their continued appeal to investors. Michael Famoroti, Head of Intelligence and Co-Founder of Stears, recently shared insights on these findings in an interview on CNBC Africa. Famoroti noted that despite negative macro news affecting several African countries, investor appetite remained strong, particularly in sectors such as financial services, agriculture, and energy. Notably, international funds are increasingly focusing on sustainability, gender balance, and digital access, leading to heightened interest in these sectors. Key Points: 1. Regional Trends: Southern, eastern, and western Africa led the way in private capital deployment during Q3 2024. However, it was surprising to see that in terms of single-country investments, South Africa and Kenya outshined larger economies like Egypt and Nigeria. 2. Seasonal Trends: Famoroti highlighted a seasonal dip in private capital activity during Q3, often referred to as the 'summer lull.' Despite this, deal activity picked up in September, indicating a positive trajectory leading into the end of the year. Notable deals, such as the $110 million investment in Moneypoint, showcased ongoing confidence in the continent's long-term prospects. 3. Funding Dynamics: While startup ecosystems in Africa have flourished, there has been a shift towards larger private equity funds participating in later-stage funding rounds. This trend is crucial for enabling promising startups to scale effectively. Additionally, an increase in debt funding, particularly in sectors like agriculture and energy, highlights a growing diversification in investment vehicles across the continent. In conclusion, the private capital landscape in Africa presents a mix of opportunities and challenges, with resilience and innovation driving growth in key sectors. As the year progresses, investors are likely to maintain interest in high-potential markets, paving the way for continued development and investment in the region.
"Despite negative macro news affecting several African countries, investor appetite remained strong, particularly in sectors such as financial services, agriculture, and energy."
['private capital deployment', 'Africa', 'Q3 2024', 'Stears data', 'investor trends', 'macroeconomic challenges', 'financial services', 'agriculture', 'energy', 'startup ecosystem', 'debt funding']