According to a recent survey, venture capital inflows to African technology and start-up firms declined 31% in 2023 to $4.5 billion as economic headwinds including weak currencies and high inflation.
Driving The News
The number of deals, which flowed in as both equity and debt, dropped to 545 from a record 781 in 2022, with the number of active investors in the region down by a third, London-based African Private Capital Association said in its report.
“The withdrawal of North American investors was responsible for 50% of the overall decline in investor numbers in 2023, significantly overshadowing the retreats of European and Asia-Pacific investors, which accounted for 18% and 9% of the decrease.”
The Big Picture
A decline in global liquidity, rising geopolitical conflicts, and challenging macro-economic conditions prompted investors to spread assets across geographies to curb risks. Foreign investors abandoned African economies struggling with high inflation and erosion in the value of local currencies.
What They’re Saying
“Those that made opportunistic rather than dedicated investments in Africa exited in favor of more familiar shores,” said AVCA, whose members include private equity, venture capital, institutional investors and development finance institutions.
There’s a “need for indigenous capital allocators with a long-term commitment to the continent.”
“The withdrawal of North American investors was responsible for 50% of the overall decline in investor numbers in 2023, significantly overshadowing the retreats of European and Asia-Pacific investors, which accounted for 18% and 9% of the decrease,” the association stated.
By The Numbers
West Africa attracted the largest proportion of venture capital deal volume in Africa at 26%, driven by Nigeria, which was the most active country by volume at 19%, the survey said. The financial sector accounted for 23% of transactions, with information technology taking 20% and consumer discretionary 17%, it said.
Source: Bloomberg
Catch up on news and other tidbits on our WhatsApp Community Page, Twitter/X, and subscribe to our weekly newsletter to ensure you don’t miss out on any news.
