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Kenya and South Africa dominate Africa's private equity fund

Series A and Series B deals together accounted for 29 per cent of the total deal volume and 38 per cent of the total value of early-stage deals.

In Summary
  • Fintech and information technology dominated the African start-up scene, with each sector accounting for 19 per cent of the total volume
  • South Africa’s well-developed VC ecosystem accounted for 21% of deals between 2014 and 2019, closely followed by Kenya (18%) and Nigeria (14%).
ast Africa Venture Capital Association executive director Eva Warigia,CMA policy and strategy director Luke Ombara and World bank finance sector specialist Grace Kibuthu during a roundtable briefing in Nairobi on November 14,2017. Photo/Enos Teche.
ast Africa Venture Capital Association executive director Eva Warigia,CMA policy and strategy director Luke Ombara and World bank finance sector specialist Grace Kibuthu during a roundtable briefing in Nairobi on November 14,2017. Photo/Enos Teche.

Kenya has attracted Venture Capital deals worth Sh74.3 billion in the past five years, second highest in Africa after South Africa, the latest continental private equity report shows.

The inaugural report on venture capital, entitled Venture Capital in Africa: ‘Mapping Africa’s Start-up Investment Landscape’ released by African Private Equity and Venture Capital Association (AVCA) yesterday shows the continent had deals worth $3.9 billion (Sh413.4 billion) between 2014 and 2019.

According to the report, 2019 marked a six-year high in venture capital activities with 139 deals worth $1.4 billion (Sh148.4 billion) – the highest year on record.

 

The number of deals more than doubled between 2014 and 2019, while the value of deals almost doubled between 2018 and 2019.

Fintech and information technology dominated the African start-up scene, with each sector accounting for 19 per cent of the total volume of venture capital deals reported on the continent during the period under review.

Consumer discretionary followed the segment at 18 per cent while industrials accounted for 12 per cent of total deals.

Communications services, health care and consumer staples collectively accounted for 19 per cent of the volume of deals over the same period.

In terms of regions, Southern Africa attracted the highest volume of deals (25 per cent), followed by East Africa (23 per cent) and West Africa (21 per cent), while multi-region deals attracted the largest share by value.

Multi-region deals had the largest median deal size at $7.5 million (Sh795 million), followed by West Africa and East Africa at $3 million (Sh318 billion) and $2.2 million (Sh233 million) respectively.

South Africa’s well-developed venture capital ecosystem accounted for 21 per cent of deals between 2014 and 2019, closely followed by Kenya (18 per cent) and Nigeria (14 per cent).

 

Over a fifth of the total number of deals over this period were in companies headquartered outside of Africa raising capital to expand or strengthen their presence on the continent.

While seed funding accounted for nearly a third of the total number of deals reported in Africa during the period, these transactions accounted for only five per cent of the total deal value.

Series A and Series B deals together accounted for 29 per cent of the total deal volume and 38 per cent of the total value of early-stage deals.

The report also sheds light on deal sizes, with almost two-thirds (65 per cent) of reported deals being below $5 million (Sh530 million) in value, while a quarter was between $5 million (Sh530 million) and $20 million (Sh2.1 billion).

Only three per cent of deals over the reporting period were above $50 million (Sh5.3 billion).

Africa Venture Capital Association chairman Tokunboh Ishmael said the continent’s venture capital industry continues to grow from strength to strength and expect 2020 to be another strong year despite global macroeconomic headwinds.

''The continent’s venture capital ecosystem showcases the best of African innovation and entrepreneurship, which has the potential to be a key source of solutions to Africa’s intractable problems and a game-changer for the development trajectory,’’ Tokunboh said.

He added that despite the relative infancy of the VC ecosystem across the continent, the sector has attracted significant international investment while local firms and innovation hubs have also expanded considerably.