The great reset in African private equity: pricing risk, finding exits, raising smarter capital
With trillions of dollars in private capital flowing through markets worldwide, Africa’s share is comparatively low, but it matters enormously to economies starved of growth capital because the continent relies on private investment to do what stretched public finances and risk-averse bank lending often cannot: finance growth.
In Q1 2025, disclosed private-capital value in Africa totaled $1.6 billion for 105 deals. That’s modest when compared to a global private-markets pool widely assessed at around $13 trillion, yet vital fuel for expansion, jobs and infrastructure. (These totals reflect only what’s publicly reported: private markets are inherently opaque, and in Africa that opacity is amplified by lower disclosure and fragmented datasets, so headline figures understate true activity and hinder like-for-like comparisons.)
In markets where public finance is stretched and bank lending is scarce, these capital flows are the lifeblood of growth, putting new factories on the ground, extending energy and digital networks, and backing fintech platforms that bring millions into the formal economy.
Unpredictable
Private investment’s distribution, however, is uneven and cyclical. In Q1 2025, most activity was directed at southern Africa, with South Africa accounting for roughly 77% of all transactions, reveals Stears’ Q1 Private Capital in Africa Activity Report. By Q2, momentum had swung towards West Africa, where 43% of private investment activity took place; southern and East Africa tied at 31%, and disclosed value rebounded to $3 billion across 147 deals.
African private equity has never been predictable, but this cycle is harder to price and less buoyant. Global conflicts, political uncertainty and tighter financial conditions are now adding to local pressures, such as energy shortages, policy volatility and choppy currencies, pushing up the cost of capital and squeezing valuations. With multiple expansion off the table, returns now must come from real earnings growth and operational improvement.
That repositioning is changing how investors judge and create value. When the goalposts keep moving, classic discounted cash-flow models become so much less appealing. Capital favours businesses with sound unit economics, resilient supply chains and real cash conversion, not just flashy top-line growth. Investors are zeroing in on operational fundamentals, by pricing discipline, procurement, working-capital hygiene and, above all, leadership.
Quarter by quarter, what the Stears data reveals is that mega-deals in Africa were muted in Q1 but rebounded in Q2, helped by private-credit financings and large strategic transactions in energy, infrastructure and technology. It also suggests that the greater use of private credit, paired with selective equity, is a pragmatic response to higher base rates and cautious public markets.
The weight of DFI capital
Another structural force changing African private equity is the dominance of Development Finance Institutions (DFIs). With many global commercial limited partners (LPs) – such as pension funds, insurers and endowments – trimming allocations after underwhelming cycles, DFIs have stepped in as anchor investors for a large share of new commitments. They set high governance and ESG standards and direct capital to areas of public good, such as renewables, inclusive finance, transport and social infrastructure, which can crowd in follow-on capital and, in some cases, align with policy priorities that ease implementation.
There is a trade-off, however. DFI processes are thorough but can be slow and encumbered by mandate constraints. Approvals may take months, sectoral restrictions narrow the investable universe and can complicate execution for time-sensitive deals. That is pushing managers to broaden their fundraising base. Encouragingly, South African and regional pension funds are cautiously increasing alternative allocations, while family offices have emerged as nimble partners capable of moving faster on proprietary opportunities. Interest from Middle Eastern allocators is also building, especially around infrastructure and energy where project size and duration fit their return profiles. The challenge is to balance the stabilising anchor of DFI capital with the flexibility of private investors, designing fund structures and co-investment options that accommodate different speeds, reporting expectations and mandate constraints.
The numbers point to a reset. In Q2, disclosed value rose to $3 billion across 147 deals, with larger transactions back in play, supported by a mix of equity, M&A and sizable private-credit lines to household-name companies across regions. That blend is expected to persist as rates ease from their peaks but remain well above the ultra-low levels of the 2010s.
Fintech and a call for adaptation
Fintech captures both the promise and the tension in African private equity. It has produced most of the continent’s recent unicorns (eight of nine as at April 2025) and widened access to payments, credit and insurance. But there’s growing unease that parts of the sector are still priced based on Silicon Valley growth curves rather than Africa’s realities, defined by uneven regulation, cross-border complexity and slowness to reach profitability. This tension strain shows at exit: founders and early backers point to unicorn benchmarks, while trade and secondary buyers want proven cash flow and durability. So as negotiations drag on, deals collapse.
In short, the market is adapting. Funds are planning exits from the start, by lining up likely buyers early on and moulding businesses to what those buyers need, while explaining the regulatory and currency realities upfront. Leadership is being professionalised sooner: founder-led companies are increasingly adding independent chairs and seasoned non-executives, tightening finance teams and succession so companies are genuinely exit-ready. In complex spaces like renewables, logistics and data centers, investors are using shared specialist teams to build and run multiple assets efficiently.
What matters now isn’t chasing bigger investments, it’s building better businesses. With smarter exits, stronger governance, the right talent and the right mix of capital, African private equity can deliver resilient firms that outlive the cycle and compound value for investors and communities alike.
