Of the 786 VC deals recorded in Africa last year, 235 were in West Africa, again recording the highest volume of deals across the continent, followed by North Africa (178) and East Africa (168), a new report by the African Private Capital Association (AVCA) report shows.
Notably, North Africa and East Africa got more VC funding than West Africa despite landing fewer deals volume. With $1.1 billion, the report shows that North Africa, led deal values across the continent, as East Africa attracted $899 million and West Africa secured inflows of $843 million. Powerhouse economies Nigeria, Egypt, South Africa, and Kenya remain the most attractive locations for venture capital investment, accounting for 64 percent of deal volume and 51 percent of deal value combined.
“North Africa’s prominence in the venture ecosystem is best highlighted by a CAGR of 57 percent in investment volume and 120 percent in investment value between 2017 and 2022. Spearheaded by Egypt, economies including Morocco and Tunisia drove further growth. The three countries saw 170 deals with a reported value of $798.5 million, dominated by the Information Technology, Consumer Discretionary and Industrials sectors,” the report states.
Further, the continued interest in investments across multiple sub-regions is illustrated in the $1.84 billion of inflows directed to start-ups with a multi-regional geographic footprint. Accounting for 10 percent of deal volume but a significant 35 percent of deal value speaks to the size of each investment and more companies’ ability to drive geographic expansion.
Financials (31 percent), Information Technology (15 percent) and Consumer Discretionary (15 percent) were the three most active sectors by volume for the third year running in 2022, highlighting the prevailing areas of growth. The dominance, the report argues, reflects Africa’s evolving demography, improved connectivity, and the changing nature of African consumerism. Driven by technology-enabled services, new products and merchants are reaching new demographics, notably a young, digitally savvy, urban workforce.
A market opportunity of 300 million Africans within digital banking encapsulates the dominance of the Financials sector. More bespoke solutions and improved accessibility are also catalysing VC activity in this sector, valued at $2.2 billion in 2022. Industrials, valued at $819 million, are being driven by mobility technology and commercial and professional services such as software improving human resource management. Investment in these areas exemplifies Africa’s place as a region of interest, innovation, and world-class service delivery.
Sector focus within venture debt shows some similarities, with financials (30 percent), utilities (28 percent) and industrials (15 percent) responsible for most of the activity. Venture debt also accounted for four super-sized deals, in excess of $100 million, while venture capital saw 11 deals of this size.