Before the significant market contraction in early 2020, private equity fundraising activity across Africa continued to show strong growth in the 2019 calendar year. The total value of PE fundraising in 2019 reached USD 3.8bn, up from USD 2.7bn in 2018, and the second-highest year of fundraising since 2010.
Pitchbook’s 2019 Annual US PE Breakdown report noted a similar spike in fundraising in the US, where an all-time high of USD 301.3bn in 2019 was achieved, up 52% from the prior year.
The final closes of large Emerging Markets and Pan-African funds, such as Actis’ Emerging Markets Focused Fund & Actis Long Life Infrastructure Fund, which closed at USD 1.2bn contributed to the increase. Other larger funds include Amethis’ Pan-Africa Fund & Amethis Fund II, which closed at EUR 375m.
However, funds raised specifically for investment in South Africa, per the SAVCA 2020 Private Equity Industry Survey, fell approximately 48% from ZAR 7.1bn in 2018 to ZAR 3.7bn in 2019.
This stands in stark contrast to the highs reached in 2019 and illustrates the impact of the uncertainty and economic distress caused by the COVID-19 pandemic. International lockdowns resulted in trade disruption and massive decreases in economic activity, combined with downgrades, currency devaluations, and revised investment sentiment towards Africa adversely affected fundraising initiatives and is likely to continue doing so for the foreseeable future.
Recent benchmark interest rate cuts coupled with the resilience of private equity compared to other asset classes are potential silver linings to cushion the impact of these events.