Private equity fundraising in Africa has in recent years faced challenging times, in line with global doldrums. However, there are some bright spots. Gerard Saviola, partner at Clifford chance, and Africa practice leader for funds, looks at current and future fundraising trends. Clifford Chance has consistently won the Overall Legal Advisor of the Year in the Private Equity Africa Awards, holding the title for almost a decade.
The African private equity fundraising market has continued to evolve over the past 12 months, presenting opportunities and challenges for fund managers and limited partners (LPs). Macroeconomic conditions and geopolitical concerns are headwinds to fundraising globally, with Preqin forecasting global assets under management (AUM) to be down by a third in the six years to 2028. This is compared to the previous six-year period, from 2016 to 2022.
Africa is no exception. Aggregate fundraising in 2022 was down significantly from a year prior, and while there have been notable successes, 2023 has continued to present challenges. Albeit Development Partners International’s (DPI’s) flagship fund closed at $900 million in 2021, making for an unfavourable comparison.
Africa’s investment potential is as tantalising as ever, with a population set to almost double by 2050, but in recent times we have seen fund managers pause fundraising plans. This is while they assess the impact of inflation and a rash of coups, with the most recent in Gabon and Niger, which have taken the total since 2021 into double digits.
Sustainable energy, however, has been a notable area of strength. The International Energy Agency reports that 43% of Africa’s population lacks access to electricity, and the private market, together with public finance, is stepping in to help meet demand.
We have seen a significant number of sizeable funds launched in 2023 from sponsors including AP Moller, Africa50, Africa Finance Corporation, Camco, and ARCH Emerging Markets Partners, with a focus on both large, utility-scale projects and smaller, decentralised solutions.
Although the likes of Alterra Capital Partners and Amethis have held successful first and final closings with generalist funds, we continue to see sector focus at the forefront of investor considerations and GP focus. LPs are also expressing preference for geographic and sectoral specialisation. Interest in healthcare, financial technology, and agribusiness has also been relatively buoyant despite the challenging overall market, with sponsors including LeapFrog and Apis Partners currently targeting significant raises.
Development finance institutions (DFIs) remain the cornerstone investors for most funds and continue to drive terms and provide crucial concessionary tickets. That said, although established sponsors and those with strong institutional backing have been able to attract a greater proportion of private capital and negotiate favourable terms.
