Grace Ashiru
Africa’s venture capital (VC) landscape faced a significant downturn in the first half of 2024, particularly evident in the stark decline in exit activities across the continent. According to the latest Africa Venture Investment Report, the region recorded only nine exits, marking a 40% decrease compared to the first half of 2023. This downturn aligns with broader global and regional VC trends, but contrasts sharply with the peak exit activities observed during the post-COVID-19 funding influx in previous years.
The median years to exit also reverted to seven years, a return to the pre-boom levels last seen in 2020. This increase from a median of five years over the last three years underscores a slow exit environment, likely affected by the current global economic slowdown and reduced investor enthusiasm for high-risk markets.
South Africa emerged as the most active country in terms of exits, accounting for nearly half of the total exits in the region, with four out of the nine recorded. This marks a significant 34 percentage points increase in its share from 2023. Kenya followed with two exits, while Nigeria and Egypt each saw one.
The dominance of South Africa in the exit landscape illustrates a slight recovery and perhaps a more mature VC ecosystem capable of weathering economic downturns more effectively than its regional counterparts.
Interestingly, the report highlights a shift in the sectors witnessing exits. For the first time since the first half of 2017, the E-commerce/Retail sector recorded no exits, breaking a six-year streak of consistent exit activity. In contrast, the FinTech and Enterprise Software sectors each accounted for 22% of all exits, underscoring a continued investor interest and consistent exit opportunities in these industries.
The report’s findings suggest that while the number of exits has declined, the quality and strategic positioning of exits remain focused on sectors that are pivotal to Africa’s digital and financial transformation. This strategic shift may indicate a more selective and cautious investment approach in response to the economic uncertainties that have characterized global markets in recent years.
Moreover, the decrease in exit activities could be reflective of a broader trend where investors are holding positions longer, possibly awaiting more favorable market conditions to maximize returns. This strategy, while prudent in uncertain times, highlights the challenges and opportunities within Africa’s evolving venture capital ecosystem.
In conclusion, the first half of 2024 has been challenging for VC exits in Africa.
However, the concentration of exits in sectors like FinTech and Enterprise Software suggests that while the market faces short-term challenges, the long-term outlook focused on technology and innovation remains promising. As the global economy stabilizes and investor confidence returns, Africa’s VC market may yet see a resurgence in both exit numbers and values, aligning with the continent’s growing emphasis on digital transformation and economic diversification.
Source( MAGNiTT H1 Report)
