Economy
Africa: Resilience in the Private Equity Market
By Angela Simpson and Lydia Shadrach-Razzino
Private markets in sub-Saharan Africa (SSA) have seen a continuous rise in activity since the COVID-19 pandemic. The latest AVCA Private Capital Activity Report 2022 revealed that $7.6 billion of private capital was invested in 2022, resulting in a 3% growth in deal value across the continent last year after a similarly upbeat 2021. According to the report, 37% of the deal volume came from multi-region investments.
Challenges, risks and resilience
This resilience is despite the impact of numerous crises over the last couple of years, especially the looming global recession, supply chain disruptions and soaring energy prices. These factors have led to fears that we could be entering an extended period of high inflation and poor economic growth, but for private equity investors, challenging periods can also provide opportunities for access to value. While not immune to market challenges, the private equity market has the resilience to survive and thrive.
On the positive side, the high amounts of available capital mean that fund managers have more to deploy in a better value environment. The private sector has a remarkable capacity to adapt to changing economic conditions and capitalize on new opportunities. This is boosted by the fact that, to a large extent, risk management has already been factored in. According to Deloitte’s Private Equity Review 2022, 41% of PE firms in South Africa have prioritized risk management in portfolio companies, and 14% of private equity firms in the country said they would focus on bolt-on and tuck-in acquisitions to augment their portfolio companies.
Exits
The general consensus is that exits in the African market might take a little longer going forward, and the fund life of a typical vehicle might need to be extended as managers hold assets a little longer to turn the time and growth into a premium. We have not seen many IPOs recently, and the cyclical nature of the market impacts this. The recent AVCA report details how private capital investors achieved 82 full exits in 2022, the highest number ever recorded in a single year on the continent. Another recent AVCA survey showed that LPs see opportunism in the PE market in Africa for the medium- to long-term, and more than 90 per cent are hopeful that returns in Africa over the next few years will be similar to those in other emerging markets.
Take-privates
Take-privates are also expected to increase in popularity in 2023. There have been some delistings from the Johannesburg Stock Exchange in the past 18 months, and this trend will likely continue. According to the AmaranthCX database of South African company listings and delistings, South Africa has been averaging about 25 delistings a year. This, however, also presents a good opportunity for PE companies as they can take over and delist struggling companies. Taking a longer-term view, PE sponsors can work with the management team of a delisted company to transform it, using innovative methods to create a stronger and more resilient company, removing the burden of reporting requirements and the market spotlight.
Adaptability in financing
Increasing inflation and rising rates have also resulted in a decrease in the availability of cheap debt financing. Fund managers have to generate organic growth and are looking at driving a real improvement in earnings before interest, taxes, depreciation, and amortization (EBITDA). Add-on and buy-and-build strategies are also proving popular because they are helping to mitigate the higher valuations that may have been paid for the acquisition.
There has also been an increase in direct lending, with investors seeking to partner with lenders that can provide deal certainty for acquisitions. However, direct lending hold sizes have been reduced, which has required that financing structures be adapted to facilitate longer-term deals. Other innovative financing methods include permanent capital vehicles, which result in a longer fund life and enable PE firms to hold assets for longer, something that aligns well with the longer holding period often seen in African portfolio companies.
Blended finance is another fundraising avenue that has risen in popularity, and it means that investors can use catalytic funding, such as grants to mobilize private sector investment. According to Convergence, SSA has been the most targeted region for blended finance transactions to date, representing 33 per cent of blended finance transactions launched in 2017–2019 and 43 per cent of the market historically.
Another factor that has mitigated the pandemic’s impact on PE activity in Africa is the composition of the limited partner base of firms operating on the continent, where development finance institutions (DFIs) continue to play a significant role. We have also seen increasing interest in and appetite for start-ups among DFIs, with some pretty edgy new ventures attracting their attention.
DFIs also continue to be the main providers of long-term infrastructure finance in Africa. Local and regional banks, specialist infrastructure funds, and private equity and debt firms are stepping in to collaborate with DFIs and access returns. DFIs can shoulder political risk, access government protections in a way that others can’t, enter markets others can’t, and are uniquely capable of facilitating long-term lending. Multi-finance and blended solutions are therefore expected to grow in popularity as a way to de-risk deals and support a broader ecosystem of lenders.
Resilience in sustainability
In terms of preparing for future market resilience, there is a growing focus among PE investors on the green, low-carbon, and sustainable initiatives in Africa. Environmental, social, and governance (ESG) have been incorporated into PE funds’ general investment considerations for several years now, but it’s fair to say that these are no longer nice-to-haves. Energy efficiency, community healthcare, staff training and qualifications, greenhouse gas emissions, the highest standards of governance and best business practices, inclusion and diversity, social impact, and litigation risks are some factors they have been considering. Alongside the increased focus of equity investors on ESG, some lenders are also prescribing particular ESG principles that a company must meet to receive funding.
It appears that the PE sector is shining in Africa as we head into the second half of 2023, and investments in the sector are playing a catalytic role in sustainable growth and investment on the continent. The Deal Leaders International report was optimistic about the M&A market in SSA, saying that foreign direct investment would increase in the next few years, despite the global economic recession. However, current economic challenges have required resilience, adaptability and agility from the PE market, leading to changes in the structure and length of deals, the implementation of new financing methods, effective risk management, and an increasing focus on ESG.
Angela Simpson and Lydia Shadrach-Razzino are Partners and co-heads of the Corporate/M&A Practice, Baker McKenzie Johannesburg
By Adedapo Adesanya
The United Kingdom via the British High Commission in Abuja has launched two flagship economic reform programmes – the Nigeria Economic Stability & Transformation (NEST) programme and the Nigeria Public Finance Facility (NPFF) -as part of efforts to support Nigeria’s economic reform and growth agenda.
Backed by a £12.4 million UK investment, NEST and NPFF sit at the centre of the UK-Nigeria mutual growth partnership and support Nigeria’s efforts to strengthen macroeconomic stability, improve fiscal resilience, and create a more competitive environment for investment and private-sector growth.
Speaking at the launch, Cynthia Rowe, Head of Development Cooperation at the British High Commission in Abuja, said, “These two programmes sit at the heart of our economic development cooperation with Nigeria. They reflect a shared commitment to strengthening the fundamentals that matter most for our stability, confidence, and long-term growth.”
The launch followed the inaugural meeting of the Joint UK-Nigeria Steering Committee, which endorsed the approach of both programmes and confirmed strong alignment between the UK and Nigeria on priority areas for delivery.
Representing the Government of Nigeria, Special Adviser to the President of Nigeria on Finance and the Economy, Mrs Sanyade Okoli, welcomed the collaboration, touting it as crucial to current, critical reforms.
“We welcome the United Kingdom’s support through these new programmes as a strong demonstration of our shared commitment to Nigeria’s economic stability and long-term prosperity. At a time when we are implementing critical reforms to strengthen fiscal resilience, improve macroeconomic stability, and unlock inclusive growth, this partnership will provide valuable technical support. Together, we are laying the foundation for a more resilient economy that delivers sustainable development and improved livelihoods for all Nigerians.”
On his part, Mr Jonny Baxter, British Deputy High Commissioner in Lagos, highlighted the significance of the programmes within the wider UK-Nigeria mutual growth partnership.
“NEST and NPFF are central to our shared approach to strengthening the foundations that underpin long-term economic prosperity. They sit firmly within the UK-Nigeria mutual growth partnership.”
By Aduragbemi Omiyale
A strategic partnership aimed at accelerating the growth, digital capacity, and sustainability of Nigeria’s 40 million Micro, Small and Medium Enterprises (MSMEs) has been signed by MTN Nigeria and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
The collaboration will feature joint initiatives focused on digital inclusion, financial access, capacity building, and providing verified information for MSMEs.
With millions of small businesses depending on accurate guidance and easy-to-access support, MTN and SMEDAN say their shared platform will address gaps in communication, misinformation, and access to opportunities.
At the formal signing of the Memorandum of Understanding (MoU) on Thursday, November 27, 2025, in Lagos, the stage was set for the immediate roll-out of tools, content, and resources that will support MSMEs nationwide.
The chief operating officer of MTN Nigeria, Mr Ayham Moussa, reiterated the company’s commitment to supporting Nigeria’s economic development, stating that MSMEs are the lifeline of Nigeria’s economy.
“SMEs are the backbone of the economy and the backbone of employment in Nigeria. We are delighted to power SMEDAN’s platform and provide tools that help MSMEs reach customers, obtain funding, and access wider markets. This collaboration serves both our business and social development objectives,” he stated.
Also, the Chief Enterprise Business Officer of MTN Nigeria, Ms Lynda Saint-Nwafor, described the MoU as a tool to “meet SMEs at the point of their needs,” noting that nano, micro, small, and medium businesses each require different resources to scale.
“Some SMEs need guidance, some need resources; others need opportunities or workforce support. This platform allows them to access whatever they need. We are committed to identifying opportunities across financial inclusion, digital inclusion, and capacity building that help SMEs to scale,” she noted.
Also commenting, the Director General of SMEDAN, Mr Charles Odii, emphasised the significance of the collaboration, noting that the agency cannot meet its mandate without leveraging technology and private-sector expertise.
“We have approximately 40 million MSMEs in Nigeria, and only about 400 SMEDAN staff. We cannot fulfil our mandate without technology, data, and strong partners.
“MTN already has the infrastructure and tools to support MSMEs from payments to identity, hosting, learning, and more. With this partnership, we are confident we can achieve in a short time what would have taken years,” he disclosed.
Mr Odii highlighted that the SMEDAN-MTN collaboration would support businesses across their growth needs, guided by their four-point GROW model – Guidance, Resources, Opportunities, and Workforce Development.
He added that SMEDAN has already created over 100,000 jobs within its two-year administration and expects the partnership to significantly boost job creation, business expansion, and nationwide enterprise modernisation.
By Adedapo Adesanya
The Nigerian Exchange (NGX) Limited is seeking review of the controversial Capital Gains Tax increase, fearing it will chase away foreign investors from the country’s capital market.
Nigeria’s new tax regime, which takes effect from January 1, 2026, represents one of the most significant changes to Nigeria’s tax system in recent years.
Under the new rules, the flat 10 per cent Capital Gains Tax rate has been replaced by progressive income tax rates ranging from zero to 30 per cent, depending on an investor’s overall income or profit level while large corporate investors will see the top rate reduced to 25 per cent as part of a wider corporate tax reform.
The chief executive of NGX, Mr Jude Chiemeka, said in a Bloomberg interview in Kigali, Rwanda that there should be a “removal of the capital gains tax completely, or perhaps deferring it for five years.”
According to him, Nigeria, having a higher Capital Gains Tax, will make investors redirect asset allocation to frontier markets and “countries that have less tax.”
“From a capital flow perspective, we should be concerned because all these international portfolio managers that invest across frontier markets will certainly go to where the cost of investing is not so burdensome,” the CEO said, as per Bloomberg. “That is really the angle one will look at it from.”
Meanwhile, the policy has been defended by the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, who noted that the new tax will make investing in the capital market more attractive by reducing risks, promoting fairness, and simplifying compliance.
He noted that the framework allows investors to deduct legitimate costs such as brokerage fees, regulatory charges, realised capital losses, margin interest, and foreign exchange losses directly tied to investments, thereby ensuring that they are not taxed when operating at a loss.
Mr Oyedele also said the reforms introduced a more inclusive approach to taxation by exempting several categories of investors and transactions.
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