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
Pathway Advisors Limited, an issuing house and financial advisory firm, has announced the successful completion of the Series 2 Commercial Paper issuance for Veritasi Homes & Properties Plc.
The Series 2 offer, issued under Veritasi Homes’ newly registered N20.00 billion Commercial Paper Programme, raised N16.76 billion, significantly above its initial N12.00 billion target on the back of strong institutional demand.
This issuance builds on the company’s track record in the Nigerian debt capital market and follows the recently concluded N10 billion 3-year 20 per cent Series 1 Fixed Rate Bond Issuance, further reinforcing investor confidence in Veritasi Homes’ strong credit profile.
The 364-day tenor instrument attracted robust participation from a diverse pool of institutional investors, underscoring sustained confidence in the Company’s financial strength, operating model, and governance standards.
Commenting on the deal, the Founder/CEO of Pathway Advisors Limited, Mr Adekunle Alade (MBA, FCA, M.CIod), noted that the outcome further validates investor appetite for well-structured transactions in the Nigerian capital market.
“The strong oversubscription speaks to the market’s confidence in Veritasi Homes’ performance, governance, and repayment track record. We are pleased to continue supporting issuers with strong fundamentals in accessing efficient funding.’’
He further highlighted that Veritasi Homes’ consistent market activities since 2022, including successful issuances and full redemption of matured obligations, continue to strengthen its reputation among institutional investors.
“Pathway Advisors Limited remains committed to maintaining its leadership position within Nigeria’s capital markets through the origination and execution of transformative, value-driven, and commercially viable transactions by deploying innovative financial solutions and facilitating strategic capital formation across critical sectors.
“We are committed to supporting credible corporates in accessing efficient short-term and long-term financing solutions within the Nigerian capital market,” he said in a statement on Monday.
Speaking on the transaction, the Managing Director/CEO of Veritasi Homes & Properties Plc, Mr Nola Adetola, described the outcome as a strong endorsement of the company’s fundamentals.
“This result reflects the resilience of our business model, our growing market reputation, and the continued trust of the investment community. We are grateful to all institutional investors for their confidence in Veritasi Homes.”
He added that the proceeds from the issuance will be deployed to support the company’s working capital requirements, enhance liquidity, and complete the ongoing development activities across its real estate portfolio.
Mr Adetola also commended Pathway Advisors Limited for its advisory and arranging role in the successful execution of the transaction.
By Aduragbemi Omiyale
The Securities and Exchange Commission (SEC) has approved the transition to the T+1 settlement cycle for capital market transactions from June 1, 2026.
This is coming some months after Nigeria moved from the T+3 settlement cycle to the T+2 settlement cycle.
The T+ settlement cycle is the number of working days required to complete a capital market transaction, such as the trading of securities, shares, and others, from the first day the trade was executed by an investor.
In a notice on Monday, the SEC, which is the apex capital market regulator in Nigeria, said it was authorising the new system to “promote an efficient, fair, and transparent capital market.”
Under the new arrangement, equities and commodities traded by investors at the market would be cleared and settled by the Central Securities Clearing System (CSCS) within one day.
The agency noted that the migration to a T+1 settlement cycle forms part of its ongoing market modernisation initiatives aimed at enhancing market efficiency and strengthening risk management. reducing counterparty exposure, improving liquidity, and aligning the Nigerian capital market with international standards and global best practices.
“Accordingly, all eligible trades executed in the Nigerian capital market shall settle one business day after the trade date (T+1),” a part of the statement noted.
It was stressed that “Friday, May 29, 2026, shall be the final trading day under the existing T+2 settlement cycle. Trades executed on Friday, May 29, 2026, and Monday, June 1, 2026, shall both settle on Tuesday, June 2, 2026. All trades executed from Monday, June 1, 2026, onward shall be subject to the T+1 settlement cycle.”
SEC tasked all capital market operators, securities exchanges, clearing and settlement infrastructure providers, custodians, registrars, issuers, and other relevant stakeholders to take all necessary measures to ensure full operational readiness and compliance with the new settlement framework.
“Market participants are expected to review and align their systems, processes, controls, and operational workflows ahead of the implementation date,” it further stated, promising to continue to engage stakeholders and monitor the implementation process to ensure an orderly and seamless transition.
The regulator said it remains committed to strengthening market integrity, enhancing investor confidence, and fostering the development of a modern. resilient and globally competitive Nigerian capital market.
By Adedapo Adesanya
The Budget Office of the Federation has defended the delay in publishing three outstanding Quarterly Budget Implementation Reports, saying the situation arose from the repeal and re-enactment of the 2025 Appropriation Act and the subsequent extension of the budget’s implementation period to June 2026.
The last publication on the budget office’s website is Q3 2025, a development that breaks the Fiscal Responsibility Act amid the country’s rising borrowing costs and mounting fiscal pressure.
In a clarification statement, the DG of the Budget Office, Mr Tanimu Yakubu, said public concerns over the absence of the reports must be understood within the constitutional and fiscal framework governing public finance administration in Nigeria, stressing that a fiscal year is not strictly tied to the January–December calendar, but is instead a legislative construct defined by appropriation laws passed by the National Assembly.
“The fiscal year is not necessarily synonymous with the calendar year. The calendar year is a fixed chronological construct of twelve months running from January to December.
“The fiscal year, however, is a juridical and legislative creation whose duration, commencement, and terminal date are determined by the extant appropriation framework enacted by law,” he said.
Mr Yakubu claimed that the recent reporting delay followed the Repeal and Re-enactment of the 2025 Appropriation Act concluded in December 2025, alongside an extension of the budget’s execution period.
These changes, he said, effectively altered the operational timeline for fiscal reporting and necessitated comprehensive reconciliations before publication of the affected quarterly reports.
“In substance and in law, therefore, the fiscal year becomes not merely a chronological concept, but a legislatively sustained expenditure window,” he explained.
The Budget Office further noted that Nigeria’s fiscal practice has historically accommodated adjustments such as supplementary budgets, rollover provisions, and implementation extensions, particularly for capital projects, to ensure continuity and prevent wastage of public resources.
It added that similar practices exist in other jurisdictions, where fiscal years are defined by law rather than fixed to the calendar year.
Citing constitutional provisions, the office referenced Sections 80 and 81 of the 1999 Constitution (as amended), which require that public expenditure be backed by appropriation laws rather than a rigid annual cycle. It maintained that as long as legislative authority exists, expenditure remains valid within the approved framework.
The DG also pointed to judicial precedents underscoring the supremacy of the National Assembly in public finance matters, noting that executive spending must align with statutory approval.
He also explained that the current reconciliation process involves revenue performance reviews, cash flow adjustments, debt analysis, and inter-agency coordination to ensure accuracy and audit integrity of the outstanding reports.
Mr Yakubu then assured that the missing quarterly reports are being finalised and will be released in phases in the coming weeks, adding that reforms are underway to strengthen digital reporting systems and improve transparency and timeliness in fiscal data publication.
In his words, “Accordingly, the outstanding Quarterly Budget Implementation Reports are being finalised and will be released in phases over the coming weeks.
“In parallel, the Budget Office is strengthening its digital reporting architecture, data harmonisation systems, and institutional coordination mechanisms to support more comprehensive, timely, and analytically robust fiscal reporting in line with evolving international public finance reporting standards.”
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