Africa’s private capital took a hit in 2023 amid global investment slump

Africa saw a significant dip in private capital activity in 2023, with 450 transactions worth some USD 5.9 bn, marking a 28% y-o-y decrease in volume and a 22% y-o-y decline in value, according to the African Private Capital Association’s latest private capital activity report (pdf). This marks the steepest decline in private capital volumes in over a decade, fueled by a slowdown in venture capital investments and sizable transactions, according to the report.

The value of transactions rose 35% in 2H 2023 in comparison to the first half of the year, mainly on the back of two large infrastructure projects in South Africa’s renewable energy sector, each exceeding USD 250 mn and accounting for 27% of total investment value during the period.

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Macroeconomic challenges weighed heavily: Africa grappled with soaring inflation in 2023,reaching 17.8%, its highest level in over a decade, propelled by global spikes in food and energy prices, domestic “fiscal extravagance,” disruptions in agricultural supply chains, and currency depreciations against the USD. North Africa bore the brunt of headwinds, with inflation doubling to 16.6% y-o-y.

The continent’s favorite asset class, venture capital, experienced a major slowdown, both on the continent and globally. Still, VCs contributed to 68% of total investment volume, with the financial sector taking the lead.

Exit activity also witnessed a 48% y-o-y decline in 2023, as the continent saw 42 exits in total during the year — unchanged from pre-2022 averages as 2022 marked an “outlier year for exits in Africa” — according to the report. North Africa was hit the hardest due to limited exits in Egypt, Africa’s primary exit market, while South Africa demonstrated resilience with only a 17% decline. Sales to trade buyers remained the most common exit route.

Some respite: Interim fundraising remained resilient, with Africa-focused fund managers achieving a record 40 interim closes valued at USD 3 bn, the highest to date. While overall fundraising declined for a second year, the overall trend saw larger funds take the backseat for smaller ones, which made up 65% of total closed funds, growing 1.6x in volume and 2.6x in value.

US institutional investors offload PE holdings amid liquidity concerns: Institutional investors in the US, including pension funds and endowments, are selling off private equity holdings at lower than their value to reduce exposure to illiquid assets, amidst a subdued market for traditional exits like stock listings and mergers, the Financial Times writes. Big investors sold 99% of their holdings in 2023, a marked increase from 95% in 2022 and 73% in 2021.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.7% yesterday on turnover of SAR 7.9 bn. The index is up 6.2% YTD.

In the green: AlAkaria (+7.3%), AlKhaleej (+6.7%) and Al Arabia (+6%).

In the red: Sinad Holding (-6.1%), ADES (-5.3%) and Arabian Drilling (-4.5%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.7% yesterday on turnover of SAR 42.4 mn. The index is up 7% YTD.

In the green: AlMuneef (+12.5%), NGDC (+10%) and AlModawat (+9.6%).

In the red: Paper Home (-8%), APICO (-6.2%) and Atlas Elevators (-2.3%)

CORPORATE ACTIONS-

#1- Banque Saudi Fransi (BSF)’s Board of Directors have approved a 2.9 mn share buyback and will transfer the shares it acquires to the bank’s share-based employee comp program, it said in a disclosure to Tadawul. The buyback, which will be financed from the bank’s own resources, will see shares retained as treasury shares for the employees-related program. The central bank has signed off on the move, which now requires a vote of shareholders.

#2- Shareholders of Saudi Azm for Communication and IT approved the buyback of up to 1mn shares, also for the company’s employee comp program, it said in a statement (pdf). The purchase, which will be financed from the company’s own resources, should be completed within 12 months of its approval by shareholders.

#3- The Capital Market Authority (CMA) approved renewables giant Acwa Power’s request to hike its capital by 0.2% to SAR 7.3 bn through a share issuance, it said in a statement. The increase will be paid by the transfer of SAR 14.2 mn from retained earnings to the company’s capital, increasing outstanding shares to 732.5 mn.

#4- Real estate developer Red Sea International (RSI) has asked the CMA to approve a hike in its capital through a debt conversion, it said in a disclosure to Tadawul. The RSI is planning to convert some SAR 476 mn in debt owed by the company to Al Dabbagh Group Holding and from the acquisition of the Fundamental Installation for Electric Work (First Six).