Alitheia Capital on the future of Africa’s private equity & venture capital industry

Africa's venture capital industry has been on a steady incline, with 613 deals amounting to $3.9 billion reported between 2014 and 2019, according to the African Private Equity and Venture Capital Association. In a recent interview with CNBC Africa, Tokunboh Ishmael, Chair of the Board of the Association and Co-founder of Alitheia Capital, discussed the future of Africa's private equity and venture capital sector amidst the global pandemic. Ishmael acknowledged the impact of the pandemic on various sectors but emphasized that the majority of venture capital transactions in Africa have been tech-enabled, particularly in essential service sectors such as finance, health, and education. These sectors, which have played a crucial role in providing access to key services, have continued to attract significant interest, keeping the VC industry resilient during these challenging times. With the rise of health tech applications and FinTech solutions, Ishmael highlighted how the pandemic has spurred innovation and investment in sectors that enable remote services, electronic payments, and telemedicine. The increased interest in these areas has led to a surge in funding, showcasing the adaptability and growth potential of the African venture capital landscape. In terms of deal sizes, Ishmael noted that while Africa has seen an increase in the size of transactions, VC deals in the region typically fall within the seed stage to series A and series B stages. Despite not reaching the scale of deals seen in more developed markets like Europe and the US, the continent has experienced a rise in the size of ticket deals, with some transactions reaching tens of millions of dollars. When it comes to the distribution of capital, Ishmael pointed out that South Africa, East Africa (particularly Kenya), and West Africa (with Nigeria leading the pack) are the main beneficiaries. These regions, known for their vibrant commercial activity, act as launch pads for companies expanding across the continent. While fund managers in Nigeria, South Africa, and Kenya play a significant role in driving VC transactions, Ishmael highlighted a shift in funding sources. Unlike traditional private equity where European institutions have been dominant, the VC space in Africa is witnessing a shift towards North American investors, drawn by the tech-centric nature of the investments. Overall, Ishmael's insights shed light on the resilience and growth potential of Africa's venture capital industry, showcasing the continent's ability to attract investment and drive innovation even in the face of global challenges.