Slowing economies, weak currencies, and falling commodity prices. The conditions aren’t great for investment in Africa. Indeed, in 2015 the value of private-equity deals on the continent fell by a whopping 70%, according to the African Private Equity and Venture Capital Association (pdf).
But dig into the details and the story becomes more nuanced. The overall value of deals fell because the biggest transactions—worth $250 million or more—recorded a steep decline. The value of smaller deals actually increased from the previous year, according to AVCA data.
“The bread and butter of African private equity, basically the small and medium enterprises, have been remarkably resilient,” Dorothy Kelso, director of research at AVCA, told the Financial Times (paywall).
Meanwhile, Africa-focused fundraising by private equity firms doubled in 2015, with increasing investor interest in commercial and professional services, healthcare, and information technology.
Fundraising can lag the cycle, so private-equity investors may have trouble putting their cash to use in current conditions, spreading their cash over lots of little deals instead of a few bigger ones. That will probably also lead to more subdued fundraising activity this year, as fund managers work through the capital already committed by investors.
Still, market watchers believe Africa remains attractive for deals in the right sector of the right size. The continent’s demographics makes consumer-facing industries appealing, and the maturity of Africa’s private equity industry means that managers are able to withstand the ups and downs of the day. “Investors in Africa have developed the requisite skills, experience and knowledge to continue to invest, grow and add value to portfolio companies,” the AVCA says.
Sign up for the Quartz Africa Weekly Brief — the most important and interesting news from across the continent, in your inbox.