Africa’s private capital deal volume in the third quarter of this year fell 34% compared to the same period in 2022, a report by an industry group that promotes private investment in the continent said. 

Multiple shocks which began in 2022 - surging high inflation, exchange rate pressures, foreign exchange shortages and poor export performance - persisted into the third quarter of 2023, squeezing private capital, the African Private Capital Activity Association said. 

As Central banks across major economies in the continent such as South Africa, Kenya, and Ghana maintained their interest rates in September for the first time in a year, there was optimism that the third quarter of this year would usher in a period of economic reprieve, it said. 

However, despite the stabilized interest rates, inflation remains stubbornly high across many African countries, and the forecast for African GDP growth rate is expected to slow to 3.3% by the end of 2023, the report said. 

As a result, private capital activity contracted in the first nine months of 2023, worsened by uncertainty in the global markets, said the report.

Striking a more positive tone, the report noted that although the third quarter of 2003 had seen some slippage, it was still higher than pre-2021 figures.

"This also indicates that there is still some appetite for dealmaking even if the climate is far from favourable," the report said.

The downturn in investments in the third quarter affected all sectors, but the steepest decline was in venture capital activity, it said.

The number of venture capital deals operated by fund managers shrank by 36% compared to Q3 2022, it said.

On the value of investments, African focused fund managers generated $1.2 billion in deal value during the third quarter of 2023, experiencing a more tempered setback of 16% drop from the same period last year, the report said. 

(Editing by Seban Scaria seban.scaria@lseg.com )