From Foreign to Local Investors: The New Face of Private Equity in Africa For the first time, African institutions are no longer passengers on the PE journey - they are becoming co-pilots.

For years, Africa’s private equity narrative has been shaped by global investors seeking yield in a fast-growing frontier market.

But the first half of 2025 has quietly signaled a structural shift.

A shift that could redefine how capital flows into African companies for the next decade.

According to the Africa Venture Capital Association (AVCA), private equity investment in Africa’s firms totaled $1.9 billion between January and June 2025, a figure that mirrors last year’s volume.

What is remarkable though is who is writing the cheques.

Local financiers — development banks, pension funds, insurers, sovereign wealth funds, and individual investors — injected $475 million, or 25 percent of the total.

That’s up sharply from $342 million (18%) in the first half of 2024.

In other words, African investors are no longer just participating in deals; they are increasingly anchoring them.

The rise of the African limited partner

“The investor base continued to shift, with local Limited Partners raising their share to 25% in H1 2025, up from 18% in H1 2024,” noted AVCA in its half-year report.

This is a profound development.

For decades, African private equity was powered by foreign limited partners (LPs) — US and European pension funds, global DFIs, and specialist Africa funds.

Local institutions either lacked the mandate, governance structures, or confidence to allocate meaningfully to alternative assets.

That is changing. Pension funds doubled their allocations year-on-year, raising their share of invested equity from 7% to 9%.

Sovereign wealth funds increased almost tenfold, from 1% to match pension funds at 9% (around $42.75 million).

Local DFIs — African Development Bank, Trade and Development Bank, and Afreximbank — remained dominant, accounting for 67% of African LP capital, up from 57% last year.

For someone who has spent two decades watching African private equity mature, this is the strongest sign yet that the asset class is becoming self-sustaining.

It is no longer a story of foreign capital parachuting in; it is about local capital building local companies.

The other story: Record exits

On the flip side, 2025 has also seen a record wave of exits — 29 in just six months, up from 27 last year.

Importantly, the average holding period fell sharply to 5.4 years from 6.6 years.

That decline matters. Private equity thrives on long-term horizons.

However, in today’s world of heightened macroeconomic risks — from interest rate volatility to political instability — investors are increasingly shortening their timeframes.

Liquidity has become a priority.

The majority of these exits came from the financial sector, which not only led in exits but also in new deals, accounting for 27% of activity.

Banks, fintechs, and insurance firms remain the continent’s hottest plays.

They capture Africa’s underbanked growth story and are relatively more “exit-able” through listings, trade sales, or secondary buyouts.

Regional dynamics: The usual suspects, with twists

As ever, Southern Africa led in both volume and value: 55 deals, worth $800 million.

East Africa followed with 42 deals, worth $300 million. North Africa recorded 41 deals ($200m); West Africa 40 ($100m). Central Africa saw none.

Southern Africa’s dominance is unsurprising — it houses the continent’s deepest capital markets, strongest legal systems, and largest pool of investable companies.

What is noteworthy is East Africa’s moderation.

Deal activity held up, but AVCA notes that “deal value declined 7% YoY to $344 million.

They were, however, cushioned by a large transaction in the energy sector that accounted for 52% of total capital deployed.”

This suggests concentration risk — a few big deals masking a slower mid-market.

For investors, that’s a signal: East Africa still offers attractive opportunities, but scaling remains a challenge outside energy and infrastructure.

Why local capital matters

The growth of African LP participation changes the psychology of private equity on the continent.

Stability against global volatility: Foreign LPs often view Africa as “hot money”. A high-risk, non-core allocation they can cut quickly when global conditions tighten.

Local pension funds and insurers, however, have a natural alignment with long-term African growth.

They are less likely to pull out during global downturns.

Pressure on governance and returns: Local LPs are closer to the ground.

They know the political risks, regulatory environments, and operational realities better than overseas investors.

Their involvement can sharpen governance and force general partners (GPs) to deliver real, demonstrable value creation.

Catalyst for deeper markets: The shift from 18 to 25% local capital may seem modest, but it is the foundation for something bigger.

As local institutions allocate more, they create track records, policy frameworks, and appetite that can crowd in even more domestic investors.

This is how deep, sustainable capital markets are built.

Emerging risks

Still, caution is warranted. The record exits — and shortened holding periods — point to a more fragile underlying environment.

Investors are not leaving due to a lack of deals; they are leaving more quickly because they fear macroeconomic headwinds.

If local LPs step in at the very moment global LPs are accelerating withdrawals, there is a risk of mismatched timing.

Domestic capital could be absorbing exposure just as valuations plateau or decline. That could dent confidence if returns disappoint.

Plus, the concentration of activity in finance, energy, and infrastructure means many sectors – agriculture, healthcare, logistics, and creatives – remain underfunded relative to their social and economic potential.

Africa’s inflection point

Many domestic private equity investors interviewed for this article understand that Africa’s industry is at an inflection point.

For the first time, African institutions are no longer passengers on the PE journey — they are becoming co-pilots.

“If this momentum continues, we will see a feedback loop where local capital builds local companies,” one private equity investor said.

“But this will only hold if fund managers deliver. Investors — whether in Lagos, Nairobi, or Johannesburg — are increasingly sophisticated,” he added.