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Why African VCs and PE Funds Have Been Generating Poor Returns
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Kenyan Wall Street
May 05, 2025
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Why African Venture Capital and Private Equity Have Been Generating Poor Returns
By Akshay Grover
Over the past decade, African venture capital (VC) and private equity (PE) have significantly underperformed compared to other emerging markets such as China and India.
Between 2014 and 2024, African VC/PE achieved average net internal rates of return (IRRs) of around 4–5%, considerably lower than China’s and India’s approximate 12% annual returns and the US ~15%.
There are several political and macro-economic factors have profoundly impacted investor returns across the continent. Several countries – Ghana, Zambia, Mozambique had to restructure debt or seek IMF bailouts.
Political events have also hurt growth e.g Nigeria’s oil production was disrupted by militant attacks; Ethiopia’s reasonably high growth was interrupted by war in 2020; and political instability or an “economic pause” in election years in countries like Kenya or Ivory Coast have impacted overall growth.
The lack of robust local capital markets severely restricts exits, prolonging investment periods to over seven years on average. Unlike China and India, where substantial IPOs and significant acquisitions frequently occur, Africa has had limited major exits, primarily through smaller trade sales.
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