South Africa has edged Kenya as the leading venture capital destination in the continent in the first three months of 2025, attracting Sh51.85 billion, according to a new report.
Kenya came second with Sh45.63 billion out of the $1.6 billion (Sh207.4 billion) total funding that was channelled to the continent.
The Q1 2025 Stears Private Capital in Africa Report, produced jointly with the East Africa Venture Capital Association (EAVCA), shows that despite the rise in the number of deals, the value significantly dropped.
The African private capital market began 2025 robustly, with Stears recording 105 transactions in the period, broadly consistent with the 106 transactions seen in Q4 2024 and significantly higher than the 88 transactions recorded in Q1 2024.
Despite this sustained transactional momentum, disclosed transaction values noticeably dipped to $1.6 billion (Sh207.4 billion), a sharp decline from $4.7 billion (Sh609.84 billion) in the previous quarter and below the $2.9 billion recorded in Q1 2024.
This reduction occurred even as disclosure rates improved slightly to 62 per cent from 58 per cent in Q4 2024 and 59 per cent in Q1 2024.
“The drop in transaction value primarily reflects a shift in deal size composition, with investors moving away from mega transactions valued above $75 million (Sh9.73 billion) towards more moderately sized large deals ranging from $25 million (Sh3.24 billion) to $75 million,” the survey reads in part.
In contrast to the decline in mega transactions, there was a marked increase in large deals valued between $25 million and $75 million.
These deals filled the funding gap and were driven largely by strategic project financings and Series B funding rounds.
The three months saw equity financing continue to dominate the landscape in Africa, featuring in 79 per cent of all transactions, an increase from 73 per cent in Q4 2024, underscoring investors’ ongoing preference for equity-based structures during the period.
Meanwhile, local institutional investors in East Africa, particularly pension funds and insurers, continued to show limited participation in private equity.
Kenya’s pension sector, which controls over $13 billion, allocates less than 1 per cent to private equity, far below the 10 per cent regulatory limit.
Sector-wise, financial services led with 30 per cent of transactions, doubling its share from the previous quarter.
The top three sectors—financial services, consumer goods & services, and technology—accounted for 73 per cent of all deals, up from 55 per cent in Q4 2024.
Financial Services transactions led sector activity, accounting for 30 per cent of transactions, doubling from 15 per cent in the previous quarter.
“In East Africa, the energy and healthcare sectors stood out for different reasons. East Africa accounted for the largest share of energy transactions (44 per cent, tied with Southern Africa), with energy trailing only financial services in the EA region by transaction volume,” the data shows.
Healthcare was also prominent, with East African deals representing 60 per cent of all African healthcare transactions in Q1 2025.
South Africa, Kenya, and Nigeria topped country rankings, with South Africa also leading in single-country deals at 17 per cent of the continent’s total.
North African nations Morocco and Egypt together accounted for 15 per cent of single-country transactions, outperforming Nigeria, Ghana, and Kenya combined (14 per cent). This marks an improvement for Egypt, which lagged behind Kenya and Nigeria in 2024.
