South Africa has overtaken Kenya as the leading destination for venture capital in Africa, according to a new report by African market intelligence firm Stears.
The report, compiled in partnership with the East Africa Venture Capital Association (EAVCA), tracked private capital activity across the continent during the first quarter of 2025.
Covering the first three months of the year, the Stears Private Capital in Africa Report shows that South Africa attracted Sh51.7 billion out of the continent’s total of $1.6 billion (Sh206.9 billion) in funding.
This pushed Kenya to the second spot, after securing Sh45.5 billion, representing 22 per cent of all transactions on the continent during the period.
As of the end of 2024, Kenya had emerged as Africa’s leading investment hub, having secured a record $638 million (Sh82.5 billion) in venture capital.
That figure accounted for 29 per cent of the total VC funding raised across Africa for the full year.
Analysts attributed this success to Kenya’s vibrant tech scene and growth in sectors such as healthcare, hospitality, and technology, combined with strong collaboration between local and diaspora entrepreneurs.
Venture capital, a form of private equity funding that targets startups and high-growth potential companies, remained a strong driver of investment momentum in Africa.
Despite consistent deal activity, the continent saw a notable decline in disclosed transaction values during the quarter.
Total deal value dipped to $1.6 billion (Sh206.9 billion), down from $4.7 billion (Sh607.9 billion) in Q4 2024 and $2.9 billion in Q1 2024.
This decline came even as transaction volumes held steady, with 105 deals recorded in Q1 2025, almost unchanged from the 106 deals in Q4 2024 and significantly higher than the 88 deals in Q1 2024.
Disclosure rates also improved slightly to 62 per cent, up from 58 per cent in the previous quarter 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 (Sh9.7 billion), towards more moderately sized large deals, ranging from $25 million (Sh3.2 billion) to $75 million,” the report notes.
While mega deals declined, there was a rise in large transactions within the $25 million to $75 million range.
These were mostly driven by strategic project financings and Series B funding rounds, helping to fill the funding gap created by the absence of mega deals.
Equity financing continued to dominate Africa’s investment landscape, featuring in 79 per cent of all transactions, up from 73 per cent in Q4 2024.
This confirms that investors still strongly favor equity-based deal structures.
However, local institutional participation in private equity remained weak, especially in East Africa.
Kenya’s pension sector, despite controlling over $13 billion in assets, allocates less than one per cent to private equity, far below the 10 per cent cap permitted by regulation.
On the sector front, financial services led investment activity, accounting for 30 per cent of all transactions, double its 15 per cent share in the previous quarter.
Alongside consumer goods and services, and technology, these top three sectors collectively made up 73 per cent of all deals, up from 55 per cent in Q4 2024.
By investment destination, Africa’s top performers in Q1 2025 were:
— South Africa, with Sh51.7 billion
— Kenya, with Sh45.5 billion
As the continent navigates a tightening global funding environment, the shift in investor focus from mega deals to mid-size growth capital suggests a more cautious but targeted approach, one that still positions Africa as a continent full of promise for strategic private capital.
