Abstract
This study examines the determinants of private equity (PE) investment flows in three prominent African economies – South Africa, Nigeria, and Egypt - from 2012 to 2022. A primary objective of the research is to identify the macroeconomic, institutional, and financial factors influencing PE deal flows, to evaluate the direction in which their relationships are oriented, and to determine their magnitude of influence. In this study, secondary data collected from the African Private Capital Association, International Monetary Fund and the World Bank is analysed using positivist paradigms and panel data regressions (Pooled OLS, Fixed Effects, and Random Effects).
Key results reveal that lending rates exhibit a statistically significant negative relationship with PE deal flows, highlighting the deterrent effect of high borrowing costs. On the other hand, political stability, gross domestic product growth, and the number of registered new businesses positively affect PE deal flows, emphasising the importance of a stable environment, economic vitality, and entrepreneurial activity. Surprisingly, control of corruption reveals a negative association, indicating the possibility of short-term compliance difficulties, because it initiates increase in regulatory scrutiny, compliance burden, reporting requirements and disruption of informal practices. Additionally, inflation also exhibits a positive relationship, possibly reflecting robust economic activity.
This study contributes to a limited body of literature on PE determinants in Africa and provides policymakers with actionable insights to foster investment-friendly conditions, such as stabilising lending rates and improving governance. This study emphasises the importance of macroeconomic-sensitive strategies for fund managers, as well as robust due diligence practices. For entrepreneurs to attract capital, formalisation, governance, and financial resilience should be prioritised.