Private equity and venture capital investments in Africa soared 66% year over year in 2022 to $7.70 billion, the highest aggregate value for the region in the last five years, S&P Global Market Intelligence data shows.

The massive jump was mainly due to the proposed acquisition of hospital operator Mediclinic International PLC, which is valued at more than $5 billion.

Transaction volume, which includes M&A and rounds of funding, has steadily climbed in the region since 2018 and reached 404 deals in 2022. The continent saw a full-year increase in transaction volume even as activity slowed sharply in the final quarter of the year.

Investments with private equity involvement totaled $370 million in the fourth quarter of 2022, down 71% from $1.28 billion in the prior-year period. Deal volume declined 43% over the same time frame.

* Download a spreadsheet with data featured in this report. * Click here for more private equity and venture capital news. * Click here to set up alerts for future Data Dispatches.

Attractive valuations, young demographics

African technology companies offer appealing entry valuations and high growth rates of about 100% annually compared to peers in the U.S., according to Fope Adelowo, principal at Helios Investment Partners LLP, which invests in telecommunications, media and financial services across the region.

"The growth outlook for those sectors are not only quite positive, but they are also, in many ways, noncyclical," Adelowo said. "When you look at the global environment, whether that's people using more digital methods to make payments ... consumers consuming more data, we're really just in the early stages."

African economies are also buoyed by young populations that are "increasingly entrepreneurial and driven by technology-led innovation," Adelowo said. Money moved into venture capital in the region has grown about 10x in the last five years, largely due to that young population, which is "very digitally engaged." That is helping drive innovation to address inefficiencies in many sectors in Africa, Adelowo added.

Health, tech sectors drawing interest

Once the multibillion-dollar deal for Mediclinic closes, that transaction will become the largest private equity capital deployment in Africa in the last three years. Mediclinic's buyers include Remgro Ltd. and SAS Shipping Agencies Services SÀRL. The deal is expected to close in the first quarter.

The technology sector, particularly digital infrastructure, is also attracting investor interest, Adelowo said. There is an imbalance in the supply of data centers, for example, compared to growth expected from consumers that need more data and are spending more time online.

Africa's financial services and fintech sectors are also expected to continue to grow as many African countries increasingly move to a cashless society, Adelowo added.