The Strategic Evolution of African Private Equity: Why Permanent Capital Investment Vehicles Deserves Greater Consideration

As African markets mature, sophisticated managers have an opportunity to lead industry innovation while enhancing returns to investors by embracing Permanent Capital Vehicles (PCVs).

For more than a decade, Africa Merchant Capital Advisory (AMCA) has worked alongside many of Africa’s leading private equity managers, observing firsthand how the continent’s most successful funds deploy capital and drive value creation. While some managers have generated attractive returns through traditional fund structures, others have struggled to align traditional structures with the unique realities of Africa’s investment landscape, particularly exit timeliness.

Against this backdrop, we believe there is a compelling case for the industry to consider Permanent Capital Vehicles (PCVs) as a strategic complement to existing approaches. This is not about replacing what already works for some, but about introducing more adaptable, patient forms of capital that align more closely with sector mandates and provide portfolio companies with the extended runway needed to unlock their full potential, enabling managers to maximise investor returns.

These longer hold periods are not just theoretical. Exit timing remains one of the most persistent constraints in the African private capital markets, even as conditions improve. AVCA’s African Private Capital Activity Report 2024 recorded 63 exits in 2024, a 47% year-on-year increase, signalling a recovery in liquidity but also reflecting the pressure on managers to return capital in a still-selective exit environment.

In venture-backed markets, trade sales continue to dominate: AVCA reports 84% of exits in 2024 were trade sales, underscoring that IPO-led liquidity remains limited across much of the continent.

Africa’s Distinct Value Creation Rhythms

A defining feature of African private equity is that value creation timelines frequently diverge from global benchmarks. Unlike global funds, which often operate on five to six year holding periods, investors in Africa may require longer time horizons to unlock full value. In critical sectors such as infrastructure, gestation periods commonly stretch from seven to ten years, roughly 20–30% longer than comparable projects in developed markets. Rather than viewing these extended horizons as constraints, they should be seen as a natural fit for structures that free managers from the artificial time pressures of traditional fund cycles. Permanent capital vehicles are uniquely suited to these development rhythms, empowering managers to maximise value over the duration that Africa’s distinct opportunities truly demand.

Infrastructure Reality Check

Infrastructure is the clearest use-case for permanent capital in Africa. AVCA estimates that between 2012–2023, private capital deployed US$47.3bn across 847 reported infrastructure deals, with energy and essential services continuing to dominate.

The financing need remains enormous. AfDB has highlighted annual infrastructure requirements in the ~US$181–221bn range (2023–2030), with persistent shortfalls.

This mismatch, long-duration assets and uneven liquidity, is exactly where permanent capital structures can reduce forced exits and allow managers to time partial liquidity (dividends, refinancings, structured secondaries) more intelligently and strategically. A very good example of this is Remgro Limited with outlying returns in strategic infrastructure investments like Seacom, Dark Fibre Africa (DFA) and Vumatel, which build and own fibre-optic networks.

Performance Advantages

In Africa, where exit windows can be uneven, recent market evidence suggests liquidity is improving (exits rose sharply in 2024), but the broader global backdrop still incentivises longer-duration solutions such as secondaries and continuation-style liquidity tools. Neuberger Berman’s model indicates evergreen funds may generate MOIC multiples of 3.2x compared with 2.7x that traditional structures achieve, with fully invested PCVs potentially achieving 3.6x. The reasons are structural: no capital call uncertainty, significantly reduced cash drag, and greater ability to time exits optimally.

These advantages do not replace operational discipline but rather amplify the strengths of experienced African managers. For practitioners already delivering strong results through closed-ended funds, permanent capital structures offer an additional lever for return enhancement.

Leveraging Existing Strengths

Permanent capital aligns with what African managers already do well. The continent’s growth capital focus, emphasis on operational transformation, and patient investment philosophy all map seamlessly onto evergreen structures. PCVs can be particularly valuable for:

• Multi-market platform strategies
• Operational and turnaround initiatives needing extended timeframes
• Market expansion and infrastructure development
• ESG and impact objectives where outcomes require longer horizons
• Vertical sector integration strategies

Supportive Market Infrastructure

Two shifts make permanent capital more plausible now than a decade ago. First, regional market integration is slowly becoming more real: AfCFTA trading has been underway since 2021, and the Guided Trade Initiative has continued expanding participation, with countries such as Nigeria commencing GTI trade in July 2024.Second, African institutional capital is starting to show up more meaningfully. AVCA’s 2025 quarterly tracking indicates African LPs contributed 25% of fundraising in H1 2025 (up from 18% in H1 2024), supporting the long-duration product set (infrastructure, private credit, permanent capital) that better matches local liabilities.

Development finance institutions (DFIs) have shown appetite for PCV’s in Africa, as demonstrated by anchor investments from key organisations. For example, British International Investment (BII) has backed Africa Capitalworks, described by BII as a permanent capital vehicle investing in mid-market companies across Sub-Saharan Africa., signalling strong confidence in the model from respected global institutions. This endorsement not only reassures market participants, but also encourages broader uptake of PCVs among pension funds, sovereign wealth funds, family offices, and other institutional investors.

PCVs offer distinct advantages that resonate with these investor groups. Many sophisticated investors prioritise reliable yield and measure growth alongside capital gains. For example, the structure of PCVs allows

for regular dividend distributions from operating companies or infrastructure assets, providing a balanced mix of income and capital appreciation. This flexibility aligns well with the objectives of investors looking to match liabilities, meet income targets, or reinvest cash flows—all while benefiting from long-term value creation.

Ultimately, these the convergence of improved regulatory frameworks, growing trade opportunities, and interest from influential backers, collectively support the evolution of permanent capital structures as an integral part of Africa’s private equity ecosystem.

Complement, Not Replace

PCVs should be viewed as a complement to traditional funds, not a replacement. The most competitive managers should deploy both approaches:

• Closed-end funds for 5–7 year growth capital opportunities
• PCVs for infrastructure, platforms, and longer operational general Private Equity transformations
• Hybrids where flexibility adds value

This diversification strengthens competitiveness, broadens investor appeal, and expands strategy sets.

Competitive Advantage

For early movers, permanent capital adoption may unlock significant advantages:

• Enhanced Deal Flow: Businesses value partners who commit beyond arbitrary exit timelines.
• Investor Differentiation: Flexible options distinguish managers in an increasingly competitive fundraising environment.
• Market Leadership: Innovators position themselves as thought leaders globally.
• Operational Leverage: Evergreen structures enable capturing full value through patient, unconstrained holding periods.
• Investment Focus: Frequent fund raising takes up a significant portion of time, reducing the frequency will allow for focus on targets and value creation.
• Access new investor pools like family offices and Sovereign Wealth Funds with longer term investment horizons.

Potential risks of PCVs

PCVs are not without potential drawbacks that both limited partners (LPs) and fund managers must carefully consider. These include:

• Reduced Pool of LPs: Many African-focused LPs may hesitate to back PCVs due to unfamiliarity, forcing managers to either educate investors on the model’s benefits or rely on a narrower pool of supporters.
• Valuation & Transparency: Longer holding periods and limited comparable transactions make asset valuation and reporting more challenging.
• Governance & Alignment: Without a fund-end date, traditional fee structures can misalign incentives, requiring tailored governance and incentive models to safeguard LP interests.
• Capital Recycling & Concentration: PCVs rely on redeployment of capital, but thin or cyclical deal flow in Africa increases risks of overconcentration and “asset trapping” in illiquid businesses.
• Liquidity optics & benchmark pressure: In an environment where LPs globally are selling more fund stakes via secondaries to manage liquidity, permanent capital managers need a clear narrative on valuation methodology, periodic liquidity options (where applicable), and governance protections.

While these risks are real, they are by no means insurmountable. Implementing tailored governance models, designing incentive mechanisms that reward genuine value creation, ensuring transparent reporting, and targeting sectors with deeper pipelines, fund managers can mitigate these challenges and position PCVs as credible, sustainable vehicles for long-term capital deployment in Africa.

Looking Ahead

The growth of permanent capital has the potential to be the next frontier in African private equity. It has the potential to be innovation that aligns with Africa’s investment realities and growth potential while enhancing investor outcomes.

This is not about abandoning successful strategies, but about equipping African managers with a broader toolkit. Those who thoughtfully explore PCVs - educating investors, building infrastructure, and testing innovative models - may define the industry’s next phase of excellence.

Permanent capital deserves serious consideration as both a value creation mechanism and a competitive differentiator. For African private equity, the opportunity to lead global innovation in this space is real. The only question is which managers will seize it and in what type of structure.

By: Milko Škoro and Estiaan van der Walt