Infrastructure – Understanding PE Returns in Africa
Summary - 10 seconds
Core takeaway: African entrepreneurs aren’t just building companies – they’re also building the scaffolding that makes every real business work. It’s slowed down returns in the past, but through innovations in infrastructure and blended finance, African businesses in 5 years could see exponential valuation growth as the pathway to profitability becomes easier.
Detailed Overview - 2 minutes
Over the last 10 years, average private equity returns in the US are between 14%-15%, while average private equity returns in Africa are between 9%-10% on a dollar-adjusted basis. Why? We know that currency devaluation has played a significant role in that, but one of the other key components is infrastructure.
We’re not just talking about roads and railways — we’re talking about the invisible scaffolding that makes every real business work: address systems, payment rails, logistics, stable energy, broadband, even legal and financial frameworks. In much of Africa, entrepreneurs aren’t just building companies — they’re also having to build the stuff companies usually depend on. It’s like trying to launch Amazon in a place where not everyone has an address and there are few package delivery services. You’re not just selling products — you’re pioneering the post office and the supply chain. It’s capital intensive and it has slowed down returns.
So, how do we solve this and what does the future look like?
Innovation - many companies, governments, and others are solving these issues through innovation in digital payments, energy, AI, and other infrastructure buildouts.
Blended Finance - this is where philanthropy and investment don’t compete — they collaborate. Philanthropic or DFI capital builds the road, investment capital drives the car. When donor and DFI dollars help build shared infrastructure, they unlock growth for entire categories of businesses. It’s a force multiplier. So, if we’re serious about lasting change, we can’t just chase what looks good on a glossy page or captures the nice photographs. We need to invest in what actually paves the way. Because infrastructure may not be sexy — but it scales.
In 5+ years, I believe that African companies will see exponential valuation growth as the pathway to profitability becomes easier through the rapid development of innovation around infrastructure and the more effective deployment of blended finance. Valuations today are as attractive as they’ll be and getting exposure now is the surest way to take advantage of that exponential growth.
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