RIDING AFRICA'S GROWTH WAVE 

By Albert Alsina, Founder and CEO, Mediterrania Capital Partners

Africa's private equity landscape is undergoing one of the most significant transformations in its history. The continent, long regarded with scepticism by institutional investors unfamiliar with its diversity and complexity, has quietly evolved into a credible, mature and increasingly competitive asset class. The fundamentals driving this shift are structural, durable and, for those willing to look closely, deeply compelling.

“The best managers in Africa will match the return profiles of top-tier managers in other emerging markets." - Albert Alsina, founder and CEO, Mediterrania Capital Partners.

THE FOUR MEGA-TRENDS

Four interconnected forces are reshaping African economies from the ground up. The first is rapid urban population growth. As hundreds of millions of people migrate from rural areas to cities, they create an enormous, concentrated and growing demand for healthcare, housing, fast-moving consumer goods and financial services. This urbanisation dynamic is not a one-cycle story — it will play out across decades.

The second driver is an expanding middle class. Population growth feeds economic growth: as people access better employment and higher incomes, consumption rises. The African middle class is not only growing in size but in sophistication, demanding higher-quality products and services. For mid-cap companies with the operational capability to serve this market, the opportunity is vast.

Thirdly, the formalisation of African economies is directly benefiting well-governed businesses. As regulatory frameworks mature and transparency increases, companies operating to international standards are better positioned to attract capital, talent and strategic partners.

The fourth mega-trend is digital and financial inclusion. Africa's markets have historically been underserved by traditional financial infrastructure. Fintech is changing this rapidly, with mobile payment systems, digital lending and branchless banking enabling the continent to leapfrog more developed markets. The implications for consumer spending, credit access and economic participation are profound.

OPERATIONAL EXCELLENCE: THE REAL EDGE

Macro tailwinds matter, but they do not guarantee returns. Private equity success in Africa ultimately depends on operational execution at the portfolio company level. This requires genuine local presence — not a regional office staffed with expatriates, but deeply embedded teams with relationships, language skills and cultural fluency across specific markets. It requires the capability to professionalise management, strengthen governance structures, implement data-driven reporting and drive the kind of operational improvements that translate into measurable EBITDA growth.

The quality of the investment environment has improved dramatically. Management teams at the companies we work with are more professional than they were a decade ago. Independent directors with real-world expertise now sit on boards. ESG practices are embedded, not bolted on. Audits are conducted by Big Four firms. Capital market infrastructure — bankers, lawyers, corporate finance advisers — has deepened significantly across key markets.

MANAGING CURRENCY AND PORTFOLIO RISK

One aspect of African private equity that demands careful attention is currency risk. Liquidity and foreign exchange risks are real and vary significantly from country to country. Effective portfolio construction requires a clear strategy for managing this exposure.

At Mediterrania Capital Partners, our approach is deliberate: we invest a substantial proportion of capital in Morocco, which operates a currency pegged to a basket of euros and dollars, and in West African CFA zone countries, where the currency is also pegged to the euro. The result is that no more than 25 percent of our portfolio carries material currency risk. Where we do invest in countries with more volatile currencies, we focus on companies with robust local supply chains, significant dollarised export revenues or diversified geographic operations that provide natural hedging. Thoughtful portfolio construction is not a constraint — it is a competitive advantage.

EXIT PATHWAYS: A STRUCTURAL ADVANTAGE

Perhaps the most underappreciated dimension of African mid-cap private equity is the quality of available exit routes. In many respects, the segment currently offers better exit pathways than comparable opportunities in more mature markets. IPO markets have been remarkably buoyant: since the Covid period, we have consistently observed between 10 and 20 listings per year across African exchanges.

The appetite for these listings has been extraordinary. A 2021 IPO we executed on the Casablanca Stock Exchange was 22 times oversubscribed. An IPO completed at the end of 2025 was 65 times oversubscribed. Secondary buyout activity is also growing, with larger global firms beginning to enter the market as co-investors to back mature African businesses that have already completed one cycle of PE ownership. Strategic buyers remain active, if selective.

This exit environment is delivering early liquidity for investors. Our fourth fund, which reached final close in May 2025, is already at 23 percent distributed to paid-in capital — a reflection of IPO activity enabling partial exits and generating returns ahead of schedule. Our average hold periods have been just over four years, but the ability to begin returning capital in years two or three meaningfully reduces the J-curve effect and directly addresses what many LPs still characterise as 'Africa risk’.

ADDRESSING INVESTOR MISCONCEPTIONS

The most persistent misconception in the LP community is that Africa is uniformly high-risk. This view fails to account for the enormous variation in political stability, regulatory quality and economic fundamentals across the continent's 54 countries. The task for disciplined investors is to understand how to arbitrage the gap between perceived risk and real risk, and to identify the specific markets and sectors where that gap is widest.

A second misconception is that African returns are commodity-driven. They are not. The sectors generating the most compelling investment opportunities — fintech, consumer goods, healthcare and business services — have little connection to resource extraction. These are growth businesses serving rapidly expanding domestic markets.

Global LP interest in Africa is growing, and attitudes are changing. Investors who take the time to engage with the continent's diversity, its strengthening institutions, and its structural growth dynamics are finding an opportunity that combines attractive risk-adjusted returns with genuine development impact. Managers with the expertise, presence and discipline to execute are well-positioned to benefit from private equity’s growth wave in Africa.

Mediterrania Capital Partners is a Private Equity firm with €1.2 billion of AUM focusing on growth investments in SMEs and mid-cap companies in Africa. Nowadays, its portfolio companies employ more than 30,000 people. With offices in Abidjan, Barcelona, Cairo, Casablanca, Valletta and Mauritius, Mediterrania Capital Partners takes an intensely proactive, hands-on approach to implementing its growth strategy by leading the governance of the companies and driving the key internal value creation process.

Mediterrania Capital Partners is a regulated financial investment manager licensed by the Malta Financial Services Authority (MFSA) and the Financial Services Commission (FSC) in Mauritius CNMV in Spain and AMIC in Morocco.

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