Africa-focused venture capitalists expect that the US Federal Reserves decision to cut interest rates could improve the inflow of foreign capital on the continent. The Federal Reserve cut the key rate by 50 basis points the first cut in four yearshigher than the 25 basis points predicted by several analysts.
From 2020 to 2022, a zero-interest rate policy pushed investors to seek higher returns in more asset classes and markets.
Africa is always seen as an alternative to when the market isnt great in the US. People dont invest in Africa because they want to invest in Africa but because its just a better option for them with regard to whats available to them and their original markets, Haile Amegashie, an Africa-focused investor, told TechCabal.
As interest rates rose in 2023, investors retreated, leading to a significant drop in funding and growth-stage deals across Africa. Only four Series B rounds were completed in the first half of 2024, reflecting the sharp decline in capital flow.
This years rate cut comes as African venture capital firms are actively raising funds and could make U.S. fund managers more open to investing in Africa once again, two investors said.
