Africa’s private capital market has reached a defining moment. 81 exits were recorded in 2025, representing a 27% year-on-year increase and the second highest annual total on record. Yet even as exit activity strengthens, exit conditions continue to top investor concerns, as cited by 73% of LPs and 62% of GPs polled by the African Private Capital Association (AVCA) for its 2026 Investor Sentiment & Outlook report. The gap between the appetite for liquidity and the availability of traditional exit routes has become a structural feature of the African private capital ecosystem.
Against this backdrop, secondary transactions have moved decisively from the periphery to the centre of liquidity strategies. Fund managers leaned more actively on sponsor-to-sponsor solutions to unlock liquidity, which represented 26% of all exits – another record milestone. In keeping with global trends, the African market is showing growing openness to mechanisms that can provide flexibility when traditional exit routes are constrained. For legal counsel advising on African private capital transactions, the deals are certainly there for the taking. The question is whether the legal architecture is ready to support them.
Valuation
Valuation can be the most contested element of any secondary transaction, and the challenge is particularly acute in Africa. Valuation misalignments were cited as a key market concern by 34% of LPs and 37% of GPs who responded to AVCA’s survey. The absence of deep, liquid comparable transaction data across most African markets means that net asset value is inherently more subjective than in markets where benchmark transactions are plentiful.
As much as standard international valuation frameworks provide a useful starting point, they have real limitations in illiquid frontier market conditions. Currency volatility compounds the difficulty for pan-African funds holding assets denominated across multiple local currencies. The legal consequences of these valuation challenges are significant and underexplored in African legal practice. If an exiting LP is cashed out at a net asset value that is subsequently shown to have been materially incorrect – whether through a GP-commissioned valuation that was overstated or an independent process that failed to account for local market realities – questions of liability, remedy and recourse arise that most existing African fund agreements do not answer.
Questions
Who appoints and instructs the independent valuer, on what terms, and subject to what conflict of interest restrictions? What dispute resolution mechanism applies where an LP challenges the valuation underpinning a secondary transaction? What information rights do LPs hold during the secondary process, given the inherent asymmetry between a GP who knows the portfolio intimately and an LP deciding whether to roll or exit? These are not theoretical questions; they will be live issues in every GP-led secondary that African fund managers pursue as the secondary market matures.
Secondary market
The secondary private equity market, previously limited, is evolving and growing rapidly to allow investors to trade existing fund interests and unlock liquidity. Among GPs who have either offered or considered these tools, GP-led secondaries accounted for 76% and LP-led secondaries accounted for 62%, dominating preferences. This trend tracks with the global statistics on this issue. According to Jeffries Private Capital Advisory, the global secondary market reached US$240 billion in transaction volume in 2025, representing a 48% year-on-year increase.
Themes
Several themes are poised to shape the next phase of market evolution in Africa, including the institutionalisation of secondary markets and the expanding use of structured liquidity solutions. What is less frequently discussed is the documentary foundation required to support this evolution responsibly.
Many existing African fund agreements were drafted at a time when secondary transactions were uncommon in the local market. They reflect the priorities of their era: capital commitment mechanics, investment restrictions and distribution waterfalls, rather than the governance infrastructure needed for a GP-led secondary or continuation vehicle transaction. This is not a criticism of how those documents were prepared; it is just a consequence of market timing. The secondary market has simply evolved faster than the fund agreements designed to govern it.
Guidance
In North America and Europe, this challenge was addressed through the development of industry-wide guidance. The Institutional Limited Partners Association has published principles and model provisions specifically addressing GP-led secondary transactions, continuation vehicle consent mechanics, LP information rights during secondary processes, and the governance standards expected of LPs’ advisory committees when approving conflicted transactions. These standards now form the baseline against which market participants and, increasingly, regulators evaluate whether a secondary process has been conducted fairly.
Evergreen vehicles – valued for their semi-liquid characteristics and long-term capital alignment – are used or planned by 61% of LPs, yet only a third of GPs report offering them a gap that itself reflects, in part, the absence of settled market practice and documentation templates to support these structures in the African context.
The development of Africa-specific secondary market guidelines could similarly be beneficial. Such guidelines would serve a dual purpose: providing GPs with a clear governance framework for conducting secondary transactions and giving LPs confidence that their interests will be protected when continuation vehicles or secondary transfers are proposed. Fund counsel, for their part, have both the opportunity and the obligation to advise GP clients on building secondary optionality into fund documentation at the outset, and not as a retrofit when the fund is already past its investment period.
Final note
The African secondary market is no longer nascent, and the transactional momentum is building. Trade sales and secondary exits are expected to remain the dominant exit routes, with a wider universe of buyers and, particularly, increased involvement from strategic acquirers and financial buyers across Africa. What is needed to meet this trend is a legal and governance framework equal to it, one that manages conflicts of interests with rigour, resolves valuation disputes with transparency, and equips African fund agreements to support the full lifecycle of a modern private capital fund. We can expect this to be an area of increased private capital activity in 2026 as the market matures.
Angela Simpson is a Partner and Lungelo Magubane a Senior Associate | Bowmans
This article first appeared in Catalyst, DealMakers’ quarterly private equity publication.
DealMakers is SA’s M&A publication.
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