The report highlights the urgent need for policy shifts to reduce investment barriers, including lowering taxes and facilitating local investor participation in the market.

Emerging fund managers are innovating to attract private investors, often starting with smaller funds to build credibility, as demonstrated by Inua Capital in Uganda.

A recent report by Investisseurs et Partenaires (I&P) reveals that 80% of the 135 small business and venture capital funds identified in Africa are led by African general partners, marking a significant shift towards an African-led investment environment.

The African small business ecosystem is experiencing notable growth, characterized by a diverse range of asset classes and increased leadership from local decision-makers.

Despite this progress, the funds are only aiming to raise and deploy $9.3 billion, which pales in comparison to the estimated $330 billion funding gap for Africa's SMEs.

Successful fundraising efforts have emerged, such as Seedstars Africa Ventures raising $42 million and Janngo Capital securing $78 million, both supported by various international funds and development financial institutions.

Development financial institutions currently dominate small business financing, with 60% of their investments directed primarily towards larger growth funds, thereby limiting direct support for SMEs.

However, the US International Development Finance Corporation has paused its investments in Africa, having previously committed over $12 billion in 2024 for various ventures.

Collaborations with fund accelerators and sponsors have shown effectiveness, with 61% of sponsor-backed emerging managers meeting their fundraising goals, compared to just 20% of those without sponsorship.

Local stakeholders are increasingly focused on developing self-sufficient ecosystems to support small and medium-sized enterprises (SMEs) across Africa, as highlighted by Amma Gyampo of the Ghana Venture Capital and Private Equity Association.

This transformation in the small business investment landscape is largely driven by African leadership, particularly in response to the decline in overseas aid following the Trump administration.