In African investment firms, professionals tend to earn lower salaries compared to their global counterparts. This wage gap is primarily attributed to the smaller assets and funds managed by African investment firms. For instance, the average annual salary for analysts in Africa-focused venture capital, private equity, and impact investment firms is $21,000, whereas outside Africa, this figure rises to $28,000. At higher levels, such as investment managers or principals, the difference becomes more pronounced, with those outside Africa earning $40,000 more than their African counterparts.
The disparity in salaries can be linked to the size of assets under management (AUM) by African funds, with the average firm managing around $87.5 million for private equity funds. In comparison, most venture capital funds in Africa manage only $50 million, and impact investment funds handle $58 million. This is significantly lower than global standards, such as in Asia, where the average VC fund size is $324 million.
The report on African investment salaries, compiled from data from 209 participants across 28 African countries, highlights the need for transparency in compensation to support the growth of the industry. African investment firms typically operate with a limited annual operating budget due to the median AUM being $50 million, contributing to the salary gap. This situation could potentially lead to a talent drain as professionals seek better-paying opportunities abroad, further reducing the pool of skilled individuals in Africa’s investment sector.
To address this issue and retain talent, African funds may need to align their compensation structures more closely with global benchmarks. This adjustment is crucial for the development of the ecosystem, especially as Africa’s investment landscape continues to evolve. The sector, which is characterized by young firms and professionals, requires more experienced professionals to strengthen and expand its reach. Additionally, the demand for local market knowledge underscores the importance of retaining talent within Africa.
While carry—investors’ share of profits—remains limited for most professionals in Africa’s investment sector, providing meaningful equity to senior roles could be a retention strategy. The report aims to establish a benchmark for salary transparency and help fund managers understand industry norms for compensation, ultimately professionalizing Africa’s investment landscape as global capital flows into the continent’s tech hubs.
Overall, addressing the salary gap and enhancing compensation practices in African investment firms could be vital for retaining talent and fostering the growth of the industry.