Permanent Capital Vehicles: Benefits, challenges, and the future of long-term investments in African frontier markets
Traditional private equity and debt fund models, which have been successful in developed markets, can struggle to deliver target returns for investors on traditional timeframes. These markets – where liquidity can be thin and volatility tends to be greater – experience slower regulatory processes and businesses typically require patient, long-term capital to reach maturity.
Permanent capital vehicles (PCVs) offer an alternative. They enable investors to support transformative businesses – including those working in climate adaptation, resilient infrastructure and urbanisation – that are often overlooked by time-bound funds. With the option of recycling capital, these funds can also support companies throughout the cycle, providing businesses with support in challenging conditions and enabling investors to exit when the timing is favourable.
This report – part of the Africa Resilience Investment Accelerator’s (ARIA) Foundations of Growth series – explores the benefits and challenges of using PCVs, and shares examples of PCVs currently operating across Africa.
The publication includes:
A clear explanation of PCVs: What they are, how they work and why they matter in the African context.
PCV opportunities: Exploring the opportunities PCVs create, including patient capital for sectors with long growth horizons and the ability to weather macroeconomic shocks.
A candid look at the challenges: From regulatory complexity and transaction costs to aligning incentives and managing liquidity.
Case studies: Looking at pioneering examples, such as Growth Investment Partners in Ghana and Zambia, AgDevCo across sub-Saharan Africa, ARISE across sub-Saharan Africa and Truestone in Sierra Leone.
Recommendations: Discussing how to unlock the full potential of PCVs to drive inclusive, sustainable growth.
This report is part of our Foundations of Growth series of publications, which shares the trends, lessons, challenges, and opportunities of investing in frontier markets in Africa. Foundations of Growth is aimed at helping development finance institutions, donors and impact investors develop their strategies for operating in these markets.