BofA’s Mensah Sees ‘Healthy Cleanup’ in Private Markets

The private credit markets that have fueled growth across Africa's emerging economies are undergoing a significant correction, according to senior banking executives. Bank of America's Bernard Mensah, who oversees international operations for the institution, recently highlighted what he characterizes as "a healthy cleanup" in segments of the private credit space—a development that European investors and entrepreneurs should carefully monitor.

For the past five years, private credit has become increasingly attractive to European institutional investors seeking higher yields in African markets. The combination of limited public bond markets, restricted bank lending, and strong demand from infrastructure and energy projects created an environment where private credit providers expanded rapidly, often with limited oversight and inconsistent underwriting standards. This expansion, while democratizing access to capital for African businesses, also introduced vulnerabilities that are now materializing.

The current market adjustment represents a natural correction in an asset class that grew too quickly without sufficient standardization or transparency. Multiple private credit funds have reported underperforming portfolios, with borrowers in sectors ranging from logistics to renewable energy facing refinancing challenges. These pressures are forcing a recalibration across the market—both in pricing expectations and in the rigor applied to due diligence and credit assessment.

For European investors with exposure to African markets, this cleanup carries dual implications. In the short term, it introduces uncertainty and volatility. Portfolios concentrated in private credit vehicles may experience valuation pressure, and borrowers dependent on this financing channel face constrained access to capital. However, market consolidation historically creates asymmetric opportunities for those with capital, expertise, and patience.

The "healthy cleanup" Mensah references suggests that weaker market participants will likely exit or consolidate, leaving stronger institutions better positioned to underwrite future deals. This consolidation typically results in higher lending standards, more transparent pricing, and improved risk management—all factors that should ultimately strengthen the African private credit ecosystem. For European investors, this means tomorrow's private credit market may offer better risk-adjusted returns than the exuberant period now concluding.

Several sectors merit particular attention during this transition. Infrastructure projects with government support or established revenue streams are likely to weather the adjustment more successfully than speculative ventures. Similarly, borrowers with strong European or international anchor customers face better refinancing prospects than those dependent solely on domestic demand. Investors should also consider the geographic dimension: markets with deeper institutional investor bases and regulatory frameworks (such as South Africa and Kenya) may stabilize faster than frontier markets with limited transparency.

The European investor advantage during this period rests on three factors: access to patient capital, relationship depth with African counterparties, and institutional sophistication in navigating distressed or restructuring situations. Institutions that can move decisively when pricing becomes more realistic, and that have time horizons extending beyond quarterly reporting cycles, will find substantial value creation opportunities.

However, the cleanup remains ongoing. Trying to catch a falling knife risks overexposure to assets that may deteriorate further. The disciplined approach involves selective engagement with high-conviction opportunities, coupled with careful management of counterparty risk and geographic concentration.