African investment professionals earn significantly less than their global counterparts, according to a new report by Dream VC and A&A Collective. The average annual salary for analysts at Africa-focused venture capital, private equity, and impact investment firms is $21,000, a stark contrast to the $28,000 earned by their counterparts outside Africa.

The salary gap widens at more senior levels, with investment managers or principals outside Africa earning $40,000 more than their African counterparts. This disparity is attributed to the smaller assets under management (AUM) by African funds, with the average firm managing around $87.5 million for private equity funds and $50 million for venture capital funds. In comparison, the average VC fund size in Asia is $324 million.

The report, which pulled data from 209 participants across 28 African countries, highlights the need for African funds to align compensation more closely with global benchmarks to retain leadership and expertise. The industry is still in its early stages, with 73% of professionals under the age of 34 and 42% aged between 25-29. This youthful demographic is reflected in the prevalence of entry-level roles, with 19% of professionals holding analyst positions and 24% holding associate roles.

Despite the challenges, the report notes that the African investment sector is growing, with 15 firms founded in 2017 and 25 founded in 2022. The data also reveals that over half of investment professionals hold bachelor's degrees, while 40% have master's degrees, including 15% with MBAs. Only 39% of professionals have studied abroad, highlighting the demand for local market knowledge in Africa's cross-border investment landscape.

Carry, an investor's share of investment profits, remains elusive for most professionals in Africa's investment sector. Only senior roles like principals and portfolio managers receive meaningful equity, with a maximum carry of 10%, though the average remains low at 0.016% for principals. This contrasts with global norms, where carry is a key retention tool.

The report's findings have significant implications for the African investment industry, which risks triggering a brain drain as investment professionals seek better-paying opportunities abroad. Mark Kleyner, co-CEO of Dream VC, notes that the report brings much-needed transparency to compensation, strengthening the industry for both emerging and established investors.

The data also highlights the need for more African fund managers to strengthen and expand the ecosystem. With the median AUM by African investment firms at $50 million, most firms operate with a $1 million annual operating budget, directly causing the salary gap. As Africa's ecosystem continues to grow, it is essential for African funds to professionalize and align compensation with global benchmarks to retain talent and attract global capital flows.

Read the full report for more context on the African investment salary gap here.