African startups are becoming more attractive

African startups are becoming more attractive


The war in Ukraine, Covid-19, and the climate crisis has halted the African development process, which has been ongoing for ten years, according to the Ibrahim Index. This annual report was published in early 2023. There is still hope. There is some optimism. While funding for startups is declining worldwide, it is showing signs of improvement in Africa, at least on an average level. This is a sign that international investors are becoming more interested in Africa. The figures are less significant than the rest of the world and are distributed unevenly. The climate crisis has worsened conflict over resources in the Sahel, Darfur, and parts of Nigeria. Nigeria is a country racked by contradictions and has seen a lot of protests against police brutality. There are also opportunities in states with a peaceful internal environment.

The number of African tech ecosystems

The overall growth in funding between equity and debt in Africa’s technological ecosystem was 8% in 2022. This is an increase of 6.5 billion USD. Partech, a Paris-based venture capital firm, presented this data. Globally, however, the contraction was 35%. Source: Crunchbase. 445 billion dollars versus 681 in 2021. The latter figure is the result of post-pandemic optimism and a season when valuations were not always realistic and not strictly speculative.

It is important to note that the decline in equity (4.9 Billion, -6% annually) was more than offset by the recourse to debt (1.25 billion, +102% annually), despite macroeconomic problems and monetary instability. It is possible to lend money to institutional investors or development banks. The interest is also evident in the increase in investors (+29% annually compared to 2021 (1149 total),

The strongest countries

The four vanguards are Nigeria, South Africa, and Egypt, which account for 72% of all funding. Nigeria is the leader, with 215 million inhabitants, which makes up 25% of West Africa’s population. 189 deals were concluded, representing 23% of Africa’s total debt and credit. These numbers are 36% lower than the previous year. South Africa is next with 830 million dollars and 95 deals. Egypt is also doing well. It recently occupied the middle of the international scene at Cop27, third place for Cairo with 787 million dollars and 144 deals. Kenya follows (758 million, 103 sales).

Following closely were Algeria (150m), Tunisia (1117 million), Ghana (202m), Ghana (117 million), Senegal (105 million), and Tunisia (217 million), which are the only states that have exceeded the psychological threshold (100 million). It is a remarkable country, but it ranks fifteenth with just 26 million dollars. The surprise of the ranking changes is Nigeria, where volumes are dropping sharply (-36%). They are stable in South Africa, however. Again, Egypt and Kenya saw their funding rise by 21% and 33%, respectively.

These are the sectors

Fintech, despite a 41% decline in overall funding, still dominates among the most appealing sectors, with a total number of 1.9 billion. This is familiar to those who regularly use African goods. Many technologies allow you to have money without having to use cash. The widespread diffusion of cell phones has made this possible. Lagos has raised more money than Egypt, Kenya, and South Africa. The prospects remain bright: 90% of transactions on the continent (1.3billion people) still occur in cash.

McKinsey’s paraphrase of Winston Churchill states that the sector emerged from the bands (“the beginning of the end”) and can provide significant benefits to the populace, including access to microcredit and health insurance. These forms are not widely available and essential when there isn’t any assistance published. The sector must deal with a regulatory environment that has yet to be developed (except in South Africa) and is highly variable according to the country. The continent is awash in cryptocurrency, which allows for significant savings in transaction costs. This includes remittances abroad. However, the price is risky, as evidenced by the recent crash.

Cleantech, worth 863 million dollars, occupies second place in the sector ranking. The set of technologies can be used to limit the environmental impact of production processes. Bronze medal for ecommerce, which has a record 638 million dollars

Which areas are less expensive to invest in?

According to some reports, active investors are on the rise. This includes many prominent names in the global market, such as Plug ‘n play and YCombinator. However, it is also starting to happen in Africa that the Italian reality is beginning to emerge. It’s interesting to see the areas where less investment has been made. These include mobility (4%) to health tech (4%) and logistics (4%) to edtech (2%), as well as connectivity (1.8%), insurance (1.2%), and agritech (1.8%). There are still many opportunities.