Rise Of Tech Startups in Africa

July 18, 2022

In Africa today, technology-driven startups keep emerging, a phenomenon that speaks to the transformation of the business ecosystem. This transformation is, however, not the only reason why the tech space in Africa has taken off.

Other reasons like Africa’s youthful and growing population, rising use of the internet, and the evidence of the application of modern technologies to improve access to healthcare, quality education, financial services and energy have contributed to the fertile ground for Tech which we currently have.

With more than 1.2 billion people spread out across 54 countries, Africa has the potential of being the next big foot in tech, however, doing business in Africa is a bigger adventure than scaling the peak of Mount Kilimanjaro, swimming with great white sharks or sleeping beside an active volcano. There is a mountain of reasons why this is so, ranging from finance to government policies etc. Yet, the continent strives to thrive against all odds.

The influx of Venture Capital funding into the African continent is also a strong reason for the growth of the startup scene. According to Partech Ventures Africa is the fastest-growing ecosystem in the world

Compared to 2020, activities in Africa’s ecosystem doubled in 2021 & the amounts invested tripled with investments in Fintech accounting for 63%. Investments in 2021 grew by 101% doubling investments raised in 2020.

TechCrunch estimates 43% of the funds investing in Africa are headquartered in the continent and managed locally. Forty-one per cent of these locally-based and run funds were headquartered in Nigeria.

The wave of venture capital financing is flowing into the entrepreneurs who are trying to solve some of Africa’s biggest challenges in sectors ranging from fintech, agritech, edtech, etc

The numbers don’t lie:

The African Start-up scene is dominated by three countries; South Africa, Kenya and Nigeria. South Africa has the most developed startup ecosystem followed by Kenya and Nigeria. This is followed closely by Egypt, Rwanda, Ghana, Uganda, Senegal, Morocco and Cameroon.

However, when it comes to investor funding, in 2021, startups from Nigeria raised $1.37 billion, South Africa $838 million; Egypt, $588 million; and Kenya, $375 million.

Other countries that received funding include Senegal, where startups received up to $222 million in financing in 2021, and Tanzania, where it was $96 million.

What the investment landscape looks like in top countries:

1. Egypt’s Agreeable Regulators

Financial regulators in Egypt are more agreeable than in most parts of Africa, arguably because they recognize the need to bank the unbanked in Egypt. Eg. The government of Egypt passed a law that allows the central bank to give banking licenses to fintech firms. This is coupled with the huge demand for disruptive payment and financial solutions due to the growing need for financial inclusion.

2. Kenya’s Money Solutions

As a start-up hub, Kenya’s development began by trying two main challenges: emergency notification and access to money. Tech start-ups and businesses in Kenya benefit from mobile phone connectivity which is being leveraged to solve problems from payment to service delivery and more.

A large private sector, diversified economy and an economically empowered and entrepreneurial-minded consumer base make Kenya a fertile territory for new ideas and companies.

3. Nigeria’s Mobile-First Nation

Nigeria is the world’s most populous black nation and Africa’s largest economy. And it’s a mobile-first nation: nearly 90% of Nigerian internet users go online via mobile phone. This provides a big opportunity for businesses to tap into.

Nigeria also has a very large market potential with approximately 184 million residents and a large but oil-focused economy. The founder of FarmCrowdy Start-up, Onyeka Akumah puts it best as

“The Nigerian Start-up ecosystem is an unconventional blend of raw talent, promising infrastructure and organised chaos”. Combining these talents with a young, growing population and the support of tech incubators makes Nigeria a leader in the start-up revolution in Africa.

4. South Africa’s start-up scene

South Africa has a well-developed startup ecosystem with a number of accelerators, incubators, and co-working spaces.

The country also has a strong entrepreneurial culture, which is helped by its stable economy and good access to capital. Most funding goes to its Fintech, AgriTech, EdTech, HealthTech and RetailTech sectors

5. Uganda‘s government support

Uganda’s start-up scene is growing rapidly, with a number of accelerators and incubators springing up in recent years. The country has a young population and a growing middle class, which provides a large market for startups

The Ugandan government has also been supportive of the startup ecosystem, with a number of initiatives to promote entrepreneurship. These include the proposed launch of a national incubation program by the Ugandan government.

So, what do these stats mean for African startups?

One of the most important takeaways is that there is a lot of room for growth. Funding in Africa still makes a very little amount when looked at on a global scale. This means that there is a huge opportunity for African startups to attract more investment in the coming years.

Another takeaway is that African startups are increasingly focused on solving local problems. This is a good thing, as it means that they are more likely to have a positive impact on their communities.

The African start-up scene is definitely on the rise with a lot of promise. The continent has many young, talented entrepreneurs who are solving some of the biggest challenges facing Africa. With the support of venture capitalists, the African start-up scene is sure to grow even more in the coming years.

Do you want to invest in world-class African startups and help build the infrastructure for Africa’s digital economy? Visit this link.


Presenting the 2021 Partech Africa Report: Africa Tech booms in 2021 with $5.2B raised in equity, $6B including growing debt deals

Nigerian startups retain $1.37bn of Africa’s $4b funding in 2021

Nigeria, South Africa, Kenya among Top 5 African countries with the most developed startup ecosystems — report

Local venture capital fund formation is on the rise in Africa, led by Nigeria

Business Incubation and SME Work Spaces

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