- Majority of private equity investment in Sub-Saharan Africa is from outside the continent and represents only a fraction of the capital required
- African startups surpassed the US$ 1 billion mark in capital raised over the first seven weeks of 2022
- The bulk of the funding (76%) and of the deals (78%) have been claimed by startups headquartered in one of the ‘Big Four’ (Nigeria, South Africa, Kenya, and Egypt)
Africa continues to show strong growth prospects, with an expectation of a significant rebound from the Covid-19 pandemic that has spanned over two years, which has also affected African growth less than in developed markets.
International investment plans and programmes to promote investment in Africa support growth potential given the correlation between Foreign Direct Investment (FDI) and Gross Domestic Product (GDP).
Currently, the majority of private equity investment in Sub-Saharan Africa is from outside the continent and represents only a fraction of the capital required.
A report by the Chartered Alternative Investment Analyst Association revealed that there is increasing foreign direct investment into Africa, from a low base, and focused on key economies.
“These opportunities are reflected in the strong venture capital flows into Africa over the past few years, with Fintech and Agritech the two leading verticals,” the report stated.
This is clearly evident through the record-breaking rounds of capital being raised by African startups which surpassed the US$ 1 billion mark in the first seven weeks of 2022.
To put this growth into better perspective, the same amount was raised within 21 weeks (4.8 months) in 2021, in 36 weeks (8.3 months) in 2020. It took 46 weeks (nearly a year) in 2019 for African startups to reach the $1 billion mark.
According to Africa: The Big Deal, this ‘only’ represents about a third of the funding raised.
With 2022 kicking off to a good start for African startups, the continent is set to attract even more inward investment as investors look beyond the continent’s post-pandemic future, sustaining confidence in the region.
“African startups seem to have developed herd immunity against the economic fallout from Covid-19, raking in a record 1 billion US dollars in just seven weeks to mid-February 2022, underpinning strong investor sentiment in the continents fizzing tech scene,” Africa: The Big Deal announced via its Paystack newsletter service.
According to the newsletter, The bulk of the funding (76%) and of the deals (78%) have been claimed by startups headquartered in one of the ‘Big Four’ (Nigeria, South Africa, Kenya, and Egypt) so far, though Tunisia (almost entirely driven by the InstaDeep deal) and Ghana (6 deals worth 56 million US dollars) are also doing pretty well.
In the span of seven weeks, two African start-ups locked mega-deals of over US$100 million each.
Tunisia’s AI startup InstaDeep made headlines in late January after locking US$100 million in investment funds from venture capital fund, AI Capital, pharmaceutical giant BioNTech, and Google.
The second startup to lock a mega funding deal is Nigeria’s fintech startup Flutterwave. Last week, the startup became Africa’s most valuable startup with the new ground-breaking US$250 million addition to its capital.
Both Flutterwave and InstaDeep’s combined funds in 2022 make up only a third of the US$1 billion raised by African start-ups, The Big Deal noted.
According to Briter Bridges, 62% of total funding in African start-ups went to fintech start-ups, double the 31% recorded in 2020.
Healthtech and Biotech follow closely at 8%, with logistics (7%), education (5%), and cleantech (5%) rounding up the top five sectors by investment value.
With 37% of all the investment volume going to Nigerian start-ups, the West African country is once again topping the list of countries in terms of investment.
Further evidence proving that Africa is a darling for investors is the fact that the continent is now home to seven unicorn investors including Jumia, Interswitch, Flutterwave, Andela, Wave, OPay, and Chipper Cash.
Five of these became unicorns in 2021- including two in September alone- indicating levels of interest in Africa’s startup market not seen before.
”Unicorn” is a term used in the venture capital industry to describe a privately held startup company with a value of over US$1 billion.
Projections show Africa could add more unicorns to its trophy shelf if its startup ecosystem maintains the impressive fund-raising trajectory it developed over the past year.
Additionally, successes in African tech, previously limited to certain countries and sectors, are set to record steady growth across the board.
With the steady rise in funding assumed to be maintained according to Africa: The Big Deal, African startup funding is projected to reach US$7.3 billion by the end of the year and US$93.9 billion by 2030.