In a report by Africa: The Big Deal, it presented a significant shift within the African startup ecosystem, as Climate Tech edges Fintech to attract most of the funding in Africa in 2024.
According to the funding numbers, Climate tech startups in Africa have raised $325 million so far, which represents 45% of all start-up funding in Africa in 2024.
While Climate Tech funding has been growing in absolute numbers in the past 5 years ($340m in 2019, $344m in 2020, $613m in 2021, $959m in 2022, and $1.1b in 2023), the investment boom in 2021 and 2022 did not benefit this space as much as other (such as Fintech), resulting in a drop in its share of total investments: from 25% in 2019 and 32% in 2020 to 14% in 2021 and 21% in 2022.
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This share started to pick up again in 2023 (36%) and seems on track to grow again in 2024 (45% so far). Climate tech startups are increasingly capturing the attention of investors, driven by the urgent need to address climate change and its impacts on the continent. These startups are working on a range of solutions, from renewable energy and sustainable agriculture to waste management and water conservation.
The surge in funding for climate tech is a clear indicator of the sector’s rising importance and the recognition of its potential to drive sustainable development. It also reflects a broader global trend where investors are prioritizing environmental, social, and governance (ESG) factors in their investment decisions.
Despite this growth in the sector, there has been a great decline in the total share of investments in tech startups on the continent. In 2024 so far, the Logistics & Transport have raised $215 million.
On the other hand, the fintech sector which usually takes the major part of the funding, experienced a significant drop in investments, with $158 million of funding raised so far this year in Africa, representing only 22% of the funding raised on the continent.
Fintech, previously the dominant sector in African startup funding, has seen a relative decline in investment. The shift towards climate tech signifies changing investor priorities, but it also reflects broader market conditions.
“In 2024 so far, start-up funding in Africa is not quite what it was in previous years, in line with a global context that remains quite gloomy. One of the key reasons is the significant drop in investments in the Fintech space. Indeed, Fintech only represents 22 percent ($158m) of the funding raised this year so far in Africa, while at the same time last year, it made up more than half of the total ($852 million out of $1.7 billion)”, part of the report reads.
Despite climate tech’s recent success in attracting significant investment, the broader African startup ecosystem is experiencing a funding slowdown. With a few encouraging signs, the ‘funding winter’ is still in full swing with no signs of slowing down yet.