African start-ups show resilience amid global chaos

Africa’s technology-dominated start-ups will continue to attract investment, even if at a slower pace, following record venture capital funding last year.

The sector has seen inflows of US$2.7-billion since January, more than double the $1.2-billion in the first five months of last year, according to data collated by Futuregrowth Asset Management.

“We still see that African venture capital will be up year on year, albeit at a more subdued growth rate,” said Ian Lessem, managing partner at Cape Town-based Havaíc, which makes between four and eight investments in early stage companies across South Africa, Nigeria and Kenya every year.

Given the size of our economy, it makes more sense to be gobbled up by a JSE-listed company

In 2021, Nigeria and South Africa led the way as investments surged to $5.2-billion, according to Cape Town-based Futuregrowth. The financing will likely slow in the months ahead as US investors, who brought in most of the money last year, retreat amid a global market downturn.

“The fundamentals for a lot of the businesses in Africa remain very, very strong,” Lessem said. “Good businesses will always raise capital. They may have to work a little bit harder.”

Nigeria, with a population of over 200 million, is a sizeable market in and of itself, while Kenyan companies have usually operated across a regional trade bloc of more than 170 million people before expanding further.

International funds, including Tiger Global, Softbank Group, Andreessen Horowitz, General Atlantic, Social Capital, Quona Capital Management and Dragoneer Investment Group, have invested about $4-billion in African start-ups in recent years, according to Futuregrowth.

Tech focus

The money has mostly gone to technology companies providing services in finance, trade, energy, agriculture and health. Some have seen their valuations grow to more than $1-billion, including Flutterwave, Chipper Cash, Andela, OPay and Wave.

Africa-focused start-up funds such as Norrsken 22, Novastar Ventures, Partech Africa and TLcom Capital Partners are currently raising about $700-million to expand their investment on the continent, according to Futuregrowth.

Nigeria and South Africa attracted the most funds last year, followed by Egypt and Kenya. Senegal and Ghana are also putting themselves on the start-up map, according to Futuregrowth research.


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