Africa’s investment reckoning

Africa’s investment landscape in 2025 is entering a decisive phase. For years, the continent has been at the centre of a global conversation about growth, opportunity, and potential. But recent data presents a sobering reality: startup funding has sharply declined, private capital is stalling, and foreign aid—once seen as a crucial safety net—is under increasing strain. This is not just a story of setbacks; it is a call to action. The choices Africa makes now will shape its economic trajectory for decades to come.

According to Africa: The Big Deal, a platform that tracks startup investments across the continent, startup funding in Africa totalled $2.2 billion in 2024, a decline from the $2.9 billion raised in 2023 and a sharper drop from the record $5 billion in 2021. The tightening of global financial markets has played a role, but Africa is also contending with persistent structural barriers—weak regulatory frameworks, limited local venture capital, and currency volatility. While investment is slowing, there are still bright spots. Kenyan startups led the continent in 2024, attracting $638 million, which accounted for 29% of total startup funding. Nigeria’s fintech sector continued to demonstrate resilience, with Moniepoint achieving unicorn status after securing $110 million, as reported by The Financial Times.

These numbers tell a deeper story: Africa is still an attractive market, but investors are recalibrating their strategies. The era of easy venture capital is over. Investors are scrutinising fundamentals more than ever, prioritising profitability over growth at all costs. This shift is not necessarily a bad thing. It presents an opportunity for African entrepreneurs to build more sustainable, resilient businesses rather than relying on the cycles of foreign capital.

Yet, while the private sector is adjusting, government policy still has room to align more effectively with market realities. The African Continental Free Trade Area (AfCFTA) was established to unlock new economic potential by creating a single integrated market across Africa. While the agreement aims to increase intra-African trade by eliminating tariffs on 97 percent of tradable goods, its implementation has faced challenges. These include disparities between countries’ capacities to enforce the agreement domestically and the need to integrate multiple sub-regional African economic communities. If fully realised, AfCFTA could reduce reliance on foreign capital, enabling businesses to scale regionally and support labour-intensive industrialisation.

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Meanwhile, the global political landscape is shifting in ways that Africa cannot afford to ignore. The Trump administration’s recent suspension of U.S. foreign aid has sent shockwaves through many African economies. The cuts, affecting key areas such as healthcare, infrastructure, and economic development, represent a stark reminder that Africa cannot rely on external support indefinitely. Funding for programs related to HIV/AIDS, food security, and economic aid has been placed under review. While the details are still unfolding, it is clear that African nations must urgently rethink their financial strategies.

The impact of this policy shift is already evident. Nations that have long relied on U.S. support to fund social programs are now scrambling to fill the gap. In the past, foreign aid has been used as a crutch, delaying necessary reforms in taxation, industrial policy, and financial market development. Now, the crutch is being kicked away. This is a harsh but necessary wake-up call. Africa’s economic future cannot be tethered to the unpredictability of foreign governments. If one administration can cut aid overnight, what stops another from doing the same?

The solution lies in leveraging Africa’s own financial and natural resources. The private capital industry remains an underutilised force for development. Carbon credit markets represent an untapped opportunity for African nations. Africa, despite contributing less than 4 percent to global emissions, has vast potential in carbon sequestration. By creating a transparent, well-regulated carbon market, African nations could attract billions of dollars in sustainable investment while positioning themselves as global leaders in the fight against climate change.

Similarly, Africa’s wealth of natural resources should no longer be seen as raw materials for export. The Dangote Refinery in Nigeria, the world’s largest single-train refinery, is an example of what can be achieved when industrial policy aligns with national interests. The refinery, expected to reduce Africa’s reliance on imported petroleum, is an example of the kind of bold, long-term investments that African economies need to prioritise.

But none of this will be possible without decisive leadership. Governments across Africa must create policy environments that attract investment rather than deter it. The hesitation of private investors is not solely due to external factors—many are reluctant to invest because of unpredictable regulations, excessive bureaucracy, and weak enforcement of contracts. If Africa wants to be taken seriously as a global economic player, it must address these systemic issues head-on.

There is no more room for complacency. The numbers make it clear that external investment is shrinking, but the potential for internal growth has never been greater. The question is whether African leaders will seize this moment to implement the structural reforms necessary to unlock that growth. The continent has the talent, the resources, and the market size to be a global economic powerhouse. What it needs now is the political will and strategic foresight to turn potential into reality.

This is Africa’s investment reckoning. The world is watching. More importantly, Africa’s own people are watching. The choices made in 2025 will determine whether the continent continues to be seen as a high-risk, high-reward investment destination—or whether it takes control of its own economic destiny. The time to act is now.