Africa’s climate tech sector is attracting the most funding from investors, attracting $325 million and accounting for 45 percent of all startup investments in the first quarter of 2024.
This is despite a decline in overall funding to the continent, according to Africa: The Big Deal. In a new report, the data insight firm that tracks startup deals from $100,00 and above highlighted a shift in investment as priority sectors like fintech face significant downturns. Fintech’s share of funding dropped from over half of the total investments ($852 million out of $1.7 billion) last year to just 22 per cent ($158 million) in Q1, 2024, reflecting a global trend of reduced funding due to cautious investor sentiment and economic uncertainties.
In contrast, climate tech aimed at combating climate change, ranging from renewable energy sources like solar and wind power to energy efficiency innovations such as smart grids and electric vehicles, has captured investor interest.
“The sector’s investment of $325 million marks an all-time high since tracking began in 2019, reflecting a consistent upward trajectory over the past five years,” the firm said.
It disclosed that the rise of climate tech is particularly notable given its fluctuating investment share in recent years. In 2019, the sector accounted for 25 percent of total investments, increasing to 32 percent in 2020. However, during the investment boom of 2021 and 2022, its share dropped to 14 percent and 21 percent, respectively, as sectors like fintech surged.
This trend reversed in 2023, with climate tech capturing 36 percent of total investments, setting the stage for its current dominance in 2024. Despite the promising start, experts caution that surpassing last year’s $1.1 billion in climate tech investments may be challenging. Nonetheless, the sector’s robust performance this year highlights its growing importance and resilience in the face of broader economic headwinds.
While climate tech leads the pack, other sectors also drove significant attention in Q1. The data insight firm said, “Logistics and transport have garnered 29 percent of the total investments, amounting to $215 million, making it the most funded sector from January to March 2024. Energy and Water closely follow, securing 18 percent ($132 million) of the investments.”
An analysis of the funding raised by startups in Africa between January and May 2024 revealed that fintech attracted $30 million, energy and water $132 million, deeptech $10 million, logistics and transport $95 million, and agric and food $68 million.
