Egypt overtakes Nigeria as Africa tech funding slows

Egypt is emerging as the tech powerhouse in Africa with new data showing it has dethroned Nigeria to emerge as the ecosystem that has secured the most funding from June 2022 to June 2023.

This is an indication that venture capitalists and private equity firms which have flocked to Africa in recent years to take positions, are beginning to apply the brakes on investments. Experts say this reflects a global response to high volatility and inflationary forces in many economies forcing investors to rethink their risk appetite, especially in the global tech ecosystem. In Africa, investors are demanding a lot more from founders and tech companies before committing to fund their ideas.

The data released by Africa: The Big Deal sees funding to tech startups in Nigeria contracting the most at 77 percent at $470 million from $2 billion year-on-year contributing to the largest economy on the continent losing its number spot to the North African country, Egypt.

Egyptian startups raised $540 from June 2022 to July 2023 which is a decline of 25 percent from the $710 million raised the previous year. The 25 percent contraction is the least among the big four countries that attract the most funding on the continent. Egypt is also the only country to hit the $500 million mark within the period.

South African startups lost 53 percent of the amount of funding they raised from the previous year. Startup funding from June 2022 to July 2023 is at $420 million compared to $890 million from June 2021 to June 2022.

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Funding to Kenyan startups also declined by 69 percent to $300 million from $970 million in the previous.

Outside the Big Four, the funding winter is also affecting other countries on the continent. Tanzania tech startups lost 68 percent of funding from the previous year, Ghana lost 81 percent and Senegal saw funding drop from $222 million to only $6 million. These were markets that previously secured funding above $100 million.

The contraction also hit seven markets where $10 million to $100 million was raised. These include DRC, Namibia, Zambia, and Uganda.

“Against all odds, three markets managed to pull off growth in this unfavourable context. Funding grew in Côte d’Ivoire (+15% YoY), and in Cameroon (+34%) where it crossed the $10 million mark. The biggest jump by far was recorded in Algeria (x5, from $30m to $150m), a prowess almost entirely attributable to a single deal: Yassir’s $150m Series B in November 2022,” said Max Cuvellier, Head of Mobile for Development, GSMA who co-authored the report.

It is not knowing what the duration of the fund g winter will be, but startups are also looking inwards, trying to grow their revenue to survive.