This is the record amount of venture capital (VC) funded by African tech startups in 2021, an increase of more than 150% year-on-year and higher than funding amounts from the previous three years (2018 to 2020) combined.
If previous amounts hadn’t already shown the huge potential of the continent’s tech startup scene, Zekarias Amsalu, founder and CEO of investment advisory firm IBEX Frontier, said 2021 was further proof that companies African technologies are more than mature for significant funding. transactions, given the several “mega rounds” – $100 million or more – recorded by private FinTech unicorns like Flutterwave, Andela, Chipper Cash and OPay.
Read more: Nigerian Flutterwave Raises $170M at $1B Valuation
Read also : African FinTech Chipper Cash Raises $150M at $2B Valuation
Amsalu attributed Africa’s growing attractiveness as a global technology hub to an awakening in the international investment community to the significant return on investment that doing business on the continent has to offer.
“The misconception about risk that is being debunked as successful international investors show [others] record return on investment [they’ve made so far]explained Amsalu, who is also a co-founder of the Africa Fintech Summit.
See also: Nigerian payments giant OPay in talks to raise $400m at $1.5bn valuation
Unsurprisingly, the African FinTech market was the largest recipient of venture capital funding in 2021, which has been key to accelerating financial inclusion in the region, accounting for 41% of all mega deals signed l ‘last year.
In a region where 43% of its 1.4 billion people are still unbanked and growing mobile phone penetration – nearly 500 million people have access to a mobile device – Amsalu highlighted the key drivers that will continue to fuel FinTech growth in the future.
Learn more: Fintech sector in Africa continues its upward trend, payment companies continue to dominate
Overall, he said, startup growth and investor interest has been more widespread in the region and is no longer confined to the “big four” countries that have driven investment capital to emerging markets in previous years: Egypt, Nigeria, Kenya and South Africa.
“For example, we’ve seen over 100 million investments in Morocco, Tanzania, while Uganda and Ghana are coming in, so the opportunity in Africa is [more widespread now]. And Africa being a mobile-first continent, any Fintech startup that can harness and leverage this mobile phone access will have a significant growth opportunity,” he said.
Next Frontier: Logistics and Supply Chain
It is not just the FinTech sector in Africa that is experiencing unprecedented growth.
According to Amsalu, a new emerging sector, logistics and supply chain, came in second after FinTech with 14% of funding raised in 2021, as a growing number of startups seek to solve the historical challenges facing the continent has been faced around fragmentation within its borders and high tariffs hampering regional trade integration.
Read more: Afreximbank Payments System (PAPSS) Goes Live with 12 African Banks
Initiatives such as the African Continental Free Trade Area Agreement (AfCFTA) and the recently launched Pan-African Payments and Settlement System (PAPSS) aim to overcome these obstacles, and for Amsalu, startups in the sector can capitalize on these projects to help improve transportation. infrastructure in Africa and create a disruption-proof supply chain landscape across the region.
Read the interview of the Deputy Director General of PAPSS: Instant payments expected to boost intra-African trade by $5 billion a year
“Intra-African trade is only 18% now, but with the AfCFTA and PAPSS, the aim is to increase it to 50% by 2030. This represents a huge investment opportunity for any chain supply chain, business technology or freight startup that is growing across Africa in the next eight years,” he noted.
Cryptocurrencies and CBDCs
Despite 2021’s record highs, Amsalu said these are “some of the toughest times” in the global venture capital funding landscape, as the pandemic, inflation and geopolitical issues have not only forced investors to take a more cautious approach, but have led to falling valuations of startups like PayPal and Klarna and a drop in new unicorns.
But there remain high expectations for Africa’s thriving tech startup scene, he said, predicting that at least $10 billion in funds will flow into the space by the end of this year. “In the past four months alone [January to April 2022]African startups have already raised $2.3 billion so that goal is not out of reach.
There will likely be another startup going public either through an IPO deal or a Special Purpose Acquisition Company (SPAC) this year, he further predicted, following from near Egypt-born, UAE-based shipping company Swvl, which went public via a SPAC deal in the United States in April.
Finally, he pointed out that cryptocurrency and Central Bank Digital Currencies (CBDCs) were key enablers that will accelerate cross-border trade in the region and facilitate decentralized peer-to-peer (P2P) remittance flows by helping users bypass inefficient traditional banking services.
And while virtual currencies have so far had a mixed reception on the continent – countries like Egypt and Morocco have completely banned the use of cryptocurrencies – more governments will eventually follow the example of the Kenya, South Africa and Nigeria by seizing opportunities related to digital assets and digital currencies.
“I think Africa will be a place where the success of cryptocurrency will be exemplified and also defined in the years to come,” Amsalu said.
You might also like: Emerging Markets See Stablecoins as a Viable Alternative to Bitcoin
Sign up here for daily updates on all of PYMNTS’ Europe, Middle East and Africa (EMEA) coverage.