Nigeria, SA, Egypt, Kenya – Frontiers for Africa’s investment in tech in 2022

By Alexander Chiejina

Nigeria, South Africa, Egypt and Kenya have remained major frontiers for investment in tech on the African Continent in 2022 despite the Covid-19 pandemic. This development, as evident in a recent Disrupt Africa’s African Tech Startups Funding Report (seventh Edition), disclosed that startups in the four countries raked in a combined total of $1.9 billion in 2021 (an estimated 92.1 percent of the entire total investments raised in the African continent in the year.

The report revealed that funding secured by Nigeria, Egypt, South Africa and Kenya has continued to be on a steady rise year-on-year: from a 79.4 percent share in 2018, to 87.5 percent in 2019 and then 89.2 percent in 2020.

The African Development Bank 2021 report titled Entrepreneurship and Free Trade: – Towards a New Narrative of Building Resilience, said these four nations account for about a third of Africa’s start-up incubators and accelerators and also receive 80 percent of foreign direct investment (FDI) into the African continent. However, subtle factors such as large population size and large economies are incentives required to drive investment toward these start-ups.

Nigeria, Egypt, South Africa and Kenya with a population size of about 206 million, 102 million, 59 million and 53 million inhabitants, respectively, have a GDP of roughly $440 billion, $404 billion, $420 billion and $110 billion, respectively.

Added to this investment growth in these countries are the four biggest African tech hubs which attract the most fintech funding on the African continent. Below is a table showing investment raked in by Nigerian based start-ups in 2022, Venture Capital/Angel Investors involves, startup type, among others.

Source: Nairametrics and Benjamindada.com

Other parts of Africa were unable to secure any huge venture investments partly due to a dearth of fintech solutions, availability of economic capital, including political and socio-economic challenges which hamper investment attractiveness in several countries across the African continent.

Experts believe that African governments have strategic roles to play in ensuring that their legal and institutional environment is improved to create a viable investment ecosystem for investors and start-ups. This would not only transform the investment landscape of non-big-four countries but would make them an attractive destination for start-up investments in Africa.

There is the urgent need to provide fiscal and non-fiscal incentives for venture capitalists to invest in the financial and tech sectors. The African Continental Free Trade Area (AfCFTA) provides African governments a unique opportunity to attract increased start-up funding by reducing barriers and improving governance as it relates to investment across countries in the continent.

Africa is the next destination for tech and innovation growth giving the youthful population that are ambitious and smart. Africa’s nascent tech scene is bound to flourish when given the right ecosystems to get into the tech and innovation ecosystem. More importantly is the introduction of the right regulations.