In 2023, climate tech startups in Africa demonstrated remarkable resilience, securing an impressive $1 billion in funding amid a broader decline in venture capital investment. This surge, highlighted by Africa: The Big Deal’s data tracker, reflects the growing recognition of the potential in green investments on the continent and the heightened focus of investors in the climate tech space.
According to Africa: The Big Deal, approximately one-third of the total venture capital invested in African startups during the forecast period found its way into climate tech ventures. Energy and water startups took the lead, while agtech dominated the early-stage pipeline, indicating a need for diversified innovation across sectors adapting to climate impacts.
While the overall funding for African tech startups experienced a 46% dip, falling to $3.5 billion, the climate tech sector showcased resilience. Despite a 22% drop in the total amount raised between 2022 and 2023, the number of debt deals increased from 71 to 74. This resilience is attributed to the sector’s diverse funding sources, including impact investors, development finance institutions, corporate venture capitalists, and philanthropic organisations.
Factors Driving Climate Tech Growth
The 2023 Africa Climate Awareness Report emphasised a growing preference for cleaner solutions among the populace. Notably, Africans exhibited a strong inclination towards green solutions such as solar-PV and electric vehicles, particularly in countries like Kenya, Nigeria, South Africa, Egypt, and some Maghreb states.
Partech Africa trackers highlighted the role of new business models and technologies, such as pay-as-you-go, in making climate tech startups more bankable. Additionally, advancements in artificial intelligence and the Internet of Things have enabled these startups to scale and reach a broader customer base.
International support for climate tech companies in Africa is on the rise. During COP27, several UN agencies launched a program to drive new capital flow into climate tech, aiding African states in building renewable energy systems aligned with the 1.5-degree goal.
Google for Startups Accelerator featured numerous African climate tech startups last year. These startups, including NeedEnergy from Zimbabwe, Octavia Carbon from Kenya, Seabex from Tunisia, and SolarTaxi from Ghana, showcased innovative solutions spanning energy, agriculture, and transportation using data, AI, and clean energy.
Recent Deals and Acquisitions
Venture funds are increasingly flowing into Africa’s climate change businesses, with significant acquisitions and funding rounds taking place. The acquisition of Ghana-based solar energy startup PEG Africa by UK-based Bboxx for a reported $200 million stands out as one of the most significant deals in this space. PEG, with a pay-as-you-go solar home system, has a customer reach of one million across multiple African countries.
FinDev Canada invested $13 million into the Energy Entrepreneurs Growth Fund (EEGF) to support early and growth-stage energy startups in sub-Saharan Africa. Africa’s Climate Venture Builder, Persistent Energy, closed a $10 million series C funding round to scale climate activities, aiming to improve lives, create green jobs, and reduce carbon emissions.
Despite the broader decline in venture capital funding for African tech startups, climate tech remains a resilient and promising sector. The surge in investment, coupled with growing international support, reflects the importance of climate tech in driving Africa’s transition to clean energy and achieving sustainable development goals.
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Featured Image: Credit: Bird Story Agency
