Africa has the potential to attract more than USD $90 billion in tech start-up funding by 2030, creating jobs across the region and a path to global tech leadership, according to a new paper just released by the Tony Blair Institute for Global Change (TBI).
The paper, “Supercharging Africa’s Startups: The Continent’s Path to Tech Excellence”, finds that despite being home to the world’s largest free trade area and the globe’s highest rates of entrepreneurship, the continent is still punching below its weight in tech entrepreneurship.
In 2021, funding grew 250 per cent, reaching a record $4.9 billion. TBI’s paper argues that governments across the continent must act to capitalise on this momentum and unlock Africa’s tech growth potential by:
- Addressing regulatory barriers to growth, including enacting the Africa Continental Free Trade Area agreements and addressing infrastructure and skills gaps through targeted policies.
- Making reliable data on tech startups freely available to potential investors, telling a more positive story about tech in Africa.
- Taking a far more innovative approach to funding:
- Establishing government-led pooled investment vehicles such as “innovation funds” or a “fund of funds” that support both start-up founders and local investors.
- Changing permissions for pension funds, which currently represent more than half of the $1.8 trillion worth of institutional funding invested in Africa, to enable them to invest some of their assets in high-growth and post-revenue opportunities.
- Changing regulation to allow corporates to allocate higher assets to private-equity and venture capital firms investing specifically in tech start-ups.
- Establishing a Pan-African Tech Startup Network, to strengthen the broader African tech ecosystem.
Africa has the potential to become the biggest start-up success story in the world.Sophie Tholstrup
“Africa has the potential to become the biggest start-up success story in the world,” says Sophie Tholstrup, TBI’s director of Technology for Development policy and the report’s lead author. “But for the continent to truly harness the power of technology to change people’s lives, it desperately needs a healthy innovation ecosystem. Tech companies, tech entrepreneurs, and governments need to create an environment that encourages and fosters start-ups. Our paper lays out the ways we believe they can do this, starting today.”
Launched ahead of next week’s Africa Tech Summit, TBI’s paper shows that funding growth for tech start-ups on the continent is accelerating, with growth rates six times the global average and a record $4.9 billion raised in 2021, more than double the previous year. Still, cumbersome regulations, the digital-skills gap, limited funding and fragmented markets mean that Africa accounts for just 0.2 per cent of the value of global start-ups.Tech start-ups in Africa face funding and liquidity challenges throughout their lifecycle; the average amount for African startup seed rounds is $1.5 million, while those of India and Latin America are around $4.6 million and $5.7 million respectively.
The report argues that more must be done to seize this moment so that Africa is able to fulfil its huge promise and put it on the path to tech excellence.
“This is a real moment of opportunity for Africa, where tech ecosystems can drive economic growth, providing much-needed jobs on a continent where 3-4x more people enter the job market each year than jobs are created,” adds Blaise Bayuo, TBI policy lead, Ghanaian entrepreneur and report co-author. “African nations must be creators, not just users of technology. The closer the creators of technologies are to the challenges they address, the more effective they are likely to be.”
- Establish a public data-sharing platform on tech start-ups.
- Develop innovative financing vehicles.
- Unleash capital from institutional and corporate investors.
- Create a single digital market by prioritising implementation of the Africa Continental Free Trade Area.
- Generate demand for local tech solutions.
- Implement legislation to support tech start-ups and seek their regular feedback.
- Improve digital skills.
- Strengthen digital infrastructure.
- Boost the capability of start-ups and support organisations.
- Launch a Pan-African Tech Startup Network.