The African tech scene is still growing as we go further into 2024, thanks to factors including market pressures, funding patterns, and calculated decisions.
African companies encountered financial challenges in 2023.
The difficulties that investors had in raising finance are reflected in the 41.7% decrease in venture capital (VC) funding from Q2 to Q3. Nevertheless, there were some positive aspects of this slump. Notably, MNT-Halan, an Egyptian fintech business, became the latest African unicorn. Companies such as Partech and M-Kopa raised more than $250 million apiece, exceeding funding targets. Furthermore, Flutterwave advanced towards its aim of an initial public offering (IPO) following its exoneration from financial malfeasance in Kenya. The Central Bank of Nigeria (CBN) also took a pro-crypto policy position.
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In 2024, startups are probably going to keep slashing expenses and concentrate on unit economics amid an unreliable funding climate. Localising expenses, cutting back on operations, obtaining money in the local currency, and reevaluating medium- to long-term objectives to put survival first are some possible strategies. Jumia closing its food delivery service and Paystack reducing its efforts outside of Africa are two recent examples.
Consolidation through Purchases and Mergers
In 2023, M&A activity in the African IT sector picked up speed. The pace was set by seven agreements totalling about $710 million, led by Biontech’s $680 million acquisition of AI startup Instadeep. B2B platforms Wasoko in Kenya and MaxAB in Egypt have recently held merger talks that could result in the largest merger in the e-commerce subsector. At least 29 such transactions have occurred, despite the fact that the majority are still unknown.
M&A in Africa is driven by startup agility, capital availability, and market dynamics. Bigger businesses aim to buy out startups that are closer to going public. Consolidation is advantageous for the fragmented market, which consists of many small and medium-sized businesses operating in many areas and industries. These businesses can attract capital and compete more successfully on a global scale by banding together.
Prognosis for 2024
Funding issues notwithstanding, optimism is high. With 65% expressing confidence, investors continue to have a good outlook for the African startup ecosystem1. Important patterns to keep an eye on are:
Enhanced Funding for Cleantech: Cleantech firms are expected to garner increased investment as sustainability becomes increasingly prominent. Solutions that deal with waste management, renewable energy, and environmental preservation will prosper.
Expanding AI adoption: Businesses in Africa are aware of the possibilities of AI. AI will revolutionise a variety of areas, including agriculture and healthcare.
The Road to Profitability: Sustainable development and profitability will be the main priorities for startups. The priority will be income growth, efficient operations, and unit economics.
ESG Assumes the Lead: Investment decisions will be influenced by environmental, social, and governance (ESG) factors. Businesses that follow ethical standards will prosper.
Collaboration with enterprises and M&A: There will be an increase in cooperation between startup companies and well-established enterprises. M&A activity is expected to persist as businesses look for strategic alliances.
In conclusion, African technology is still tough, but it is able to overcome obstacles and seize chances for expansion. In 2024, expect to see more breakthrough technologies, interesting developments, and key alliances as the continent’s innovation ecosystem continues to mature.