“Only four countries recover 80% of investments in start-ups in Africa”

By celebrating the African continent’s business landscape with the Africa Tech Awards, VivaTech is highlighting the technological nuggets of a still very limited market. However, as Fabrice Perez, responsible for venture capital investments* on the African continent at Proparco, a French development finance institution that operates in developing and emerging countries, points out, “it is therefore a very active market, which still includes many disparities”.

He cites the example of Go My Code, a Tunisian start-up in the area of ​​code education and IT development, present in the 2022 edition of VivaTech. “It’s a kind of School 42”, narrates Fabrice Perez. Founded five years ago, Go My Code meets an essential need in the African tech market: recruiting local talent and, above all, retaining them. “There is a training deficit in Africa,” explains Fabrice Perez. And even when training exists, it does not always correspond to the needs of the labor market”. The venture capital investment expert provides some keys to understanding this technology market in Africa.

What are the most innovative sectors of African technology?

The reality is disparate. The African market presents great asymmetries in terms of countries and sectors. It is a very small market compared to the other giants: between 2013 and 2019, it is less than 4 billion dollars, while in the United States we are talking about a market of more than 500 billion and in Europe, around 100 billion euros. . .

The disparities are stark at a geographic level, as 80% of funds raised by start-ups in Africa go to four countries: Nigeria, Kenya, Egypt and South Africa. This was the ratio in 2020 and will be the same in 2021. In francophone Africa there is a real deficit. There are four main sectoral verticals that recover 60% of funds invested in start-ups in Africa: fintech, agritech, GreenTech and business services (also called BtoB).

Even if that means comparing the African continent, it’s better to do it with India: roughly the same population size, the same GDP and the same level of mobile internet penetration. In Africa, there were 1.4 billion venture capital investments in 2019, compared to 10 billion in India, or nearly eight times less. The deficit is clear, but in recent years growth has been very strong. The investment rate increased by 155% between 2017 and 2020 and the number of companies financed in the same period was over 187%. The fintech sector continues to be the one where we see more sucess histories.

A dozen African start-ups are participating in VivaTech this year. To export your solutions abroad?

The African market is very large. Depends on the sector: in the energy sector, some start-ups are exported to Asia, for example. A solar system to have access to energy, because the grid is malfunctioning, does not seem to respond to the needs of the European population.

The advantage of the few African start-ups present is finding investors, because there are many on the ground, to present their solutions for inter-country development in Africa. Countries come to VivaTech with their nuggets to showcase a beautiful showcase. This is possibly the opportunity to meet partners, new customers, etc.

Where is the African tech market more than two years after the Covid-19 pandemic?

The Covid-19 crisis has halted the growth of African start-ups because they regularly need to raise money, fundraisers that are organized every 12 to 18 months. With Covid-19, there was a standstill in investments and some that needed to raise money had to cut costs and even others closed. At Proparco, in partnership with Digital Africa, we offer bridge loans in cash pending their funding. We financed 12 between 2020 and 2021.

Growth rates have increased, trends have resumed their pre-crisis pace and, finally, the pandemic has made it possible to develop digital activities, also in Africa.

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