Current funding approach for tech innovations doesn’t empower local organisations

The broader innovation ecosystem funding for Africa from 9 major funders analysed amounts to 1.4 billion between 2020 and 2023 with the median funding size at $2M. There were close to 200 funding opportunities distributed to over 150 intermediary recipients in the broader African innovation ecosystem. The top recipients of innovation funding are government, funds, and NGO intermediaries that can implement on-the-ground programmes and initiatives.


The five key insights for innovation ecosystem support activities and organisations are: 

  1. Funding remains stable, but concentrated and not evenly distributed across innovation ecosystems and recipients.

Ecosystem support grant funding remains steady amidst a general decrease in innovation funding. However, funders are consolidating their funding for longer periods and more scalable projects. Kenya, Tunisia, Rwanda, Ghana, and Egypt are the top recipient countries of ecosystem support funding. The majority of support outside of the above-mentioned countries is channelled towards Pan-African initiatives. Further, within these markets, there are a select group of recipients that receive the majority of funding. Several receive funding directly from funders, but the majority are intermediated through other organisations, often located outside of the markets where the work is being delivered.


  1. Specialisation is on the rise mirroring trends in the wider innovation ecosystem.

Funders are increasingly seeing innovation ecosystems as a tool to deliver wider socio-economics outcomes focusing on support to high-impact sectors such as agriculture, climate and health as well as underrepresented groups such as female and local startup founders. This reflects wider trends in innovation ecosystems in Africa where more and more funding is going towards funds and startups focusing in these areas. For example, in 2023, Briter Intelligence data shows that nearly $1 out of every $3 invested in startups in Africa went to climate-related startups. The innovation ecosystems are catching up with this shift with several new support initiatives being launched around climate by major funders active in the continent in 2024. Similarly, more funds are being set up and capitalised focusing on agriculture, health and gender with funders also increasingly launching initiatives around these areas.


  1. The current funding approach is not yet empowering local organisations.

Ecosystem support champions are rarely the direct recipients of funding. Their funding is often intermediated by another organisation and is often subject to the constraints of these intermediaries. Stakeholder interviews revealed this is creating pressure on the business models of local ESOs and also undermining the ultimate impact they can deliver. Many intermediaries take between 10 to 15% of the total grant funding as overheads while putting pressure on recipients to reduce costs and budgets. This is a good business approach for many of these intermediaries, as evidenced by the number of major consulting firms that have emerged as financial intermediaries for funders. But it is rarely good for local organisations. Further, many of these intermediaries do not understand the local context of the markets they are intermediating funding to as they are often located elsewhere.


  1. Funders are increasing the burden of financial and impact reporting for ecosystem support champions.

Interviews highlighted that ecosystem support champions are spending more and more time tracking and reporting how grant funding is spent and the impact it has had. In many cases, funders are requiring this before they release funding. Those who can afford it are increasingly bringing on additional capacity related to financial management and monitoring and evaluation capacity to meet these growing demands. The result is that funding is going to a smaller number of ecosystem players making it harder for new entrants to access this grant funding. Those that can access it, are spending less time on the support activities that the funding was initially disbursed for and more time on reporting.


  1. The lack of transparent data obscures the full funding picture.

While there are many organisations tracking funding flows to investors and startups in Africa’s innovation ecosystem, there are currently no databases tracking funding flows towards the organisations supporting these stakeholders. Further funding to many of these activities and organisations falls across different focus areas and departments within funders making it harder to collect, aggregate and analyse. For example, some support activities fall under private sector engagement, while others fall under specific sectors like agriculture, climate and health. Given the nascent nature of Africa’s startup ecosystems, this makes it hard to provide a full picture of the funding to innovation ecosystem support organisations and activities in Africa, limiting the understanding of local innovation partner constraints and opportunities in Africa.


Excerpt of: Exploring the Funding Landscape of Africa’s Tech Innovation Support Ecosystem (ENRICH in Africa Centre (EiA), 2024)


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