Investing in Climate Tech in Africa

Over the past 15 years, many hundreds of startups have sprung up to offer climate smart technologies and solutions to African consumers. According to Briter Bridges’s Adapt, Migrate and Grow report of 2022, they have more than 500 startups on their count, operating across Africa in the climate-tech space in industries such as agriculture, clean energy, sustainable materials, e-mobility, transportation, and nature based solutions. Of these 500 climate-tech startups, 147 have been able to raise funds from venture capital investors since 2015. Within that period until the second quarter of 2022, they raised $2.1 billion. Of the total $440 million was raised in 2021, according to Briter Bridges. This amount is almost doubled, where the Partech State of Tech in Africa report states that clean-tech raised US$863M in equity, representing 18% of total funds raised across all tech sectors. This YoY increase of 347% highlights the rise and investability of climate-tech in Africa and the notable trend by venture capital investors in seeing climate-tech start-ups and the sector as a viable means to migrate inflation in the long run. However, one must note that the performance of 2022 was largely due to some large clean-tech rounds such as Boxx acquisition of PEG for $200 million. Most of the funding deals were made with climate-tech startups in their scale and growth stages of funding, where only 69 deals were made according to Partech, a 65% increase from 2021 where 26 large deals were made.

It should be noted that the African Private Equity and Venture Capital Association (AVCA), counted 79 climate-related deals worth $1.3 billion for 2022, with an average ticket size of $22.7 million. Of these deals, 73% were venture capital investments while there was a mix of debt investments and other financial products like grants. However, one must be reminded that due to the overlapping and interchangeability of the terminologies clean-tech, climate-tech and green-tech and the technologies associated under each umbrella term and that there will be differences in numbers and data according to the preferences and frameworks of the market research agencies.

According to the Big Deal (2023), 25% of all funds raised by startups in 2022 were by startups within the climate-tech sector that offered renewable energy products and solutions. However, he states it is a bit tricky to engage due to the overlaps and interchangeability of the terminologies for the sector. He states; “The Climate Tech scene for sure will grow. All into one sector because not all agriculture startups are necessarily climate and not all energy startups are climate. So it’s a bit tricky, but I would say it’s about 25% in 2022, the total investment that went to overall climate or environment type stuff, whether it’s solar energy, waste management, access to waste management, resilient agriculture, and carbon edits. That’s roughly 25% perfect. Not far from FinTech.”

For Partech (2023), their State of Tech report for Africa states that clean-tech claimed 2nd spot after Fin-tech as the sector that raised the most during 2022.

According to Briter Bridges, 75% of venture capital investments associated with the climate-tech sector went to climate-tech startups that provided renewable energy technologies and solutions such as solar power. Agri-tech followed suit with 14% of the investment fund distributed to climate-tech startups within Africa. Clean alternatives or low carbon emissions technologies and e-mobility are the only two other noticeable technology product sectors with 6.8% of the funds raised and 2.3%. Thus, the African climate tech market is dominated by technology products and solutions that fall under clean-tech and agri-tech.

According to Cerin Maduray, a finance consultant for the WWF Green Trust Fund, “Clean-tech technologies such as the renewable energy sector still represents a huge opportunity for businesses in Africa. In South Africa we are seeing a massive growth in demand for Solar Systems, Inverters, generators and other energy sources. The circular side as well, with regards to waste management, upcycling and sustainable consumer goods represents growing markets. As consumers become more conscious about their impact they are looking for plastic free alternatives, biodegradable packaging as well as upcycled, second hand (pre-loved) and earth friendly goods. Sustainable foods are also a growing sector, from organic farming to alternative protein as well Agri-tech. Sustainable Transport and related industries are also sectors to look at”.

When one looks at HolonQI’s top 50 climate-tech startups of 2022 based on the funds they raised and who were the best performing in market, product, team, capital and momentum, we can see that again renewable energy startups dominate the climate-tech sector with agri-tech following in second.  E-mobility startups saw a surge in deals made and growth in the market. Thus, there are similarities in the numbers between Briter Bridges and HolonQI in the percentage of funds raised and deals between the different climate-tech product sectors.

It can also be highlighted that most of HolonQI’s top 50 climate-tech startups of 2022 and Briter Bridge’s map of climate-tech innovators in Africa that the “Big 4” tech ecosystem’s of Nigeria, Kenya, Egypt and South Africa still dominate the tech landscape of Africa. However, with resources being more accessible to entrepreneurs in the climate-tech sector such as black soldier and protein farming, there are a number of climate-tech ecosystems emerging from countries like Ghana, Senegal, Tunisia, Uganda and Rwanda. This thanks to a number of international financial institutions investing into the tech sector within these countries,  the conducive business environments that countries have established and the active policies promoting climate change migration and the growth of the tech sector.

From these two maps of Africa’s climate-tech startup landscape, one can identity the best performing start-ups per climate-tech product sector and who will be the emerging startups to lookout for in 2023. From the startup maps by sector, it is highlighted that the most common technology product sector of funding and growth in the climate tech market is renewable energy, agri-tech and clean alternative energy technologies. However, one of the interesting new markets starting to rise across is the hybrid circular economy and agri-tech business and black soldier and insect farming for protein to be feed back into agricultural ecosystem. Inseco from South Africa was able to raise $5 million in 2022 while other black soldier farms in Kenya, Rwanda, Uganda, Tunisia and Tanzania.


Excerpt of: The State of Tech In Africa 2023 (AfricArena 2023)

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