According to a recent report, a surge in funding for nature-based solutions worldwide is opening opportunities for green startups in Africa, with a resultant increase in cleantech startups.
AfricaGoGreen Fund (AFGGF), a pan-African fund that supports climate-friendly projects on the continent, recently secured $47 million in its second fundraising round.
The fund focuses on installing rooftop solar and battery storage for residential, commercial, and industrial consumers, purchasing high-efficiency appliances and industrial equipment and retrofitting existing and new green buildings.
The International Finance Corporation (IFC) provided $17 million in equity during the round, besides committing $30 million in debt. At the same time, the African Development Bank (AfDB), the Nordic Development Fund and the Sustainable Energy Fund for Africa each invested $10 million in equity.
In December 2022, AFGGF closed $10 million in debt from Calvert Impact Capital. Several other financing initiatives for climate tech have rolled out across Africa in recent years.
The Africa Climate Change Fund, established under the African Development Bank in 2014, has supported greening initiatives in more than six African countries by offering grants to governments, NGOs and initiatives.
According to ACCF secretariat coordinator, Rita Effah, “ACCF provides grants from $250,000 to $1 million per project.”
The growing availability of funds offers hope to climate-facing tech startups on the continent, which often struggle to raise seed and growth capital. Where fintech, health tech, and logistics startups are increasingly well-financed, climate-tech investment has lagged, despite being sorely needed on a continent that has already felt the impact of climate change.
“Green startups are addressing the urgent need to address climate change and creating economic opportunities in Africa,” explained Ivor Price, the editor-in-chief of Ventureburn, a publication about startups, entrepreneurship and venture capital.
However, with funding programs availing the required capital for some startups, Price warns of the need to channel investments appropriately.
“There is a need to ensure that climate-tech investment is channelled towards sustainable technologies that have a real impact on reducing emissions and mitigating climate change,” he concluded.
The 2023 AfricArena’s State of Tech in Africa confirms a rapid increase in climate startups in Africa in the past 15 years.
Briter Bridges’ Adapt, Migrate and Grow 2022 report shows that funding values in cleantech in Africa increased from 5% in 2021 to 15% of total venture capital funding in 2022.
While the share of venture capital deals directed to Africa remains relatively low compared to other regions, the figures are growing for clean techs.
According to Henrik Elschner Pedersen, IFC Regional Industry Director in Africa for Manufacturing, Agribusiness, and Services, funds like AfricaGoGreen are particularly important for Africa’s energy transformation.
“It is also expanding access to electricity, green building, and e-mobility solutions,” he noted.
AfricaGoGreen Fund aims to raise $250 million at a final close, with the second round raising its current funding to $138 million.
A 2022 report by the Climate Policy Initiative indicates that Africa needs $2.8 trillion, or $250 billion annually, between 2020 and 2030 to implement its Nationally Determined Contributions (NDCs).
This is against the current climate inflows of $30 billion, slightly more than 10% of the required amount.
AfricaGoGreen’s beneficiaries include AktivCo, an activity-driven subsidiary of Camusat Group, which received $4 million as a debt fund to support the construction of renewable energy power plants for telecom towers, replacing diesel generators.
Through the funding, AktivCo reports, it will manage the execution of these greening projects in Niger, Chad, Cote d’Ivoire, Cameroon and Burkina Faso.
In 2022, BBOXX received financing of US$5.5 from AfricaGoGreen to aid the mitigation of 760,000 tonnes of CO2 by providing clean energy and cooking solutions. BBOX is active in the Democratic Republic of Congo, Rwanda, Togo, Kenya, Nigeria and Burkina Faso.
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Recent funding increases for nature-based solutions are creating opportunities for green startups in Africa, leading to a rise in cleantech ventures. AfricaGoGreen Fund (AFGGF) has secured $47 million in its second fundraising round, with contributions from the International Finance Corporation (IFC), African Development Bank (AfDB), Nordic Development Fund, and Sustainable Energy Fund for Africa. The fund's focus includes rooftop solar, battery storage, high-efficiency appliances, industrial equipment, and green buildings.
Additional financial support is seen from the Africa Climate Change Fund (ACCF), which provides grants between $250,000 and $1 million per project to various entities across the continent. Despite challenges in raising capital, climate-tech investments in Africa are growing, with 15% of venture capital funding directed to cleantech in 2022, up from 5% in 2021.
IFC Regional Industry Director Henrik Elschner Pedersen highlights the importance of funds like AfricaGoGreen in Africa's energy transformation and access to green solutions. The fund aims to ultimately raise $250 million and has already supported projects like AktivCo's renewable energy power plants and BBOXX's clean energy and cooking solutions, which contribute to significant CO2 mitigation.
Despite progress, Africa needs $2.8 trillion between 2020 and 2030 to meet its climate goals, far exceeding the current funding inflows of $30 billion per year. Ensuring investments are channeled towards effective, sustainable technologies is crucial for maximizing their impact on emission reductions and climate change mitigation.
