by Bonface Orucho
Start-up funding clearly favours African climate tech startups, with companies in this sector attracting 45% of the total funding raised by tech startups in Africa so far in 2024.
According to an analysis by startup funding data tracker Africa: The Big Deal, the sector has received US$325 million so far in 2024. While significant in percentage terms, a major downturn in overall funding for African startups over the past two years has weighed on overall funding for the sector, after years of growth.
“Climate Tech funding has been growing in absolute numbers in the past 5 years ($340m in 2019, $344m in 2020, $613m in 2021, $959m in 2022 and $1.1b in 2023),” the report explained.
“After its share of total investments reaching 36% in 2023, it seems on track to grow again in 2024 despite the fact that topping last year’s US$1.1b invested in Climate Tech seems unlikely at this stage,” the analysis added.
Despite raking an impressive US$187 million in May, a surprise funding surge of 149% compared to investment funds tech startups raised in April, the sector has overally been dropping compared to previous years.
The Big Deal report attributes the slowdown primarily to a significant slump in funding within the fintech space. Once dominant, fintech startups have only managed to raise US$158 million so far in 2024, representing just 22% of total funding.
At the same time last year, funding to fintech stood at US$852 million of the US$1.7 billion raised by this time last year. This represented more than 50% of total funding then.
However, this year, climate tech has overtaken fintech. The climate tech sub-sectors attracting the most funding in 2024 so far are Logistics & Transport (29%, $215 million) and Energy & Water, which is a not-so-distant third (18%, $132 million).
“But what’s particularly interesting is to look at the proportion of funding that is going to ventures than can be considered as ‘Climate Tech’,” the Big Deal explained, highlighting that Climate Tech covers a wide range of use cases.
Climate tech companies offering fintech solutions in various African markets raised US$30 million, while logistics and transport firms secured US$95 million. Tech startups in agriculture and food innovations received US$68 million, and deep tech climate solutions garnered US$10 million. Leading the pack, energy and water tech companies attracted US$132 million in investments.
The continued funding interest in climate tech breathes hope into the future of climate transition and action in Africa, as innovators leverage technology to accelerate resilience efforts.
The impact of increased funding is already being felt, with global investors providing much-needed resources and expertise. This support has enabled innovations, such as battery swapping technology solutions, to increasingly grow across the continent.
Chinese EV-manufacturer, BYD, has for instance this week announced a partnership with Kigali-based EV line, Ampersand, to ramp up production to more than 40,000 electric motorcycles by the end of 2026.
Part of the plan is to scale not just the quantity but also the quality of the units, including high-quality battery solutions which will be more affordable.
“This partnership marks a major milestone for Ampersand as we continue to lead the charge in providing sustainable, cost-effective, mass-market EV solutions,” Ampersand CEO, Josh Whale, explains in a statement.
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African climate tech startups have attracted significant attention in 2024, securing 45% of the total funding for tech startups on the continent, amounting to $325 million. Despite this, the overall funding for African startups has seen a downturn compared to the previous years.
The report by Africa: The Big Deal highlights a growing trend in climate tech investment over the past five years, with annual funding rising from $340 million in 2019 to $1.1 billion in 2023. Although not expected to exceed last year's figure, climate tech funding is still on an upward trajectory.
In a notable shift, fintech startups, which once dominated the funding landscape, have seen a significant drop, raising only $158 million so far in 2024 compared to $852 million by the same time last year. Climate tech sub-sectors such as Logistics & Transport and Energy & Water are leading in funding, with $215 million and $132 million respectively.
Climate tech ventures are diversifying, covering areas like fintech solutions, logistics, transport, agriculture, food innovations, and deep tech, which all collectively contribute to the sector's growth. The continued funding interest in climate tech is spurring innovations aimed at enhancing climate resilience and infrastructure in Africa.
Partnerships, such as BYD's collaboration with Ampersand to produce over 40,000 electric motorcycles by 2026, highlight the sector's potential. Increased investments and technological advancements are expected to improve the quality and affordability of sustainable solutions in Africa.
