The impact of climate technologies is becoming more and more pronounced as the hottest investment destination, according to a report by “Africa: The Big Deal.”
Despite the global slowdown in startup funding, particularly in the previously dominant Fintech sector, Climate Tech attracted $325 million, representing 45% of all startup investments in Africa so far.
Being a broad term, climate technology encompasses a wide range of technologies and processes that are designed to address climate change.
This includes everything from renewable energy sources like solar and wind power; to energy efficiency measures like smart grids, and electric vehicles.
The report noted that, so far in 2024, startup funding in Africa has not been what it was the previous years. In line with a global context that remains quite gloomy, one of the key reasons is the significant drop in investments in the Fintech space.
Indeed, Fintech only represents 22% ($158 million) of the funding raised this year so far in Africa, while at the same time last year, it made up more than half of the total ($852 million out of $1.7 billion).
As a result, the sector attracting the most funding in 2024 so far is not Fintech but Logistics & Transport, accounting for 29% ($215 million). Energy & Water follows closely in third place, securing 18% ($132 million) of the total investments.
An analysis of the funding raised by startups in Africa between January and May 2024 reveals that Fintech attracted $30 million, Energy & Water $132 million, Deeptech $10 million, Logistics & Transport $95 million, and Agric & Food $68 million.
This indicates that Climate Tech accounts for 45% of the total funding announced on the continent this year, amounting to $325 million—an all-time high since tracking began in 2019. Climate Tech funding has seen consistent growth over the past five years, rising from $340 million in 2019 to $1.1 billion in 2023.
The investment boom in 2021 and 2022 did not benefit Climate Tech as much as other sectors like Fintech, leading to a decrease in its share of total investments: from 25% in 2019 and 32% in 2020 to just 14% in 2021 and 21% in 2022.
However, this trend reversed in 2023, with Climate Tech capturing 36% of the total investments. It appears poised for further growth in 2024, already accounting for 45% of investments so far, although surpassing last year’s $1.1 billion investment seems unlikely at this stage.
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