The first half of 2024 has witnessed significant shifts in the African venture investment landscape, marked by notable trends across various industries. Despite economic challenges and global investment headwinds, certain sectors have shown resilience, while others have struggled to attract investor interest. This analysis offers a detailed look into the performance and dynamics shaping Africa’s venture capital ecosystem.
FinTech Continues to Dominate, But Faces Decline
FinTech maintained its position as the most funded industry in Africa for the fourth consecutive year, securing 48% of total funding in H1 2024. However, this marks a slight decrease from 51% in H1 2023. This consistent lead aligns with broader trends in emerging markets such as Southeast Asia (SEA) and the Middle East and North Africa (MENA), where FinTech also remains the top-funded sector. Notably, major deals like the $100 million MEGA deal by Nigeria’s Moove Africa have been instrumental in sustaining FinTech’s dominance.
Despite its leading role, the sector faced a 59% year-on-year (YoY) decline in funding, reflecting broader global market corrections and risk aversion among investors. The sharp drop in the number of accelerated deals, from 32 in H1 2023 to just one in H1 2024, further underscores the challenges within the FinTech space. This trend suggests that while FinTech remains a cornerstone of Africa’s investment landscape, it is not immune to the wider economic pressures impacting the venture capital market.
Agriculture and Logistics Show Growth Potential
Agriculture emerged as a noteworthy contender, climbing two ranks to become the third most funded industry. This rise is largely attributed to significant deals such as the $28 million investment in SunCulture, which accounted for 93% of the total funding in the sector. The increased focus on agriculture underscores a shift towards sectors with substantial socio-economic impact, particularly those that address food security and sustainable development.
Similarly, the Transport and Logistics (T&L) sector recorded a 36% YoY increase in funding, driven by deals like Roam’s $14 million funding round. This growth highlights the critical role of logistics and transportation infrastructure in supporting Africa’s economic development, especially in enhancing trade and connectivity within and across borders.
Healthcare and E-commerce/Retail Face Challenges
Contrasting the positive momentum in agriculture and logistics, the healthcare sector experienced a steep decline in funding, primarily due to the absence of significant Series “B” investments. This marks a departure from H1 2023, where healthcare deals by companies like Helium Health and Yodawy were pivotal in driving investment. The lack of follow-on funding rounds suggests that healthcare startups may face challenges in scaling beyond early-stage investments, potentially impacting the sector’s long-term growth prospects.
In a surprising shift, the E-commerce/Retail industry, which had previously shown strong performance, recorded no exits for the first time since H1 2017. This trend mirrors the MENA region, where E-commerce/Retail also saw a hiatus in exit activities. The stagnation in E-commerce exits highlights the need for strategic pivots and innovation within the sector to revive investor interest and facilitate liquidity events.
Conclusion
The industry trends observed in H1 2024 reflect a complex interplay of global economic factors, regional market dynamics, and sector-specific developments. While FinTech continues to lead in funding and transaction volumes, the sector’s growth is slowing, prompting investors to explore opportunities in agriculture, logistics, and other emerging industries. The varying performance across sectors indicates that African startups and investors must remain adaptable and strategically aligned to navigate the evolving venture capital landscape. As the year progresses, these industry trends will play a crucial role in shaping the future of venture investments in Africa.
Source( Magnitt H1 report).