Kenya and Egypt Soak Up Over Half of African VC Funding Amid Capital Squeeze

Kenya and Egypt have made major gains in the African venture capital stakes, sweeping up most regional funding as African startups continue to face a capital crunch that started in 2023.

Egypt and Kenya have raked in over half of Africa’s venture capital funding for the year to date, as the continent faces a sharp annual drop in investment inflows.

Figures from Africa: The Big Deal show that the two countries collectively hauled in 75% of all venture capital in the third quarter of 2024.

 

Egypt led with US$272 million, accounting for 43% of the total, while Kenya followed closely with US$201 million, or 32%, The Big Deal’s figures showed.

This concentration of capital reflects changing market dynamics and the resilience of these markets amid a broader funding drought across the continent.

So far in 2024, Kenya and Egypt have together secured US$437 million and US$373 million, respectively, making up 58% of all venture capital raised on the continent this year.

It’s the highest share on record for both countries since 2019, potentially marking a shift in where capital is flowing within Africa’s start-up scene.

Deals in key sectors like fintech and renewable energy have helped these markets maintain their appeal to investors despite tightening global financial conditions.

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While Egypt and Kenya have been raking in capital, Nigeria — a long-time heavyweight in Africa’s venture scene — has seen its fortunes change.

The country has only hauled in US$218 million so far in 2024, accounting for just 15% of the continent’s total.

This is a significant drop from the 35% average share Nigeria enjoyed between 2019 and 2022. South Africa isn’t faring much better, with its share slumping to 9% this year, the lowest since 2019.

These declines hint at changing market dynamics, with tighter financial conditions and investor caution due to political and regulatory challenges driving capital away from what were previously dynamic markets. Total funding for 2024 is significantly down on previous figures. The Big Deal previously reported that the total funding raised in Africa in 2023 was US$2.9 billion, a 39% drop from 2022.

Investors are increasingly looking for stability, and Egypt and Kenya seem to fit the bill.

While Egypt and Kenya see gains, other regions face a severe funding drought. Just 18% of total venture capital this year has gone to Africa outside of the “big four” (Egypt, Kenya, Nigeria and South Africa), with many countries failing to record significant inflows.

In Q3 alone, 38 African markets reported no major start-up funding, highlighting the growing concentration of capital in a few key markets.

There are a few bright spots outside the dominant duo. Tanzania, Ghana, and Rwanda have shown some growth, but this is often due to isolated big-ticket deals.

For instance, Tanzanian cross-border payment platform Nala raised US$40 million out of the country’s total US$53 million this year, while Ghana-based credit provider Fido bagged US$30 million of the country’s US$64 million in 2024.

The gender gap in venture capital funding is also a lingering issue. Less than 5% of the total investment in 2024 has gone to start-ups with female CEOs, down slightly from 5.6% between 2019 and 2023.

All-female founding teams received less than 1% of funding this year, pointing to the ongoing challenges women entrepreneurs face in securing capital.

Despite efforts to address these disparities, progress remains elusive, and the figures show that much more needs to be done to support female-led ventures.

With tightening global financial conditions, the outlook for Africa’s venture capital scene remains cautious, according to The Big Deal. Investors are becoming more selective, focusing on mature markets. This trend of concentrated funding may well continue, but emerging markets like Tanzania and Ghana show potential for future diversification as they gain traction.

The uneven spread of capital across the continent also raises questions about whether regions like Nigeria and South Africa, just recently major players on the continent, can bounce back.

Source:norvanreports.com