Although the novel coronavirus outbreak is still a big blow on the economies of some African countries, but the story is not any different with the global economy, as it shrinks with about 4.3%, according to the World Bank and foreign direct investment to Africa dropped by 18% in 2020.
However, the the venture funding market in Africa also suffered a decline by 29% in total value, according to a new report by Partech Research. Despite this decline in the market size, the Africa’s startup ecosystem recorded a higher number of deals, increasing by some 44%.
Seed round deals on the continent rose from 127 to 228. The latest report showed that capital funding for African startups would amount to between $2.25 billion and $2.8 billion in 2021.
According to the report, Nigeria is Africa’s top-performing market, despite ranking low on the ease of doing business. Kenya occupies the second position, according to the report. Today, Nigeria and Kenya are the hotspots for African VC investment, raising $307 million and $305 million respectively in 2020.
Nigeria startups, according to the Partech report, received the most investment in 2020 at a total value of $307 million in 71 deals and an average deal size of $4.3 million.
“This is 59% lower than the $747m invested in 38 deals at an average of $19,7m in 2019m,” the report said.
Furthermore, Egypt aces the startup ecosystem in North Africa, attracting $269 million in venture funding while South Africa had $259 million. Ghana attracted $110.0 million.
Below are African countries with thriving startup activity:
Nigeria: $307 million.
Kenya: $305 million
Egypt: $269.0 million
South Africa: $259.0 million
Ghana: $111.0 million
Rwanda: $11.6 million
Uganda: $11.3 million
Morocco: $11.2 million
Cote d’Ivoire: $6. 5 million
Algeria: $5.5 million
Meanwhile, the report also projects that VC investment in Africa is expected to reach between $3.4 billion and $4.7 billion by the year 2023 and hit $10 billion by 2025.
“While the pandemic resulted in major setbacks in 2020 with growth declining 29 percent, the good news is that major improvements are expected. In 2022, VC investment is expected to climb sharply to between $3.8 billion and $4.7 billion while the upper range is expected to be $6.8 billion by 2023. By 2025, VC investment in Africa is forecast to exceed $10 billion,” the report said.
“This is thanks to a number of factors such as an increased allocation of capital from corporates to their corporate VC activities, acquisitions of African tech companies, intensified FDIs and major initiatives from Europe such as the Enrich in Africa program.”