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Fintech drives Africa’s private investment boom


AFRICA’S private investment soared to 7.4 billion dollars in 2021 to hit a fresh historical high, driven by a startup funding boom, shows a new report.

A buzzing start-up scene on the continent last year helped Africa defy deep economic disruptions caused by the COVID-19 pandemic, to raise 5.2 billion dollars from 604 unique companies in 2021, according to the Africa private capital activity report 2021.

“The impressive growth in Africa’s investment activity over the year, which was driven by venture capital super-sized deals and large investments in Africa’s infrastructure space, further proves that investors are keen on balancing any short-term challenges against long-term growth potential,” said African Private Equity and Venture Capital Association (AVCA) Chief Executive Officer, Abi Mustapha-Maduakor.

Compared to 2020, Africa’s private capital deal value has more than doubled from 3.4 billion US dollars and surpassed the previous record of 4.8 billion US dollars reached in 2017.

Over a five year period from 2016, the historical annual average has been 4 billion US dollars.

According to the AVCA report, super-sized deals valued between 100 million US dollars and 250 million US dollars accounted for 40 percent of the total private capital deal value.

The rise in the number of super-sized deals was largely driven by the increasingly attractive financial technology (fintech) sector, which accounted for 60 percent of venture capital value and continues to gain prominence in Africa’s startup scene.

There were a total of 16 super-sized deals in 2021, involving 15 companies – 13 firms being in the financial sector, two from industrials and one in the consumer sector- raising a combined value of 2.6 billion dollars.

Among the largest deal within Africa’s Financials sector was the 400 million US dollars investment in Africa-focused fintech company, OPay.

Of the 16 super-sized deals, five catapulted their recipients – Opay, Flutterwave, Wave, Chipper Cash and Andela to African unicorn status (startups with valuations of over a billion US dollars).

“This rapid surge in African unicorns highlights the speed of, and prospects for, continental growth,” according to the report.

With the exception of Andela (a global job placement company), Africa’s most recent unicorns are all fintech companies.

A requirement to limit the use of paper cash transactions to curb the spread and severity of the deadly coronavirus in Africa sparked a fintech boom, offering new solutions to unbanked Africans and in the process creating a hugely attractive investment opportunity.

According to AVCA, international investors in Africa’s venture capital landscape accounted for 75 percent of the activity, while 25 percent were African Investors.

The continent also saw a significant investment in infrastructure, as private investors pumped in 1.8 billion dollars to fund the construction of data centres and projects in renewable energy, transport and telecommunication projects.

Infrastructure investments in 2021 accounted for 25 percent of the total deal value of the private capital as the report pointed to a future rise in funding to build African connectivity.

“This upward trend in infrastructure investing is a positive sign for the continent, given the wide infrastructure finance deficit which is estimated at around 100 billion US dollars per year, and needs to be filled to promote economic development in Africa,” said the report.

Multi-regional deals valued at 3 billion US dollars accounted for 40 percent of the total value of private capital investment, driven by mega deals of more than 100 million dollars with fintech also dominating multi-region deals.

West African countries had the largest share of multicountry details, while large infrastructure projects in Gabon’s transportation and renewable energy sectors saw growth in Central Africa, while investment in Southern and Eastern Africa halved.

By The African Mirror

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