According to a recent report by TechCabal Insights, female-led startups in Africa raised over $200 million in funding between 2019 and 2023, a significant achievement that underscores the growing recognition and support for women-led businesses. According to Disrupt Africa, 40% of venture capitalists (VC) investing in African startups between January 2022 and April 2023 had at least one female founder, partner, general partner, or managing partner. Among the Africa-based VCs active, this number goes up slightly to 47.8%.

While the funding figure represents only 1.54% of the total funding raised by startups during the same period, it highlights the immense potential and untapped opportunities for female entrepreneurs on the continent.

The fintech sector emerged as the most funded area for female-led startups, accounting for 27% of the total funding received. This trend reflects the growing demand for digital financial services and the innovative solutions these startups provide to address the continent’s unique challenges.

Geographically, East Africa has emerged as a hub for female-led startups, with Kenya leading the pack, attracting over $92 million in funding between 2019 and 2023. Nigeria, Tanzania, and Egypt also stand out as countries where female founders have secured significant investments, collectively accounting for nearly 80% of the total funding raised by women-led startups during the same period.

Notable startups led by female founders have made remarkable strides, raising substantial funds to scale their operations. Anu Adasolum’s B2B e-commerce platform, Sabi, secured $59 million, while Lesley Marincola’s software startup in Kenya, Angaza, raised $29.5 million. Other notable female-led ventures include Aisha Pandor’s home services platform SweepSouth ($20 million), Miishe Addy’s logistics startup Jetstream ($16 million), and Hilda Moraa’s fintech company Pezesha ($12.6 million).

Despite these remarkable achievements, the report highlights the persisting funding gap faced by female founders, particularly in certain regions like Central Africa, which received only 0.7% of the total funding during the period under review.

As Maya Horgan Famodu, Founder and Managing Director of Ingressive Capital, aptly stated, “The most important work that investors and stakeholders can do is to stop focusing on women as a group that needs to be helped, aided, or in some way considered incompetent… If we just focused on performance metrics and removed all other distractions, it would be a lot more of an egalitarian and equitable investing, entrepreneurial, and hiring ecosystem.”
The African tech ecosystem stands at a pivotal juncture where embracing diversity and fostering an inclusive environment for female founders is not only a moral imperative but also a strategic business decision. By championing and investing in these trailblazers, the continent can unlock its full potential, drive innovation, and create a more equitable and prosperous future for all.

As we continue celebrating African women, TechCabal Insights invites you to a live event on Wednesday, March 27, where we discuss ways to drive digital gender inclusion in Africa. You can preregister for the event by visiting this link.

See you soon!

Over 1.4 million kilometres of these cables are spread across the earth’s oceans, with France, the US, and Japan being the major suppliers. According to data from Submarine Networks, Egypt has the most subsea cables landing in the continent, with 15. This is followed closely by South Africa and Djibouti, with 11, while Nigeria, Cameroon, and Kenya have six each.

Although the scale of the incident was unprecedented in Africa, cable cuts are relatively common. Around 100 of them happen on an annual basis, on average. Most service providers try to avoid a single point of failure by spreading their network capacity over multiple cables as a backup, which is why you don’t often hear of them. The most common cause of cable faults is human activities. However, MainOne ruled out human activity as the cause of the internet disruption in Africa and suggested it was caused by “some form of seismic activity on the seabed.”

Estimates vary over when full service will be restored. Ghana’s National Communications Authority (NCA) said complete repairs could take up to five weeks. 

Some internet users in Nigeria observed that some Google services, like YouTube, remained accessible during the outage. Mobile network Globacom also announced that it was unaffected by the disruption. Meanwhile, the Nigerian Communications Commission (NCC) disclosed that internet services are now at 90% capacity.

In South Africa, four undersea cables went offline at once. The load-shedding challenge combined with the internet outage has made Starlink an appealing alternative to South African customers as it doesn’t use terrestrial or undersea backhaul infrastructure.

While the productivity and financial losses due to the outage may be unquantifiable at the moment, the silver lining may be that it lays bare the importance of building a more robust internet infrastructure on the African continent. 

Yet, the region produces only 10% of global output and imports most of the food it consumes. Around 82% of basic food imports still come from outside the continent. By 2021, food insecurity in Africa had risen alarmingly, affecting 794 million people—nearly 60% of its population.

Different factors contribute to this conundrum. Climate change has played a debilitating role, with attendant risks such as the loss of terrestrial, marine, and coastal ecosystems, thereby contributing to food insecurity.

The lack of large-scale industrialisation in the African agricultural sector is well-known, leading to far lower land productivity than the rest of the world. Another challenge is a wide investment gap. While several interventions have come from the African Development Bank (AfDB), the World Bank, and other multilateral institutions, government allocation to agriculture remains wanting. In 2021, the average government expenditure on agriculture in Africa was a meagre 4.1%. Private capital allocation—which is more efficient—also remains low. In the last decade, African agritech startups, per data from Agfunder, raised over $1.8 billion in funding. 

However, the figure pales considerably when placed in perspective with worldwide funding figures. For comparison, African agritech startups in 2022 raised just a little over 2% of the $29.6 billion in total global funding within that sector.
Despite these challenges, there are opportunities for agritech to solve some of these agelong problems with the aid of artificial intelligence (AI) and allied technologies. In an earlier report this year, we noted that Africa’s AI market is projected to reach $6.9bn in 2024, with widespread application across various sectors. We will explore use cases showing how AI can be beneficial.

The case for precision agriculture

A 2020 study on Nigeria’s agricultural sector noted that:

• Ninety percent of agricultural production in Nigeria is the output of inefficient methods and deficient input use by small-scale farmers.

• Nigeria uses 18kg/hectare of inorganic fertiliser, compared to a global average of 100kg/hectare.

• Only 5% of Nigerian farmers use and access seeds of improved varieties compared to 25% in East Africa and 60% in Asia.

• Ten tractors exist for every 100 hectares, compared to Indonesia, which has 241 tractors per 100 hectares.

Another analysis by McKinsey determined that African agriculture had unrealized potential and could produce “two to three times more cereals and grains, which would add 20% more cereals and grains to global output.”

In light of these reasons, precision agriculture, which employs climate-smart solutions using advanced technology and sensor tools to aid crop management decisions and improve crop yield, has become vital. Other uses of AI in agriculture include pest and disease detection, harvesting and sorting, livestock management, and supply chain optimization.

India’s Agricultural Success Story Powered by AI

In 2020, the Indian centre of the World Economic Forum, in partnership with India’s Ministry of Agriculture and the state of Telangana, launched the AI4AI initiative (AI for Agriculture Innovation). Over eight months of workshops with smallholder farmers were organized, educating them on implementing new technologies, including AI, drones, and blockchain. The framework proposed incorporating smart farming and data-driven agriculture to achieve the end goals.

The pilot program was tested among 7,000 chilli farmers for 18 months over three crop cycles. Here are the key findings:

• An important component of this initiative was a WhatsApp chatbot developed in collaboration with an open-source developer. Designed in the local language of the farmers, the chatbot provided farmers with timely prompts in line with the maturity stages of their crops.
• An agritech startup built soil testing centres powered by machine learning technology that provided AI-based quality testing and a digital platform for buyer-seller connections.
• Farmers reported a significant increase in net income: $800 per acre in a single crop cycle (6 months), double the average income. They also significantly reduced wastage, which was as high as 40% before the start of the initiative.
• Digital advisory services contributed to a 21% increase in chilli yield production per acre.
• Pesticide use decreased by 9%, and fertilizers dropped by 5%.
• Quality improvements led to an 8% increase in unit prices.
• The initiative’s success led the state government to increase the number of crops to five and scale it to ten districts covering 500,000 farmers. 

India’s success story, while commendable, is not isolated. In Senegal, there has been research into how combining algorithms with Internet of Things (IoT) detectors can develop sustainable automated irrigation systems. A World Bank study showed promising results from Ethiopia, Tanzania, and Uganda by highlighting how machine learning can help achieve transformational agriculture by optimizing clusters.

Local startups are also buying into these solutions. Nigerian-based agritech Kitovu employs an AI and data-driven agronomic advisory that uses remote sensing to provide insights for reducing input costs, increasing yield, and offering precise inputs and personalised soil and crop health analysis. East Africa-based Grekkon also specializes in AI-powered irrigation and greenhouses that serve tens of thousands of farmers.

Despite the stated benefits of AI, it still carries limitations. According to Adewale Adegoke, CEO of AgroXchange, an agricultural digital platform, the biggest challenge towards implementing precision agriculture remains data accessibility, especially for farmers who may find it tough to stay at pace with constantly emerging data. 

There are also cultural impediments, like convincing farmers steeped in one way of farming to adopt new technologies. Much of the work requires mass education and a strong will to power through on the part of entrepreneurs who are invested in adopting AI at scale. It is, however, no longer a matter of blind faith—we now have ample evidence to show that AI can supercharge Africa towards the next phase of the agricultural revolution.

The event was packed with highlights and action points that serve as an invaluable resource for participants. Here are three that stood out for us:
2023 was a reality check—leave your entitlement at the door
For Nadayar, the silver lining behind the 2023 investment cloud was that it served as a reality check for investors. While acknowledging that most information is private and within companies, he noted the challenges startups face, including regulatory threats, macroeconomic headwinds, and funding cuts.

He commended the resilience of African founders despite limited global funding. As challenging as things were, he insisted that “it could have been a bigger bloodbath.” Nadiyar advised on the need for companies to reinvent themselves, a sentiment that Moses shared when he noted that companies are pivoting, with a stronger emphasis on more B2B and less B2C models. “We should be thinking of how to prioritise profitability and sustainability and move away from an entitlement mentality towards funding.”

Debt funding is great for African tech—but it should be localised

Last year, there were 45 recorded debt deals in Africa, and for Ory, it’s a good thing noting, “While debt funding is sector agnostic, I think it’s a great development. However, there are challenges in how it’s currently structured.” Ory believes there’s a mismatch of instruments since much of the equity funding could be structured as debt instead, particularly working capital and assets, because it otherwise creates a premature dilution for founders who have no skin left in the game by the time they get to Series A or B.

Another challenge she notes is that the debt coming in is in US dollars, which is tough in light of multiple devaluations affecting local currencies. She maintained that rethinking around exploring local currency debt will help grow startups while protecting them.

An exit is an exit—take whatever wins you can

As much as it’s great to hear news about emerging tech unicorns, current realities require a different focus. Investors consider mergers and acquisitions a lifeline, with exits becoming rarer. This point was expanded on by Ory, who said, “It doesn’t matter how big an exit is, an exit is an exit. It might not be the 10x you hoped for, and it could even be a down round, which constitutes a challenge. But you must remember that this is a tough environment. So, if this merger and acquisition option gives a founder time to breathe, go for it.”

She added that for earlier investors, this option creates liquidity. “In a few years, people will say VC doesn’t work in Africa because we have not had enough liquidity. Remember, these are people who are putting in money expecting a return. Maybe what will change is that the return expectations shift, but we don’t want to be in a place where you put your money in and get nothing out.” 

Ory also tasked us with building transparency and what she calls an “M&A muscle” to make it more viable. She suggested that TC Insights build an index of M&As and secondary markets that could be a helpful resource for investors.

Other interesting subjects were discussed around expansion strategies, data protection, artificial intelligence, regulation and compliance, consumer behaviour, and switching costs. You can catch up on the full event by clicking this link.

Venture Capital (VC) experienced a funding decline of 40.2% compared to 2022, forcing innovative entrepreneurs to explore alternative avenues. However, fintech stood strong, maintaining its status as the most funded sector despite a 79% dip in funding.

Weathering the storm explores the strategies for growth and adaptation. One silver lining was the utility of mergers and acquisitions as a startup lifeline, which will remain a mainstay in 2024. For all the challenges faced, 2023 still recorded the single largest acquisition deal in the history of African tech, with fintech, once again, being the pacesetter. The report also examined multimarket models and pivots, highlighting notable examples that can serve as a compass for investors needing a strategic shift. 

Regulation and policy look at the regulatory framework shaping African tech as policymakers and innovators thread carefully between navigating the digital frontier and staying compliant, in line with best practices. It covers regulation around digital identity, financial inclusion, cryptocurrency, open banking, anti-competition and data protection.

For our two-part survey, we collated primary data to provide a nuanced understanding of the impact of tech layoffs on the workforce and a founders’ outlook for 2024, offering a real-time pulse on the sentiments within the tech community.

Lastly, we provide an outlook for the future. What does the uncharted terrain look like? Can bootstrapping take the place of VC funding? What imperatives lie ahead for founders, investors, and policymakers alike? Which trends from the past can serve as a prognosis for 2024? What multipolar forces will define Africa’s digital economy in the future?

The answers to these and more can be found in our State of Tech Report Q4. Click this link to download it. We also value your feedback. Help us fill this brief survey to let us know how our reports can serve you better.

On the other hand, the challenges have led to deeper thinking among investors, who are now looking at novel ways to adapt and build resilience for 2024. One such way is through the predicted rise of mergers and acquisitions. Another is a renewed focus on secondary markets for liquidity lifelines. These ideas and more have been captured in our newly released 2023 Watershed Report, which provides startups with the unique opportunity to solve huge problems using innovative solutions.

Here are a few highlights from the report:

• A decade that has seen startups raise close to $20 billion in funding
• Prospects of an emerging local venture capital market
• Contending with economic headwinds vis-a-vis evolving regulatory directions
• New ways to unlock value
• Leveraging data and an informal approach backed by empirical evidence

To get actionable insights from this report, please visit: https://techcabal.com/report/watershed-report-building-for-2024/

BVN

In February 2014, the CBN deployed a centralised BVN system with a clear mandate to institute effective Know Your Customer (KYC) standards, provide biometrics solutions for identity management, combat fraud, and promote an efficient payment system. The Nigeria Inter-Bank Settlement System (NIBSS) was tasked with providing the Application Programming Interface (API) for financial institutions to integrate their systems into the BVN database. 

In 2019, the CBN set a five-year target to hit 100 million registered people in the BVN database. As of December 2023, 59,956,056 accounts have been registered, per NIBSS, placing it 40% short of the benchmark. Based on the CBN’s December 2022 Financial Stability Report, there were 159.42 million active customer accounts. 127.92 million of these were linked with BVNs. The gap in the figures is primarily because the CBN’s data includes individuals with multiple accounts, while NIBSS’s is unique. 

Notably, there was nearly one BVN for every three active bank accounts in 2022, up from about one in two in 2017. The data suggests the trend will continue to rise.

This disparity benefits payment platforms in the fintech space that allow customers to open wallets and operate them easily, compared with the stringency of creating and maintaining a traditional bank account. However, while introducing the BVN has certainly helped entrench financial inclusion, bad actors have also targeted it. 

A study by the Nigerian Financial Intelligence Unit (NFIU) disclosed that between 2015 and Q1 2018, 9,517 suspicious activity reports (SAR) were filed, with 6,503 of them (68.3%) being BVN-related. As of December 2022, 7,399 BVN-linked accounts were placed on a watchlist by the CBN under suspicion of fraudulent activity. Factors attributed as causes include the random issuance of affidavits in place of original documents and insider abuses by financial institutions.

To ramp up the BVN drive in the Nigerian financial system, the CBN has announced that it will freeze accounts not yet linked to BVNs and NINs from April 2024.

NIN

Based on the most recent data from the World Bank, only 42.6% of Nigerians have birth certificates, which speaks to a gap in identity management. In 2020, the World Bank entered into an agreement with Nigeria for the Digital Identification for Development project. Its collaboration with the National Identity Management Commission (NIMC) aimed to capture 148 million Nigerians and provide them with a digital ID by June 2024. The figure represents 65% of the projected population of Nigeria.

As of December 2023, 104.16 million Nigerians had been issued NINs; 59.12m (56.8%) were male, and 45.04m (43.2%) were female. This marks a 10.77% increase from the 94.03 million registered in 2022 but would almost certainly fall short of the target set for 2024. Lagos, Kano, and Kaduna, with 11,427,825, 9,196,640, and 6,451,081 enrollees, respectively, account for 26% of all NIN registrations.

Voter registration

The Independent National Electoral Commission (INEC) began digitising the voter database in 2010 when the Electronic Voters’ Register (EVR) was introduced in preparation for the 2011 general election. Since then, there have been notable technological upgrades, including the Bimodal Voter Accreditation System (BVAS) and INEC’s Results Viewing Portal (IReV). The upgrades were touted to restore trust in the electoral process by eliminating duplication and minimising discrepancies. 

While there has been success in integrating biometrics, the jury remains out on how effective this has been. Leading up to the 2023 elections, around 45% of “completed registrations” were deemed invalid by INEC for reasons including incomplete data and complicity by INEC staff in infractions that invalidated the process. During the general elections, the BVAS failed, in some instances, in accrediting voters despite having captured their biodata. Doubts have also been raised about the integrity of the voter register with allegations of underage voters, fake identities, and questions over a historically low turnout of 27% despite a record number of registered voters at 93.4m.

SIM registration

The Nigerian Communications Commission (NCC) is legally mandated to maintain a central database and institute data and confidentiality protection for all telecom subscribers. In 2022, the total number of registered SIM cards crossed 300 million. However, a sizable fraction of those are inactive. As of August 2023, the NCC revealed that there were 220 million active subscribers distributed among four major operators. 

An estimated 12.4 million phone lines are yet to be linked to their NINs, prompting the NCC to issue an ultimatum of February 28, 2024, before those lines are barred from placing or receiving calls. 

Passport 

The biometric passport was first adopted in 2007. Since then, efforts to ensure the collection of passports often take a long waiting time and are encumbered with issues, including a shortage of booklets. Fast-tracking involves high costs and back channels, contributing to a slower adoption rate than other forms of identification. 

The latest developments show some promise as e-passport issuance has now been automated after it went live on January 8. A step-by-step guide on how to apply for a passport online can be found here.

However, a publicly available database on passport issuance in Nigeria is hard to come by, and even the most recent report on passport applications from the Nigerian Bureau of Statistics (NBS) dates back to 2018. It disclosed that 1,011,158 passport applications were received in 2018, up from 720,958 in 2017—a 40.25% increase. Recent trends suggest that the demand for passports has not waned. In 2022, the ministry of interior revealed that it had received an unprecedented 750,000 applications in the first five months, issuing 625,000. Overall, around 1.7 million passports were said to have been issued that year, per the ministry.

Driver’s license

The harmonisation and digitisation of the driver’s license have undergone various phases since the first national driver’s license (NDL) was produced in 1990. The Federal Road Safety Corp (FRSC) is the agency tasked by law to regulate and digitalise NDLs.

In the early days, NDLs were created using standalone computers that captured biodata. Biometrics were manually placed before the cards were sent to the Nigerian Security Printing and Minting Company Limited for lamination. Over time, the NDLs evolved and assumed more sophistication. The current NDL is the Enhanced National Driver’s License Scheme (ENDLS).

In 2022, NDLs issued crossed one million for the first time, based on FRSC records. As of Q2 2023, the FRSC produced 161,246 NDLs, up from 124,684 in Q1 2023. Nevertheless, the FRSC has disclosed that network bandwidth issues are a major challenge in digitising NDLs. Slow network speeds mean applicants wait unnecessarily long periods to capture their biodata. 

In conclusion, Nigeria is on track towards establishing a robust digital identity architecture, with the financial sector as proof of its tangible benefits. The NIN is pivotal in this endeavour, weaving through various applications as the common thread. 

More strategic measures can be put in place to optimise the momentum gained so far. These include the consolidation and regular auditing of databases, prioritising outreach efforts in historically disenfranchised rural areas, intensifying educational initiatives to articulate the advantages of digital identities, cultivating a data-driven culture, eliminating regulatory bottlenecks, fostering transparency, and fostering more partnerships—particularly between the government and corporate entities with proven mechanisms for advancing digitisation. 

Ultimately, Nigeria’s digital identity will continue to evolve, paving the way for a more inclusive and technologically empowered future.

In 2022, funding raised by African startups peaked at $5bn. As of November 30, 2023, this figure stood at $3.246bn, which, so far, shows a stark 36% dropoff from last year, highlighting the difficulty investors faced in raising funds in 2023. The number of $1m+ equity deals also waned significantly from a high of 125 in Q1 2021 to 42 in Q3 2023.

Despite the low numbers, 2023 had some positives. Notably, a new African unicorn emerged in the shape of MNT-Halan, the Egyptian fintech startup. Firms like Partech—via its Africa II fund—and M-Kopa raised money above their expectations, exceeding $250m each. Flutterwave made strides towards its goal of an initial public offering (IPO) after being cleared of financial misconduct in Kenya, and Nigeria’s central bank shifted its posture on crypto to adopt a crypto-friendly policy stance. So, what trends should we look out for heading into 2024?

• Funding downturn and cost-cutting measures likely to remain 

In 2023, fintech, logistics, and e-commerce platforms, which traditionally attracted heavy funding, witnessed a slowdown marked by downsizing and, in some instances, shutdowns. In Q1 2024, startups will likely continue cost-cutting measures and refocus on unit economics in an uncertain funding environment. This could be anything from localizing costs and scaling back operations, raising funds in local currency, revising medium to long-term goals by prioritizing survival, and reducing exposure to markets susceptible to foreign exchange volatility. Recent trends point to this, as we have seen companies like Paystack scaling back its activities outside Africa and Jumia shutting down its food delivery business. Resilience will be the watchword.

• Consolidation via mergers and acquisitions

Seven mergers and acquisitions deals (M&A) led the way in African tech at the beginning of 2023, valued at ~$710m, with Biontech the pacesetter by acquiring AI firm Instadeep for $680m. More recently, there have been merger talks by B2B platforms Kenya’s Wasoko and Egypt’s MaxAB, which, if finalized, would make it the largest merger within the e-commerce subsector. So far, there have been at least 29 such deals, although most have been for undisclosed amounts.

Market dynamics, capital availability, and startup agility drive M&A in Africa, often initiated by larger companies looking to acquire earlier-stage companies on the path toward going public. The presence of numerous small and medium-sized companies operating across diverse regions and sectors creates a fragmented market. By coming together, they can be better equipped to compete in the global market and attract investments. Expect such collaborations in 2024.

• Artificial Intelligence to gain wider application

Beyond its widespread use in large language models (LLMs), there will be more integration of artificial intelligence (AI) across diverse sectors ranging from payments to health infrastructure. However, digital commerce platforms are likely to adopt AI tools using surgical precision rather than implementing them on a sweeping scale.

Africa’s AI market is projected to reach $6.9bn in 2024. Most of it will be powered by machine learning, natural language processing, and autonomous and sensor technology. 

• African investors to maintain cautious optimism

A survey by the AVCA on the expectations of 88 African investors, including Limited Partners (LPs) and General Partners (GPs), noted that 85% of LPs plan to increase their allocation to private capital in Africa over the next two years, with impact (77%) and investment mandate (68%) identified as their primary reasons. Data from our Founders’ Outlook Survey revealed that 65% of investors maintain an optimistic outlook for the African startup ecosystem in 2024.

The optimism does not appear misplaced, as the Financial Derivatives Company projects that inflationary pressures will ease across Africa, falling from 18.6% in 2023 to 16.1% in 2024. The Economist Intelligence Unit (EIU) predicts that “Africa will be the second-fastest-growing major region in 2024, with most countries increasing economic growth compared with 2023. East Africa is expected to champion African growth.” However, the EIU also says many African countries will feel the weight of excessive debt and a heavy repayment burden in 2024.

• Possible shifts in regional preferences

In 2024, investors could reevaluate their regional strategies in response to changing macroeconomic and political conditions. Per the EIU, fifteen African countries have elections next year, and investors will observe their outcomes keenly. Elections are fraught with risk, especially in regions where armed conflict is rampant. The EIU notes that elections in Algeria, Egypt, Ghana, and South Africa will add to political risk, which could have long-term implications on where investors put their money.

The AVCA survey revealed that LPs favored investing in West Africa while GPs leaned towards East Africa. The data aligns with this: between 2019 and 2023, per The Big Deal, there were over 700 recorded deals worth $1m or more. West Africa led the pack with 246, East Africa with 175, Northern Africa with 160, Southern Africa with 147, and Central Africa with 14. Depending on the degree of confidence, the numbers could realign with investors becoming more risk-averse. It’s all “wait and see” going into 2024.