TechCabal Insights presents trends and occasions in African tech throughout the second quarter of the yr: Sectoral funding, expansions, acquisitions, rules, and extra.
In our evaluation of trends and occasions in Q2 2023, we offer a glimpse into the main strikes and the occasional rocky street in the African tech ecosystem. Let’s dig deep into the information, as we discover the highs and lows, the triumphs and challenges that outlined the ecosystem throughout the recently-concluded quarter.
Funding: A rollercoaster journey
Image supply: Ayomide Agbaje/TechCabal Insights
Notably, enterprise funding reached $621.8 million in May from 34 introduced offers—a 42% year-on-year improve from May 2022. This was pushed by two mega offers: M-Kopa securing $255 million in a debt-and-equity financing spherical and SunKing’s $130 million securitisation deal. This was not like the momentum in April and June which had offers amounting to $129.8 million from 23 introduced offers and $126.2 million from 25 introduced offers respectively.
While the figures present a basic slowdown in funding for African startups, the quarter nonetheless witnessed a powerful feat. A complete of $877.8 million was raised throughout 220 startups, representing a 6.9% improve from Q1 2023. Although these numbers fall brief of the $1.2 billion raised in the corresponding quarter of the earlier yr (Q2 2022) at a 23.63% decline.
Image supply: Ayomide Agbaje/TechCabal Insights
Sectoral breakdown: Energy (cleantech) surpasses Fintech
Startups working in the vitality, fintech, and logistics sectors emerged as the frontrunners in Q2 2023. Unlike earlier quarters, fintech startups didn’t obtain the largest share of VC funding. Energy-focused startups changed them, elevating $486.9 million, which accounted for 53% of the complete funding in the quarter. Contrary to expectations, the funding panorama for African fintech in the earlier quarter didn’t reside as much as the anticipated ranges of success. For instance, the quantity of fintech startups securing funding in June 2023 was fairly restricted, leading to a subpar efficiency in phrases of capital funding from enterprise capitalists, angel traders, and accelerators. It is noteworthy that, so far, no African fintech startups have managed to safe mega-equity offers (exceeding $100 million) solely via debt funding and grants.
Nigeria takes the lead
In the race for enterprise funding, Nigeria sprinted forward in Q2 2023, leaving different Africa’s Big 4 international locations Kenya, South Africa, and Egypt on the path. Nigerian startups secured $462.4 million, whereas Kenya adopted with $149.3 million. South Africa and Egypt obtained $214 million and $6.1 million respectively, experiencing a decline from their earlier quarter’s highs. Notably, Kenya’s rise this quarter will be attributed to the mega offers that native startups in the nation closed, which performed a big function in toppling Egypt from its earlier place. These figures additional spotlight the dynamic nature of the startup panorama in Africa, with every quarter bringing new alternatives and challenges for each startups and traders.
Expansions: Broadening horizons
Expansion is the title of the recreation as African startups search to deepen their market presence to drive each operational and income progress. This earlier quarter, TechCabal Insights tracked 4 noteworthy enlargement strikes, an identical determine to Q1 2023’s however a pointy drop from the eight tracked in Q2 2022. Nigerian auto-financing startup, Autochek, took a significant leap ahead by buying a majority stake in Egyptian startup, AutoTager, successfully increasing its footprint throughout 9 African international locations. Also, Ghanaian agri-tech startup Farmerline unfold its wings into Francophone Africa, launching its operations in Ivory Coast.
Ecosystem turbulence: Major strikes and rocky occasions
Fintech fraud and cybersecurity issues
In June, two South African corporations witnessed cyberattacks. The first incident concerned hackers gaining unauthorized entry to MultiChoice’s streaming platform, Showmax, allegedly exposing greater than 27,000 usernames and passwords. Meanwhile, Heritage Bank in Nigeria reported an insider hack price ₦49 billion ($83 million) in buyer funds. Also, Globus Bank, one other Nigerian financial institution, disclosed a hack in 2022, through which hackers exploited a USSD glitch to withdraw over ₦1.75 billion ($2.9 million) from buyer accounts. In Kenya, cybercriminals focused Naivas, the nation’s main on-line retailer, with a ransomware assault, threatening to leak delicate information. These incidents underscore the ongoing want for corporations in the ecosystem to boost their cybersecurity measures and handle the ever-present dangers of fraud.
Shutdowns: Copia Global and Lazerpay bid farewell
As Q2 2023 unfolded, the international development of shutdowns additionally continued to make its mark in Africa’s tech ecosystem. Nigerian crypto startup, Lazerpay, introduced its closure after struggling to safe the mandatory funding. Meanwhile, Copia Global, a Kenyan e-commerce firm, made the powerful resolution to close down its Ugandan operations. These developments spotlight the harsh realities of the tech enterprise panorama, the place even promising ventures on the continent face the pressures of sustainability.
Layoffs: Shaking the African tech ecosystem
In the ever-evolving African tech ecosystem, layoffs have change into an unlucky actuality. What started with Swvl in May 2022 has continued to brush throughout the continent, leaving a mark on some distinguished startups.
June witnessed a wave of layoffs as 5 African startups collectively laid off over 238 staff. Twiga, a Kenyan agritech firm, made a “cost-cutting” transfer by shedding 211 staff, together with its whole gross sales crew. Nigeria’s fintech Eyowo, amidst a pivot to a D2C mannequin, additionally needed to let go of 13 staff. Similarly, Smile Identity, a KYC startup that raised $20 million in February 2023, needed to scale back its workforce by 8 staff on account of difficult macroeconomic situations. Fintech big Chipper Cash executed its third spherical of layoffs, although the actual quantity stays undisclosed. Also, sources revealed that Mara, a Web3 startup that raised $23 million in 2022, needed to make the troublesome resolution to put off six staff in May.
Digital currencies by African international locations
During the final quarter, Zimbabwe launched into a brand new chapter by launching its digital foreign money. However, the International Monetary Fund (IMF) raised issues, cautioning that the gold-backed foreign money may not resolve the nation’s fiat foreign money devaluation issues and will deplete its gold reserves. Despite the criticism, the Reserve Bank of Zimbabwe (RSV) bought a powerful 14 billion Zimbabwean {dollars}’ price of gold-backed digital tokens, amounting to round $39 million.
The IMF additionally challenged Nigeria’s e-naira. Contrary to the Central Bank of Nigeria’s (CBN) claims, the IMF revealed that Nigeria’s digital foreign money, the e-naira, has fallen brief of expectations. The IMF disclosed that a powerful 98.5% of the 14 million e-naira wallets created have by no means been used, even two years after their launch. With solely round 860,000 retail e-naira wallets being energetic, equal to simply 0.8% of Nigeria’s energetic financial institution accounts, the digital foreign money’s adoption seems to be underperforming.
Regulatory ripples: Nigeria revokes MFBs’ licenses
While Nigeria opened its doorways to mortgage apps in April, May witnessed a distinct state of affairs as the Central Bank of Nigeria (CBN) revoked the licenses of 179 microfinance banks, 4 major mortgage banks, and three finance corporations. The regulatory crackdown was a response to non-compliance with regulatory necessities and unauthorized actions. Among the affected establishments was Eyowo, a Nigerian digital financial institution, which suspended all withdrawals pending the re-approval of its license, leaving prospects searching for inventive methods to entry their funds.
The unpredictable terrain forward: Expectations for the relaxation of 2023
It’s essential to notice that sectors expertise funding slowdowns in another way. This quarter noticed fintech, traditionally the darling of the African ecosystem, take a backseat to vitality startups. This signifies that traders are more and more drawn to rising sectors with excessive progress potential. While previous efficiency isn’t at all times indicative of future success, we predict that fintech will reclaim its dominance by the finish of 2023 primarily based on historic trends. Only time will inform how the relaxation of the yr unfolds.
Watch out to learn extra on our flagship State of Tech In Africa report, our fowl’s eye view on African tech trends for Q2 2023 providing information, insights, and specialists’ views round funding, acquisitions, startup enlargement, and rules on the continent.
…. to be continued
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