Partech Africa, the VC fund dedicated to tech startups in Africa, has released its annual Africa Tech Venture Capital report. The report, which aims to provide a comprehensive and in-depth view of the evolution of Africa Tech’s VC ecosystem, reveals that, in line with the global downturn in venture capital funding, the African tech sector experienced a significant slowdown in 2023, securing only half of the funding obtained in 2022. In 2023, African tech startups secured $3.5 billion in total funding (equity and combined debt), marking a 46% year-over-year decline, spread across 547 deals (-28% year-on-year). The report sheds light on the resilience of debt financing. Despite a 22% drop in the total amount raised from $1.6 billion in 2022 to $1.2 billion in 2023, the sector showed some resilience with a modest increase in the number of debt transactions from 71 in 2022 to 74 in 2023. 
“Two years after the start of the global crisis, it is clear that Africa’s tech ecosystem is feeling the full effects, even if it is doing much better than the Latin American and Southeast Asian regions,” Cyril Collon, general partner at Partech, said in a statement. Despite this correction, over the past 10 years the African technology ecosystem has grown almost 10-fold in terms of transactions and financing, with about $20 billion invested in about three thousand deals, 68% of which in the last three years.” Focusing on equity financing, the report notes a general downward trend affecting all aspects of investing. Firstly, the African tech ecosystem saw a massive 50% decrease in active investors (569 vs. 1,149 in 2022) and a similar 49% decrease in highly active investors who participated in over 5 deals. During the VC crisis, many investors disappeared from the market, leaving startups with fewer options. Analyzing the investment stages, the report notes the biggest drop in the growth phase, where the average size of investment tickets declined by another 31% year-on-year in 2023, falling to $34.7 million, after the severe 50% decline recorded last year. The seed and series A stages saw declines of 8% and 16%, respectively, compared to their 2022 averages. In contrast, the Series B stage maintained a stable average transaction size at $18.9 million, in line with the prior year. 
South Africa, Nigeria, Egypt and Kenya are the most active countries
South Africa, Nigeria, Egypt and Kenya are still in the top 4 of African venture capital investments, contributing 79% to total volume, despite a slight decline in the number of deals, with 68% of all deals (up from 77% in 2022). South Africa emerged as the leader of Africa’s tech financing landscape, securing $548 million in equity, despite a 34% year-on-year decline. However, if equity and debt are combined, Kenya takes the lead with $719 million raised, thanks to the higher amount of debt. Nigeria, despite experiencing a significant 59% drop in total equity funding to $468 million, remained at the forefront in terms of the number of equity deals. Egypt suffered the most substantial impact among the top four countries, with a 58% drop in the number of equity deals to just 60 deals. Outside of the top 4 countries, Morocco and Ghana are the only ones to exceed the $50 million threshold in equity financing. French-speaking Africa stands out, with 52% of countries (up from 46% in 2022) having seen a transaction in 2023, i.e. 14 out of 27 countries. This region occupies an increasing share of equity funds (compared to 2022). This region occupies a growing share of equity investment in Africa: 15% of funding in 2023 (vs. 11% in 2022) and 20% of transactions (vs. 12% in 2022), accounting for two-thirds of equity financing and the number of transactions outside the four major markets. 
“In this arid market, the African tech ecosystem has paid much more attention to French-speaking Africa, growing its share of transactions and financing,” said Tidjane Deme, partner of the fund. The steady growth of this region in recent years can be explained by the ability of local investors, who increasingly lead the ecosystem, to expand beyond the main markets visible to global investors. They see untapped opportunities in French-speaking countries.” The fintech sector maintained its leading position in the African technology ecosystem, being the first both in terms of number of deals, with 113 deals, and in terms of funding amount with $852 million, accounting for 37% of total equity investments. E-commerce and cleantech took second place, with 13% each of the total funding amounts. Startups founded by women collected 25% of stock transactions, an increase of 3 percentage points compared to 2022. They raised $392 million (-39% YoY) or 17% of total equity funding (+4% YoY), marking a modest shift toward gender diversification among grantees. On the debt side, on the other hand, women-led startups account for only 2% of funding. Finally, debt remains a solid alternative source of capital for African tech startups in 2023, accounting for 35% of total $3.5 billion, up 11 percentage points from 24% in 2022. Debt financing is led by Kenya (32% of total debt financing) and is mainly focused on cleantech (50%) and fintech (26%). Here is the full report
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