Africa's Climate Tech Revolution
Where necessity has bred Innovation
🌟Good morning, entrepreneurs & tech enthusiasts!
The evidence of Africa's climate tech boom is undeniable. Over $3.4 billion flowed into the sector between 2019 and 2023, and in 2023 alone, one-in-three investment dollars in African startups backed climate tech initiatives.
So what is driving this boom?
Climate change is the existential challenge of our era, demanding urgent action from governments and corporations around the world. Africa's engagement in this battle is both unique and critical - situated at the intersection of vulnerability and urgency.
The continent bears a disproportionate burden of the climate change crisis due to it’s heavy reliance on agriculture. Prolonged droughts and shifting weather patterns are devastating agriculture and pushing entire communities into food insecurity. According to the African Development Bank Group:
Sub-Saharan Africa has 95% of rain-fed agriculture globally.
Agriculture's large share of GDP and employment adds to this vulnerability, as do weather-sensitive activities like herding and fishing, leading to income losses and increased food insecurity.
Seven of the 10 countries that are most vulnerable to climate change are in Africa. In 2015, four African countries ranked among the 10 countries most affected: Mozambique (1st), Malawi (3rd), Ghana and Madagascar (joint 8th position).
This vulnerability, coupled with an urgent global call for climate change adaptation and resilience, propels Africa to the forefront of innovative climate tech solutions.
How Big could Africa's Climate Tech Economy Grow?
Africa will need investments of over $3 trillion in mitigation and adaptation by 2030 in order to implement its NDCs for the Paris Peace Agreement - translating to an enormous market for climate solutions. Think 54 countries, most of which need to be remodelled - the opportunities are endless.
What are the key drivers for Climate Tech Innovation?
Catalyst Fund’s analysis of pre-seed investments shows that agriculture makes up 40% of the solutions in this pipeline. However, further investigation of data from Africa: The Big Deal reveals that energy dominates venture funding at later stages. In 2022, nearly 75% of funding for climate tech startups went to energy and water solutions.
To put these facts into perspective, more attempts are made to solve the agriculture problem since it is the dominant economic activity in Africa – employing 55% of the labor force and accounting for 17% of the continent’s GDP. However, the most developed and most backed startups are in the energy and water sectors.
The continent's struggle with energy shortages, evident in persistent power cuts in countries like South Africa, Zimbabwe, and Kenya, creates opportunities for new, inherently clean energy solutions:
The South African government’s ambitious LPG rollout strategy for cooking and heating in households has created a lot of investment opportunities in supply chain development and household distribution networks.
Close to 32% of households in Zimbabwes rely on solar power as their primary energy source. Today, most new buildings are developed with solar installations such that they have no reliance on the national grid.
Nearly half of Kenya’s $800 million investment in 2023 went to energy projects, including off-grid solar solutions fueled by deals like Sun King's $130 million and M-Kopa's $250 million funding round.
Who is investing in Africa’s Climate Tech?
In 2023, the Catalyst Fund reached a first close of $8.6 million on its $40 million fund for African climate startups. In February 2024, they invested $1.8 million in nine African climate tech startups.
The International Finance Corporation (IFC) made a $20 million investment in Africa50 to support sustainable infrastructure development in Africa, including renewable energy (January 2024)
Not to forget to mention the Pan-African climate summits like Africa Climate Week in Nairobi (2023) and the Africa Tech Summit (2024) that place the continent at the forefront of conversations and drive important collaboration between policymakers, investors, and innovators.
In conclusion, Africa's climate vulnerability is undeniable but so is the innovation that is being driven by it. The need for solutions, coupled with investment and government support, positions Africa as a leader in the technologies that will shape our climate future.