3
Create an enabling environment to attract investment
In the last one decade, there has been a significant investment inflow into the tech startup ecosystem across Africa in the last decade. According to the Partech annual African Tech Venture Capital Report, investment into the African tech startup ecosystem in 2021 surpassed US$5 billion, more than three times the amount invested in 2020. In addition, 681 equity rounds were raised by 640 start-ups, a 92% YoY growth compared to the 359 rounds raised by 347 start-ups in 2020. Nigeria, Egypt, South Africa and Kenya remain recipients of the largest share of the total funding. Despite the growth in funding, access to capital remains the biggest challenge for early-stage startups, according to surveys conducted across the continent. Other blockades include limited investments from within Africa, and narrow exit opportunities - very few African startups have exited. Jumia is the primary example of an exit through an initial public offering (IPO). For a turnaround, it is critical to develop investor-friendly policies that incentivize and attract different types of financing to close the existing funding gaps. Innovative investment vehicles at the early, pre-seed and seed stages, including state-administered innovation funds are also important in mobilising commitment from the private sector and donor communities. The Rwanda Innovation Fund is a prominent example of successful initiatives by governments to support local innovation.
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