TLDR:
- Funding for African climate tech startups is increasing, with businesses raising over $3.4 billion since 2019.
- Despite this growth, Africa still requires $277 billion annually to meet its climate goals for 2030.
More money is being directed towards African climate startups, but there still remains a substantial funding gap that needs to be addressed. Ademola Adesina, founder of Rensource Energy, highlights the challenges he faced in raising funds for his startup in 2015, but notes that the ecosystem has since evolved. Climate tech startups in Africa have raised over $3.4 billion since 2019, indicating a positive trend in funding growth. However, the continent still needs $277 billion annually to meet its climate goals for 2030, suggesting that there is a long way to go.
Experts emphasize the need for African countries to address risks like currency instability, which can reduce investor appetite, and for investors to expand their scope of interest to encompass various climate sectors. Climate tech startups raised $1.04 billion last year, a 9% increase from the previous year, despite a decline in the overall funds raised by startups on the continent. Venture capitalists play a crucial role in providing risk capital to nascent businesses, supporting their growth and expansion into new markets.
While private sector financing for climate initiatives in Africa is increasing, it still lags behind public financing. The low contribution of private sector financing is attributed to investors’ preference for more familiar areas like renewable energy technology, rather than diverse climate initiatives. However, investments in sectors like waste management and construction can transform traditional industries over time, with venture capitalists accelerating this transformation.
Other forms of investment, such as private equity, syndicates, and grant providers, are actively financing climate initiatives in Africa. The role of public financing is crucial in de-risking the private sector and attracting more capital into climate initiatives. By diversifying funding sources and blending private and public sector financing, Africa can unlock more financial resources to address its climate challenges.
