Financial Support Soars for Climate Technology Startups in Africa

In a promising development for Africa’s climate resilience, financial backing for climate technology startups has surged, with businesses raising over $3.4 billion since 2019.

In a promising development for Africa’s climate resilience, financial backing for climate technology startups has surged, with businesses raising over $3.4 billion since 2019. This injection of funds comes as a beacon of hope as the continent strives to secure $277 billion annually to achieve its climate objectives by 2030.

Experts emphasize that to attract additional investment, African nations must address risks such as currency fluctuations. Moreover, they advocate for diversified investments across various climate sectors, including flood protection, disaster management, and heat management, while also exploring alternative funding methods.

According to Africa: The Big Deal, a database tracking financial support, climate tech startups on the continent secured $1.04 billion in funding last year alone. This marks a notable 9 percent increase from the previous year and reflects a threefold rise compared to 2019. Remarkably, this surge in funding occurred against the backdrop of an overall decline in startup investments across Africa in 2023.

Despite this encouraging growth, private sector financing accounted for just 14 percent of Africa’s total climate finance between 2019 and 2020, according to a study by Climate Policy Initiative, underscoring the need for increased investment. By comparison, private sector financing represents 39 percent and 49 percent of climate finance in East Asia and the Pacific and Latin America and the Caribbean, respectively.

Sandy Okoth, affiliated with FSD Africa, a non-profit organization funded by the British government, attributes the relatively low investment in Africa to investors’ preference for familiar areas like renewable energy technology. Okoth notes a shortfall in funding for “more complex” technologies, particularly those aimed at climate adaptation.

One such success story is Wetility, a South African renewable energy startup that secured $48 million in funding last year, primarily from private equity sources, to expand its operations. Specializing in providing solar panels for residential and commercial use, Wetility also offers an online platform for remote power usage monitoring, addressing energy access and reliability challenges in southern Africa.

Vincent Maposa, the CEO of Wetility, acknowledges the ongoing scarcity of private sector financing in African climate initiatives but remains optimistic about the sector’s growth prospects.

Meanwhile, Maëlis Carraro, a partner at Catalyst Fund, a Kenya-based venture capital firm supporting climate adaptation solutions, advocates for a more diverse funding landscape, including hybrid public-private financing models.

Carraro stresses the importance of leveraging public financing to attract additional private sector investment, emphasizing the need for collaborative efforts between public and private stakeholders to unlock more funding opportunities.

In conclusion, while the financial support for climate technology startups in Africa has shown significant growth in recent years, there remains a considerable gap between current investment levels and the financing required to meet the continent’s climate goals. Diversified funding mechanisms and closer collaboration between public and private sectors are crucial to bridging this gap and accelerating Africa’s transition towards a more sustainable and resilient future.