Capital financing in Africa's venture sector drops by a staggering 57%, coinciding with global economic ambiguity.

The first half of 2024 has seen a significant downturn in Africa's venture capital (VC) ecosystem, with total funding reaching $393 million, a 57% decline compared to the same period in 2023. This decline is the lowest level recorded since 2019.

The contraction in deal numbers and values has led to a retraction of investor interest, with the total number of deals plummeting by 52% year-on-year. The African VC market's reliance on a few large deals could exacerbate the challenges faced in securing funding, as the significant reduction in MEGA deals underscores the difficulties.

FinTech remained the most funded industry in Africa, accounting for 48% of total funding in the first half of 2024. However, Agriculture saw a notable increase, surpassing E-commerce/Retail and Healthcare, with SunCulture's $28 million funding being a significant contributor. The industry is expected to continue its upward trend in funding, potentially challenging FinTech's dominance in the second half of 2024.

The volatility in Africa's VC ecosystem is driven by a combination of global economic factors and region-specific challenges. The heightened economic instability, characterized by fluctuating exchange rates, high inflation, and interest rate hikes, has made investments in VC sectors less attractive.

Several factors have contributed to the marked reduction in venture capital activity across Africa, including a shift in global and regional investor focus toward safer, more stable assets. Despite the decline, projections suggest that Africa could end 2024 with fewer deals than in 2023, despite the increase in the number of deals compared to the first half of 2024.

In the first half of 2024, prominent investors and institutions actively involved in African venture capital included Delta40 Venture Studio in collaboration with the BESTSELLER FOUNDATION, focusing on circular economy startups with significant funding and co-investment opportunities. Additionally, Egypt emerged as a major hub for foreign direct investment in Africa, attracting $46.1 billion in 2024 with strong government and business leader support facilitating investment.

The number of deals in Africa for the first half of 2024 is projected to reach 238, representing a 48% drop year-on-year. The funding decline is particularly noticeable in the reduction of larger deals beyond Series "A". Pre-Series "B" and Series "B" deals dropped drastically from 14 deals totaling $324 million in H1 2023 to just two deals worth $48 million in H1 2024.

With targeted strategies and supportive policy measures, there may be opportunities to stabilize and revitalize investment flows into the African VC landscape. However, Africa's VC landscape may continue to face significant challenges in securing funding due to investor caution and selectivity.

Capital financing in Africa's venture sector drops by a staggering 57%, coinciding with global economic ambiguity.