Nairobi. Reforms geared towards boosting business friendliness, together with young, tech-savvy populations, are boosting “second-tier” startup ecosystems in Morocco, Ghana, Senegal, Uganda and Ethiopia, as venture capital expands beyond the “regular” African destinations.
Investors have started eyeing new African startup markets away from the traditional ecosystems of South Africa, Kenya, Egypt and Nigeria, in what could significantly grow the size and value of the nascent market, according to a report.
Morocco, Senegal, Ghana, and Uganda have started attracting more early-stage growth funding as they emerge as the continent’s next start-up markets, according to a new report, African Tech Ecosystems of the Future 2021/22.
The report prepared by foreign direct investment intelligence and research firm, Briter Bridges, shows that while funding remains heavily skewed towards the “top four” of South Africa, Nigeria, Kenya and Egypt, new startup markets are expected to give these giant economies a run for their money.
“This clustering has shown a propensity to channel the attention away from the rest of the continent; despite this, several notable developments have been happening in other African countries,” says the report.
“A new tier of less well-funded tech ecosystems is now experiencing an increase in funding facilities and interest,” the report authors add.
Ghana, ranked 4th with over 260 startups that raised over $21.3 million over the period, is being driven by a strong business outsourcing market bolstered by a young and tech-savvy population and the country’s commitment to technology education. Morocco, ranked 7th, has seen growing investor interest, attributed to its ambitious reform agendas that placed the country in second place just behind South Africa in business friendliness ranking.
“Morocco’s favourable environment has proven popular with investors, as the country counted the highest number of jobs created by inward FDI between 2015 and 2020,” according to the report.
Senegal (ranked 11th), with over 90 start-ups has so far raised $8.9 million, while 14th ranked Uganda has raised $7.7 million for its more than 235 start-ups, over the period.
Ethiopia has also been listed among the next startup market with the potential to raise significant early-stage funding though no indicative data was provided.
The report also points to increased activities in most North African countries as the continent prepares to fully open up tech ecosystems across all regions.
“From a regulatory perspective, countries in north Africa are gearing up to become ICT hubs as Gulf-based investors begin broadening their interest in the continent,” the report added.
Amongst Arabic speaking countries, Tunisia is coming up strongly, currently in fifth position, with its more than 190 startups raising $3.3 million, while Algeria’s has an active investor ecosystem, with more than 75 startups.
The report ranks South Africa as the top African country in terms of funding, having raised $241 million through over 700 startups during the period.
Next is Kenya with more than 650 startups which raised a total of $50.7 million, followed by Egypt with attracted $47 million despite a relatively smaller number of startups (360).
Nigeria, which had the highest number of startups (over 750) raised $61.5 million to take the sixth position in the rankings.
Despite the relatively nascent stage of start-up ecosystems across Africa, more than $2 billion has been raised over the past two years.