Africa has long been tagged as a land of untapped potential. While this when said about two decades ago would originally switch the listener’s mind to the raw materials of Africa, today it does not carry the same label of extraction as before. Not to beat down the potential of the world’s fastest-growing continent, Africa is still a resource hub. But more importantly, the continent is more than just an extraction pit where the raw materials for the fanciest things in the world are sourced. Yet its people only dream and wish they had the chance to enjoy some of those fancies created with the resources that kiss the soles of their feet.
Africa has evolved; albeit not in most key areas as the continent’s forebears had dreamed. But at least, the sleeping giant continent is up on its feet, making things for its own needs and seeking solutions for its entrepreneurs. Entrepreneurship; Africa has found its entrepreneurship charm; one that is not based on setting up retail points and buying made products and services from the West and America or Asia and retailing. The new spirit of African entrepreneurship is centred on innovation, sustainability and resilience.
About two decades ago, one would struggle to list top African enterprises taking advantage of the technological shift to create solutions for the continent’s needs. But going back the past 10 or more years, startups have sprung up from all corners of Africa with varied business solutions.
African startups boom and the investor dynamics
However, more than 1000 African startups are doing wonderful things in different fields. Within the last two decades especially from 2010, at least 300 e-Commerce startups have emerged from Africa raising more than $3.9 billion from at least 700 investors. The likes of Jumia, Konga, Twiga Foods, Copia Global, Takealot, MaxAB, Tekkie Town and Sabi have all entered the market and raised tens of millions in funding from a diverse portfolio of investors.
That number is dwarfed when you consider that fintech and clean tech have been on the rise and attracting even more funding now. Jumo, Interswitch, Flutterwave, MNT-Halan, Chipper Cash, Zoona and Tala are all making headways in fintech having raised funding that cumulatively has shot into billions of dollars. To put in the numbers, according to Startuplist, there are at least 600 fintech startups in Africa that have collectively raised at least $13 billion in funding from more than 2300 investors in over 1500 deals.
These numbers show how Africans have become innovative and surging to take their rightful place in the world. While the majority of funding for these startups has largely come from pan-African venture capitalists and investors, it is equally important to note that Europe, America and Asia have remained some of the biggest backers of African startups.
For instance, MNT-Halan, the most-funded African startup in 2023 raised $400 million in equity and debt financing with $200 million coming from Abu Dhabi-based Chimera Investments. M-Kopa the second most-funded startup in Africa in 2023 also has India’s Lightrock and Japan’s Sumitomo Corporation as part of its top investors. This is a testament to how much external funding has been crucial to the growth of African startups.
But how does China play in the African startup ecosystem?
China has for a long time attracted investors to its shore though that trend is fast becoming part of history with India emerging as the preferred destination for investors in recent times. But apart from China attracting investments for its startups, the country has also encouraged its people to go into the world. Since the implementation of the “Go Out” policy in the 2000s, the country has witnessed increased foreign direct investment in many countries in the world. African countries have not been an exception though the majority of Africa-China economic relationships have been centred on inter-government dealings.
Understandably, early Chinese investments in Africa were centred on roads, railways, dams, power and oil among other areas of infrastructure. But there is a radical shift in direction though still relatively smaller in terms of volumes of investments. Chinese investors have shifted towards Africa’s expansions into untapped markets such as fintech.
African startups have benefited from Chinese investments, especially in the last 5-10 years. Leading China’s incursion into Africa’s fintech and digital technology markets are Hillhouse Capital, Tencent Holdings, 3W Capital, Sequoia Capital China, Source Code Capital, Meituan-Dianping, NetEase, IDG Capital and GSR Ventures. These have invested in numerous African startups such as Opay, PalmPay, AutoCheck, Jetstream, Cassbana and PawaPay have all benefited from Chinese investors.
Several other startups including Wapi Pay, Carry1st, Termii and Lori Systems have also benefited from Chinese investments.
African Startups Exploring Chinese Strategic Partnership
However, aside from the money that Chinese investors push into African emerging companies, several others are venturing into technology transfer and partnership. Such examples include BasiGo, a Kenya-based electric vehicle startup. BasiGo has partnered with Chinese EV giant BYD to assemble electric-powered buses to be sold in Kenya. In Ghana, Solar Taxi relies on Chinese-made EVs for its solar car business. It works directly with Cherry, BYD and Dongfeng to ensure those needs are met. Nigeria-based Jet Motors works with Chinese companies to get parts for its EV motor assembly in the West African country.
Outside of that, some African startups are exploring opportunities to venture into the Chinese market through strategic partnerships. WiCrypt, the Nigeria-based blockchain WiFi-sharing startup partnered with one of its early investors Onega Ventures to distribute the Enugu-based startup’s devices in China.
Strategic partnerships between African startups and Chinese firms go beyond just the above. For instance, PalmPay and Transsion Holdings have a strategic partnership where the Nigeria-based startup has its app pre-installed on Transsion-owned smartphones. M-Pesa also worked with Huawei to migrate the Kenya-based startup’s systems to a new platform to improve its operations.
