Money Flows Into Africa’s Climate Tech Startups

African climate tech startups are pulling in more money than ever before, overtaking fintech as the continent’s hottest investment sector.

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African climate tech startups are pulling in more money than ever before, overtaking fintech as the continent’s hottest investment sector. By September 2024, these startups had raised $413.9 million, making up a third of all startup funding in Africa. The shift shows investors are betting big on companies that tackle climate change while solving everyday problems.

The numbers tell a clear story. From $340 million in 2019, funding for climate tech in Africa grew to $1.1 billion in 2023. In total, these startups have brought in over $3.4 billion since 2019, with investors backing everything from solar power to electric motorcycles.

Big Money, Big Moves

Recent deals show just how much money is moving into the sector. Kenya’s D.Light secured $176 million, while Benin’s e-mobility company Spiro raised $50 million. Kenya’s electric bus maker BasiGo brought in $42 million in debt and equity funding. In Ghana, solar energy company PEG Africa was bought by UK-based Bboxx in a deal worth $200 million, creating one of the fastest-growing clean energy companies in Africa with 3.5 million customers across 10 countries.

The International Finance Corporation (IFC) just put $5 million into the Equator Africa Fund I, which focuses solely on climate tech startups in Africa. The fund now has $54 million to invest in new companies working on clean energy, farming, and transport solutions. They’ve already backed six promising startups, including SunCulture for solar-powered irrigation, Roam for electric motorcycles and buses, and Apollo Agriculture, which helps small farmers get funding and advice.

Other investors are jumping in too. FinDev Canada put $13 million into the Energy Entrepreneurs Growth Fund, which helps early-stage energy companies grow. Persistent Energy raised $10 million to build more climate companies in Africa, aiming to create 6,000 green jobs and cut 700,000 tonnes of carbon emissions.

This money is already changing lives across Africa. In Rwanda, Ampersand is working with Chinese company BYD to build 40,000 electric motorcycles by 2026. This means cleaner air and cheaper transport for many Africans. Wetility, based in Johannesburg, got $48 million to help more homes and businesses use solar power and manage their energy better through their digital system.

The impact reaches far beyond cities. Kubik, working in Kenya and Ethiopia, has raised $5.2 million to turn hard-to-recycle plastic waste into building materials. MAX, formerly Metro Africa Xpress, has brought in nearly $100 million since 2015 to build electric two- and three-wheelers and charging stations across Nigeria.

Room to Grow

Africa needs $277 billion every year to meet its climate goals by 2030. Right now, it gets only $30 billion annually. This huge gap between what’s needed and what’s available creates opportunities for both investors and entrepreneurs.

But there’s still work to do. Only 14% of climate funding in Africa came from private companies between 2019 and 2020. That’s much lower than other regions – East Asia and the Pacific got 39%, while Latin America received 49%. Most investors stick to what they know, like solar and wind power, leaving out important areas like flood protection and heat management.

The sector is starting to expand though. In the first half of 2024, different areas of climate tech got significant funding: Logistics and Transport received $215 million (29% of total funding), while Energy and Water secured $132 million (18%). Companies working on agriculture and food innovation brought in $68 million, and climate fintech solutions raised $30 million.

For everyday Africans, this investment boom means more jobs, cleaner cities, and better access to basic services like electricity and transport. Farmers can water their crops even when rain is scarce. Homes that never had power can now run fridges and lights. Motorcycle taxi drivers can spend less on fuel and maintenance with electric bikes.

As Africa’s population grows and the impact of climate change worsens, these startups will become even more important. They’re not just good for the environment but also good for business. The success of companies like Bboxx, which now serves millions of customers, shows these solutions can work on a large scale.

For investors looking to make money while helping solve big problems, Africa’s climate tech companies offer a perfect chance to do both. With current funding meeting only about 11% of what Africa needs for climate action, there’s still plenty of room for new investors and companies to come in and make a difference.