Between 2015 and 2022, investment in African startups sees unprecedented growth: The number of startups receiving funding increased more than seven timesDriven by mobile technologies, the expansion of fintech and massive flows of international capital. However, from 2022 onwards, due to tight economic conditions “lack of funding” (a decline in venture capital investment) which was more severe for African startups than in other regions of the world. This trend gained further strength concentration of capital In countries with the most developed start-up ecosystems, namely South Africa, Egypt, Kenya and Nigeria.
However, there is a strong case for ensuring that these investments are more evenly distributed across the continent. Ahead stimulate economic activityThe technological innovations developed by these startups represent a Important lever for developmentas they Provide solutions tailored to local contexts: targeted financial solutions, improved agricultural productivity, strengthened health and education systems, and responses to priority climate challenges, etc.
Concentration of investment in the Big Four
In the early 2020s, the term “Big Four” emerged to describe Africa's main tech markets: South Africa, Egypt, Kenya, and Nigeria. This notion, possibly inspired by the term Big Tech, suggests the existence of “champion countries” in the technology sector.
In 2024The Big Four captured 67% of equity tech funding (investments made in exchange for shares in technology companies). In detail, the shares received by each country were distributed as follows: About 24% for Kenya, 20% for South Africa, and 13.5% each for Egypt and Nigeria..
This funding cluster is not just geographic; It also has a strong regional dimension. capital is largely Directed towards areas deemed low risklike digital finance or “Fintech”often at the expense of areas such as edtech And cleantech – That is, technologies dedicated to education and environmental solutions respectively.
One An estimated 60%-70% of funds raised were in Africa come from international investorsEspecially for funding rounds above $10-20 million. These investments, often concentrated in more structured markets, represent the most visible transactions, but are also considered the least risky.
Emerging peripheral ecosystems and capabilities that remain inadequately translated into investment
While the Big Four focus most of the investment, many African countries now display proven potential in AI and a group of promising startups, without capturing the amount of investment commensurate with that potential.
Countries like Ghana, Morocco, Senegal, Tunisia and Rwanda are formed An emerging group whose members have favorable AI fundamentals But remain underfunded. This difference is even more notable given that Ghana, Morocco and Tunisia, all of which have dynamic start-up pools, together account for it. About 17% of African technology companies Outside the Big Four. At the same time, local financial structures struggle to meet these funding needs. Considered as peripheral in geography.
This difficulty in attracting investment can be explained in particular by the institutional and business ecosystem that still need to be strengthened, as the survival of technology companies depends on their performance. Structured Entrepreneurship Ecosystem Which enables access to knowledge, skilled labor and support mechanisms (accelerators, incubators and investors).
Finally, it is important to remember that these vulnerabilities are part of a broader context: In 2020, The African continent as a whole accounted for only 0.4% of global venture capital flows and represents just the current 2.5% of global AI market. Emerging countries outside the Big Four are therefore mechanically disadvantaged in a competition that is already highly concentrated.
Driving investments to prepare countries for AI
To attract capital to AI startups, a country itself has to be AI ready. Adoption of AI at the national level does not depend solely on technical factors. AI investment potential index (AIIPI), a research initiative, highlights that adoption also depends on economic, political and social factors. As a result, enhancing a country's AI potential requires not only strengthening energy and connectivity infrastructure, but also improving governance standards, public sector effectiveness, and human capital.
Priority actions vary depending on countries' level of progress in AI. In more advanced countries like South Africa or Morocco, the challenge is more about supporting research, optimizing AI applications and attracting strategic investment. In countries with more moderate scores, priorities focus on strengthening connectivity infrastructure, human capital and regulatory frameworks.
platform aipotentialindex.org Among other things, it enables to visualize the results of the index on a global scale and identify areas in which countries can invest to increase their AI investment capacity (research, government effectiveness, connectivity, human capital, AI strategies, etc.). AIIPI helps investors identify not only countries that are already advanced in AI, but also countries with untapped potential. For public decision makers and development actors, it provides a framework for prioritizing reforms and investments.
Sovereign funds and instruments dedicated to new technologies
Once a country's AI investment strategy is defined, the question of AI financing instruments arises. At the continental level, several tools dedicated to technology and AI are emerging. Development finance institutions, such as african development bank Or West African Development BankLaunching initiatives aimed at supporting the development of the continent's digital economy.
At the national level, African Sovereign Wealth Funds (SWFs) provide an additional channel to support AI and start-up financing across the continent. These funds, like Mohammed VI Fund in Morocco Or Pula Fund in BotswanaMobilizing public savings and working in partnership with development banks for long-term economic development.
Partnership as a powerful lever for start-up financing
Financing digital and AI infrastructure alone is not enough to create a start-up ecosystem capable of accelerating economic growth. International public-private partnerships also play an important role. Africa 2 Choose InitiativeLed by AFD and BPIFrance, it aims to overcome the financing barriers faced by entrepreneurship across the continent, especially in the early stages. Support mechanisms, such as Digital Africa, enable small-ticket investments at an early stage by bringing together public actors and local partners “Tech for Good” Startups whose technologies generate strategic, social and environmental impact.
While these mechanisms are not sufficient in themselves to correct investment imbalances, they can help broaden access to financing beyond the traditionally best-resourced ecosystems.
Central political, strategic and legal leadership
Financial investment alone is not enough and must be supported by strong political ambition. Legislative and strategic frameworks established at national and continental levels are key structural levers for the development of digital startups in Africa.
On the one hand, African Union-led strategies, including Digital Transformation Strategy for AfricaThe continental artificial intelligence strategy and this African Digital CompactProvide roadmaps enabling states to accelerate digital transformation. There are also national level instruments such as Tunisia “Start-up Act” Law Or National AI StrategiesSuch as that published by Ghana, which outlines the country's ambition to become Africa's “AI hub”.
Ultimately, a major political commitment was made at the Global AI Summit in Kigali last April, where 52 African countries announced the creation of a $60 billion African AI fund A combination of public, private and philanthropic capital. This initiative reflects a strategic ambition across the continent: to position Africa around these emerging technological challenges. However, these AI-focused funds may face Governance and financial structure challenges. There remains a risk that if transparency mechanisms are not implemented they could reproduce the disparities already seen in sovereign wealth funds. Therefore, their impact will depend on the establishment of standards and governance tools suited to emerging technological challenges.
These frameworks create the necessary initial conditions for the emergence of local AI solutions and provide a structural strategic framework. However, their impact on investor confidence will depend on how effectively they are linked with appropriate financing mechanisms and strengthen local capacities.
This article was co-written with Anastasia Tayeb, Innovation Officer at AfD, and Emma Pericard, Digital Africa Representative to the EU..
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