Adapt, mitigate, and grow
Climatetech innovation in Africa | An introduction
This piece draws on our recent research that was developed in partnership with EIT Climate-KIC.
Check out the full report here.
Why building climate-tech solutions is key for Africa
Africa contributes less than 4% of the world’s total emissions, yet is one of the most vulnerable regions to the effects of climate change. Increased temperatures have contributed to a 34% reduction in agricultural productivity in Africa since 1961. The impact of climate change, the reduced agricultural productivity, and the increasing conflict in Africa are resulting in a food crisis affecting an estimated 346 million people in Africa. This trend is expected to get worse in the future. A global increase in temperatures of 1.5 °C is projected to result in a further 9% decrease in the yield of maize in West Africa and a 20% to 60% decrease in the yield of wheat in Southern and Northern Africa. Water access is also being impacted. According to the World Health Organization (WHO), 1 in 3 people across Africa are already facing water scarcity with predictions showing that by 2025, close to 230 million Africans will be water scarce, and up to 460 million will suffer from water stress due to climate change.
The need to mitigate the negative impacts of climate change and adapt to the new environment in Africa is critical. In response, there is a growing agenda to develop solutions for the adaptation and mitigation of climate change, supporting growth and creating more resilient communities. Climate-tech refers to technology-driven innovations that contribute to the reduction of emissions and more sustainable development and cuts across a range of sectors, including waste management, recycling and smart living, access to energy, and agriculture. Below we unpack the trends in climate-tech and clean-tech solutions and how funders and support organisations can further unlock their potential for Africa.
Who is shaping the climate-tech space in Africa? An overview on the climate-tech innovation in Africa
The climate-tech industry is on the rise in Africa. There has been rapid growth in the number of solutions developed as well as the availability and expansion of financing. Briter Intelligence counts more than 500 startups operating across Africa in the climate-tech space offering more than 35 products. The largest concentration of startups in the continent is found in Kenya, Nigeria, Uganda and South Africa. Due to the vast availability of natural resources and the maturing and conducive business environments, Egypt, Kenya, Nigeria, and South Africa are often considered as the continent's leaders in the climate-tech space. Products can be categorised in two ways, either based on their role in addressing climate change or based on the sector under which they fall. In terms of the role in addressing climate change, products are either offering adaptive solutions to become more resilient to climate change, or offering mitigating solutions to address the risks around it. In terms of the sector, climate tech products fall into 6 main groups:
Renewables: The top funded products within the climate-tech space. Renewable solutions combine the use of technology and digital tools with sources of renewable energy. Products include solar home systems, solar kiosks, biofuels, wind energy, and hydropower.
Rensource, a West African provider of renewable energy-related services specialising in the development and financing of solar hybrid captive power provision.
Bboxx, a platform providing access to essential solar and energy products across Africa and Asia.
Clean alternatives: Sustainable and clean alternatives to non-renewable energy sources and products. Products include gas and cooking, batteries, LPG, electricity and smart metering systems.
Koko, offering clean ethanol cooking fuel and cooking products.
Biolite, a solution designing off-grid personal scale energy products for cooking, charging, and lighting.
Agriculture: Digital tools and technology helping farmers and businesses create more productive and efficient food value chains. Products include fertilisers and inputs, alternative proteins, precision agriculture and data, farm management,cold storage, forestry, aquaculture and hydroponics.
Komaza, turning underutilised land into thriving micro-forests by partnering with a network of smallholder farmers.
Aerobotics, a solution providing insights for precision growing and crop insurance.
Waste management: Platforms and providers dealing with the collection and disposal of waste and pollution. Waste and recycling facilities, from collection to disposal, upcycling, and waste-to-energy products, have also seen an increase in uptake, especially due to the lack of centralised and organised mechanisms for waste disposal across the region; Products include recycled products, e-waste, waste to energy, FSM, hydropower, household waste and organic waste.
Coliba Africa, using a mobile app to create a formalised plastic recycling economy in Africa.
Mr Green Africa, a recycling company selling pre-processed recycling materials.
Smart living: Solutions facilitating more sustainable cities and lifestyles through energy and resource management and tech-driven decision making. Products include Electronic Vehicles (EVS), IoTs and sensors.
Ampersand: Providing electric motorcycles and a battery-swap station network to power motorcycle taxi drivers in East Africa.
Water and sanitation: Ventures tackling the lack of clean and safe water and sanitation services. Products include WASH, wastewater, and water access.
Sanivation, a social enterprise that partners with local governments to deliver clean, safe, and efficient sanitation services to urbanising communities.
Waterpod, a sustainable desalination pod that works on solar distillation to convert seawater into drinkable water.
It is worth noting that the climate tech industry is seeing systematic innovations and integration across sectors and products. Abdelrahman Fahmy, Chairman and Executive Director at YTG, says “we are noticing that agricultural products, water access solutions, and energy providers are often overlapping”. SunCulture, for instance, is a solution using off-grid solar technology to provide customers with reliable access to water, irrigation, lighting, and mobile charging,
Who is funding and supporting these innovations
Funding landscape
In terms of funding, Briter Intelligence data shows that between 2014 and Q1 2022, 167 African climate-tech startups successfully raised $2.1 billion in disclosed funding, accounting for around 15% of the total funding raised by tech startups in Africa. In 2021 alone, climate-tech companies recorded at least $440 million in funding, demonstrating the growth of climate-focused startups and the rising number of active investors. Kenyan climate-tech startups attracted the most funding over the full period, capturing $1.2 billion of total funding across 140 deals and accounting for 56% of the total disclosed funding, followed by Nigerian startups with almost $450 million raised across 65 deals. The type of funding generally ranges from grants to blended finance, patient capital, equity, and debt.
While Africa’s big four, Kenya, Nigeria, South Africa, and Egypt are dominating the funding landscape, there are several budding ecosystems emerging. Thanks to their conducive business environment and active policies to promote climate and ICT, innovators in Ghana, Rwanda, Uganda and Senegal are also attracting a growing number of deals in the climate-tech space.
The top products receiving funding are renewables. Renewables received 75% of the total disclosed funding between 2015 and 2022, with solar-energy-based products seeing the strongest growth. Climate-focused agriculture solutions emerged second. Although the data reveals that a limited number of solutions capture the bulk of funding at the growth stage, there is more and more early-stage capital becoming available to startups. Between 2018 and Q1 2022, the majority of deals were seen at the early-stage rounds ranging from angel and incubation/acceleration to Series A rounds, with a large presence of DFIs, impact investors offering, accelerators, and targeted sustainability challenges offering primarily equity and grant funding, as well as awards and prizes.
The investor landscape is continuously evolving. Tumusiime from Yo-Waste notes that most venture capitalists are still profit-oriented and lean more towards high-growth sectors with already traction like solar. Nils Razmilovic, Co-founder at Tamuwa, explains that there are currently few impact investors targeting new products like renewable biomass, but the deal sizes remain small and unattractive to most venture capitalists. Knowledge sharing, co-investments, and de-risking the range of climate-tech solutions are crucial to attracting more investors to the space.
Support landscape
Climate-tech innovators benefit from the existence of a dedicated support ecosystem working toward facilitating the development of an enabling environment to accelerate innovations and technologies through funding, training, networks, partnerships, mentorship, community, and technical assistance. Tech hubs and entrepreneur support organisations (ESOs) act as an entry point for entrepreneurs developing their ideas and business models, however, the number of acceleration and incubation programmes targeting climate-tech start-ups is limited. Programmes such as the ClimAccelerator seek to address this gap, helping startups develop their models, get investor-ready, and become commercially viable. Through funding and training programmes, investors and ESOs can also support startups by bringing credibility to their ideas, developing business strategies, connecting entrepreneurs to key networks, helping to scale solutions, and creating measuring and reporting mechanisms.
The way forward
While the climatetech space is rapidly expanding in Africa there are still several challenges that are present for entrepreneurs. On the one hand, Vincenzo Capogna from OOLU argues; "year to year, there is a lot of innovation, impact, and investment happening, and providers are increasingly targeting local problems or broken services that the government does not always have the capacity to fix". On the other hand, Jade Bouhmouch, Managing Partner at Ambo Ventures, notes that “the lack of affordable, scalable, and effective technologies is heightened by the lack of resources going into the sector, despite there being a wealth of entrepreneurs capable of building climate-tech at scale”. Expanding on the success of the existing innovations in the climate-tech space and growing the amount of capital available to climate-tech entrepreneurs will be critical to unlocking further innovation, particularly at the early stages. And while climate-tech solutions may not address all the challenges identified at the beginning of this article, the products offered are playing a critical role in reaching markets and groups that the government and large corporates are not able to.