By Jeph Ajobaju, Chief Copy Editor
Mono, a Nigerian fintech startup, has just raised $2 million seed that raised its total to $2.625 million; and Kuda, another Nigeria fintech startup, earlier got $25 million, bringing its total to $36.6 million in two years.
These sums are small compared to South Africa, however.
Nigeria has over tech 750 startups, the highest on the continent, followed by South Africa with 184. But South African startups raised $241 million in 2020 while those in Nigeria raised $64.1 million.
South Africa received more than three times the amount Nigeria got.
Nigeria also ranks behind Morocco, Tunisia, and Kenya in other metrics and it is missing altogether in other rankings, according to fDi Intelligence, a specialist division of the Financial Times.
These findings are highlighted in a report by fDi Intelligence – done in collaboration with research company Briter Bridges – which aims to “map the continent’s nascent tech ecosystems and explore their potential moving forward.”
Investment in Africa’s startups is tiny compared to the global North. Startups in the United States raised $156.2 billion in venture capital last year, per Pitchbook.
African startups raised just over $2 billion in the past two years, according to data compiled by Briter Bridges (funding varies depending on metrics used).
Huge potential
However, fDi notes, the potential of Africa’s vibrant startup ecosystem to improve is evident in the impact created as “a growing number of success stories involving digital and impact-focused businesses are driving investor engagement and startup support.”
Per reporting by Quartz, Briter Bridges selected 17 countries for evaluation, based on being home to several tech hubs, having more than 50 startups, and attracting investments greater than $500,000 between 2019 and 2020.
Using specialist online tools, in addition to supporting data from Briter Bridges, the countries were judged on categories such as their economic potential, business climate, cost effectiveness, connectivity, and worker experience.
South Africa’s first-place ranking reflected its relatively advanced startup scene; it led the way in the categories of startup status and business friendliness.
“South Africa is home to one of the most developed VC networks and the oldest startup incubator on the continent, the Cape Innovation and Technology Initiative,” the report states.
“The incubator is credited with supporting more than 3,000 entrepreneurs in its two-decade history. With ready access to VC funds, government grants, incubators and tech talent, South Africa is a vision of what other tech ecosystems could become.”
Kenya’s second-place reflected its immense growth in recent years. It boasts the highest number of coding schools and is a forerunner in the African fintech space.
Nigeria had the highest volume of startups – over 750. South Africa came second, but its startups raised $241 million in 2020, compared to Nigeria’s $64.1 million.
Nigeria was missing altogether in the top 10 rankings for categories critical to helping a startup thrive beyond its founding, including cost effectiveness and the level of country-wide tech talent.
It also only ranked sixth for business friendliness.
Frustration of doing business
This highlights the frustration of conducting business in Nigeria, where entrepreneurs contend with stifling government policies, poor internet speed, access and connection, and a host of other systemic challenges.
“Although Lagos is renowned for its startup ecosystem, there is a significant disconnect between the city’s tech ecosystem, its surroundings and the wider country, which suffers from chronically poor infrastructure and education, and recurring political instability and security issues,” the report said.
Countries such as Morocco and Tunisia earned praise for enacting reforms that have supported startup growth.
Morocco won out in connectivity for its plans to improve digital infrastructure. Tunisia’s 2018 startup act, which positioned science and technology at the heart of its goals for economic transformation, was applauded for inspiring similar acts in other Africa countries.
In Nigeria, promising startups with potential to make huge contribution to the economy have had to stop operations due to shifting government positions.
Bike-hailing apps, popular alternatives to Lagos’s traffic jams and poorly maintained road network, were banned last year for safety and security reasons by the Lagos State government.
And the Central Bank of Nigeria (CBN) has cracked down on crypto startups, which prompted business leaders to approach the government for consistent regulation.
“This challenging environment prevents Nigeria from excelling,” the report said.
