In December 2020, as Africa faced its first recession in 25 years due to the COVID-19 pandemic, the continent’s tech industry emerged as a bright spot.
While most African nations avoided the high COVID-19 mortality rates seen in the West, the global economic downturn hit hard.
Yet, the tech sector bucked the trend, with startup funding reaching $1.4 billion by August 2020, an 8% increase from 2019’s $1.3 billion, according to Partech.
This growth contrasted sharply with the continent’s economic challenges, drawing global investor attention.
Milestone Investments
Africa’s tech ecosystem achieved historic milestones. In April 2019, Nigeria’s Jumia became the first African startup to list on the New York Stock Exchange.
In October 2020, Stripe acquired Nigerian fintech Paystack for over $200 million, marking the largest exit for an African startup.
In November 2020, Bezos Expeditions, Jeff Bezos’ venture fund, invested in a $30 million Series B round for Chipper Cash, a fintech enabling cross-border payments in seven African countries.
These deals signaled a shift, as US investors, once wary of Africa’s risks, increasingly backed its tech ventures.
Nigeria, Kenya, and Egypt Lead
Nigeria, Kenya, and Egypt, home to vibrant startup hubs in Lagos, Nairobi, and Cairo, captured the bulk of investments.
Their large populations, youthful demographics, and diaspora networks fueled adoption of mobile technology.
Startups in these countries drove economic growth, with Nigeria’s tech sector outpacing its oil industry in GDP contribution from 2010 to 2019, per TechCabal.
However, smaller nations like Tunisia and Senegal also made strides through supportive policies.
Rise of Startup Acts
To boost innovation, African governments followed Italy’s 2012 Startup Act model.
Tunisia’s 2018 Startup Act offered founders state salaries for a year, tax breaks, and a one-year leave for employees to start ventures, alongside grants and fast-track licensing.
Senegal’s 2019 Act provided three tax-free years, training for youth and women, and an online registration platform.
By 2019, Tunisia saw 165 new startups, 24 co-working spaces, and $18.5 million raised, per Entrepreneurs of Tunisia. Ghana, Rwanda, Kenya, Ethiopia, and Uganda began exploring similar legislation in 2020 to ease regulatory burdens.
Challenges and Opportunities
African entrepreneurs face complex regulations, as noted by Endeavor Nigeria’s Elohu Giban-Mbelu, who highlighted time lost to policy lobbying.
Startup Acts aim to simplify business operations, incentivize investment, and build trust between governments and innovators.
Tunisia’s success, despite pandemic concerns, inspired others, showing that policy reforms can address ecosystem bottlenecks and attract global venture capital.
A Path to Recovery
As Africa navigates economic challenges, its tech sector’s growth—driven by fintech, e-commerce, and mobile solutions—offers hope. Startup Acts could further catalyze job creation and economic resilience, especially in smaller economies.
With technology contributing significantly to GDP, governments increasingly recognize its role in countering recession. As more countries adopt pro-startup policies, Africa’s innovation ecosystems are poised to thrive, fostering trust and drawing global investment.
