In Detail 05 Oct 2022
Africa’s share of global emissions accounts for about 2 per cent of the world’s total. Yet it is one of the regions most negatively affected by climate change. Climate resilience and the ability of the people to live through the climate crisis are at the heart of the climate tech efforts. But the solutions must be adapted to the local context, meaning they should be developed locally, to enable faster and easier integration into the existing market, and the economy. This is one of the findings of the “Adapt, Mitigate and Grow,” report recently published by EIT Climate-KIC and research firm Briter Bridges on the state of the climate tech ecosystem on the African continent.
Climate technologies can support the transition towards reducing the reliance on high-pollution industries associated with economic development, adopting renewable sources and promoting an energy transition in line with the 1.5-degree goal. The climate tech industry in Africa is rapidly growing, creating more start-ups, and attracting more investment, but there are many obstacles that prevent the climate tech ecosystem to flourish. The largest barrier is a lack of access to finance.
Solutions that are highly technical, costly, or hardware-intensive are therefore much more difficult to develop, and when they manage to start-up, this lack of access to finance affects their ability to grow and scale. Additionally, the majority of programmes managed by entrepreneur support organisations in Africa are not designed to meet the needs of climate-focused entrepreneurs as the ecosystem historically focused on fintech.
One positive signal is that there is growing investment into climate tech in Africa, with renewable innovations, especially solar energy, leading the race. Solutions that reduce inefficiencies in the use of natural resources and agriculture are also on the rise, and waste management and sanitation companies are slowly gaining traction. But there are only a limited number of solutions at the growth-stage that capture the bulk of funding volumes.
The report highlights the importance of blended finance and patient capital as key instruments to tackle the investment gap in costly hardware and capital-intensive solutions. Finally, there is a need for creating more efficient partnerships with stakeholders that can align on missions and leverage their strengths. The private sector, the support landscape, governments, and consumers are four key stakeholders that are central to the development of the climate tech landscape in Africa. These groups must align on needs and priorities for the ecosystem to thrive.
- Between 2014 and Q1 2022, climate tech start-ups in Africa cumulatively raised just over $2.1 billion in disclosed funding, accounting for 14.7 per cent of the total investments raised by digital- and technology-driven start-ups in the same period.
- In 2021 alone, record funding into climate tech companies reached at least $440 million, demonstrating the growth of climate-focused start-ups and the increased number of active investors.