According to Briter Bridges’ year-end report for 2023, titled “Debt Financing in Africa’s Innovative Ecosystem: An Overview of Drivers, Trends, and Key Takeaways for the Ecosystem”, Nigeria, Kenya, Egypt, and South Africa collectively secured more than three-quarters of all debt funding to Africa from 2014 to 2023.
The report highlights, “Over the past ten years, digital, technology-enabled, and green companies in Africa raised over $2 billion in disclosed debt funding from 140+ funders through more than 200 deals, constituting around 10% of the total funding in Africa during this period. Notably, more than 75% of debt funding has been directed to Nigeria, Kenya, Egypt, and South Africa, mirroring trends seen in equity funding.”
Additionally, the report reveals, “Almost 75% of debt funding has been allocated to asset-heavy businesses, particularly in cleantech, mobility, agriculture, and logistics. Cleantech companies, in particular, received nearly half of all disclosed debt funding. Fintech and digital lending, on the other hand, represented around 20% of the total disclosed debt funding.”
The report emphasizes, “Despite the decline in equity funding, debt funding to startups has consistently increased from approximately $100 million in 2019 to $685 million in 2023.”
Increasing debt in Africa’s startup ecosystem results from factors like a decline in equity funding and a better understanding of debt’s effectiveness in meeting startups’ funding needs. Cleantech and Fintech startups are major recipients, with Cleantech alone representing almost half of the total debt funding for African startups.
The rise in debt is a favorable indicator for the ecosystem and this trend is expected to persist, particularly in the coming year, and should be regarded as one among various funding instruments and support mechanisms to effectively foster sustainable investment and innovation ecosystems across Africa.
