To solve the fundraising crunch and continental-wide positioning economy facing African startups, Artificial Intelligence (AI) has enjoyed the full advantage of the dominant debate in Morocco's third edition of Gitex Africa.
Over the past year, several speakers have issued warnings about a decline in funding for start-ups in Africa, venture capital (VC), arguing that this trend has highlighted the important need for continental entrepreneurs to rethink their funding strategies and consider alternative sources of funding.
According to a new report from the African Private Capital Association (AVCA), the value of transactions involving African startups fell 22% year-on-year in 2024, while trading volume fell 28%. Continuing inflation, higher interest rates, supply chain disruptions and geopolitical shocks have led capital allocators to retreat from the continent, forcing many startups to shelve their expansion plans and prioritize their organic growth strategies.
African investors step up
Despite the challenging fundraising environment, AVCA CEO Abi Mustapha-Maduakor struck a positive tone, highlighting that Africa has demonstrated “notable resilience” in the face of global challenges. She pointed to the increased involvement of African investors in diversification beyond funding rounds and fintech as reasons for optimism, noting that trading in African technology over a longer time frame was on a healthy upward trajectory.
“While the overall funds are under contract, we see strategic adaptation, high quality trading, diversification of sectors beyond fintech, increased venture debt and the strengthened role of investors in Africa,” she said.
The AVCA report shows that African investors appeared as the largest group of VC active participants in 2024, accounting for 31% of the total investor pool compared to 19% a decade ago. Overall, 35 fund managers from 41 funds raised $2.7 billion in their final closures since 2015, reflecting the annual growth rate (CAGR) of 25% complications.
Speaking on the panel, Alami Capital CEO Olu Olufemi-White called on African startups to reevaluate their investor engagement strategies in light of recent pullbacks in recent VC funding. She said entrepreneurs should not only focus on showing business growth potential, but prioritize the credibility of building as responsible and reliable operators. She argued that reliability is essential to beat investors in an environment marked by risk-off sentiment
“Entrepreneurs need to understand that when they load investors' money, it is a signal of trust. You are a trustee. It's not a repository to fund your lifestyle. Reliability allows you to build a durable company,” she said.
ai raises hope
According to an AVCA report, Fintech has remained dominant, with 116 transactions raising $1.4 billion or 34% of the tech-enabled round, from the perspective of the highest VC-funded sector, with Clean & ClimateTech rising from an average of 7% over five years to 13% of its tech-enabled trading volume, while AI has made its debut among the top four most funded industries, with 42 transactions raising $108 million.
Investors, startups and multinationals have expressed optimism that AI will help drive a faster recovery in technology trading in Africa. The speaker highlighted a new focus on increasing deployment of digital infrastructure across the continent and increasing the workforce in Africa as a positive tailwind for AI.
The recent partnership between Nvidia and its UK headquarters Cassava to build data centres powered by NVIDIA AI computing technology in South Africa, Kenya, Nigeria, Morocco and Egypt has been widely cited in several panels as a major boost to African AI.
Nkululeko Thangelane, executive head of AI at Vodacom South Africa, said on the Gitex sidelines that the benefits of AI for African businesses are not far from the future, but are already felt now.
“Internally, we have improved productivity and efficiency, but externally, we have improved our customer service through increased personalization and chatbots that speak Zulu and local language,” he said. “We also managed to reduce fraud by about 20%.”
Thangelane said these improvements have encouraged Vodacom to allocate a larger share of capital expenditures on AI investments.
“There are KPIs that ensure at least 10% of IT costs are invested in AI over the next two years. That's the lowest, so we need to increase it at some point,” he said.
“The direction we want to go is Agent AI. We are changing our business from traditional robot automation to intelligent automation.”
