African Tech In 2022: Tribute To A Tricky Year
As the year 2022 draws to a close, Africa’s tech startup and digital economy/innovation ecosystem, like many other walks of life, is naturally having its fair share of the time-honoured tradition that has sort of become compulsory end-of-year rituals: various forms of stock-taking, recaps, and predictions for the soon-to-arrive new year.
But unlike recent years, this year’s instalment of the year-end ritual has been evidently more gloomy and cautious than what has come to be common in tech circles, perhaps the result of the humbling realities that 2022 served up which upended the rosy industry sentiments and outlook that had persisted for the better part of a decade.
Adverse economic conditions have battered the tech industry across public and private markets, sparking a performance shortfall and capital crunch that have unsettled the industry to the tune of 150,000+ job cuts in 2022 alone (more than the 65,000 tech jobs lost between 2000 and 2009 during the post-dotcom bubble depression). Also, tech stocks have tanked alarmingly, and billions of dollars have been shaved off of valuations.
However, even as investors are spooked and a lot more circumspect these days, triggering a reality where tech funding has shrunk significantly across the globe and startups have had to make painful adjustments, 2022 has by no means been a disaster in African tech.
Not all rosy, not all gloomy
African tech is closing the year respectably with well over USD 4 B raised in venture capital investments for 2022, going by widely cited data as of early December. Sure, it’s nowhere near the USD 7 B declared in projections from industry insiders who thought they had had a good look into the crystal ball (A reminder that it’s hard to predict these things).
And of course, this year’s sum is only marginally better than the approximately USD 4 B raised in 2021, but it puts the continent’s tech scene in an enviable position: Africa will be the only continent to have recorded positive year-on-year (YoY) growth in terms of startup funding in 2022, barring any unlikely last-minute surprises from other regions.
Indeed, Africa’s tech scene got off to a flying start in 2022, crossing the USD 1 B total funding mark by March – a record – and hitting USD 3 B by the first half of 2022, faster than ever before, which is also true for the pace at which the funding total crossed every billion-dollar mark leading up to the USD 4 B+ total raised this year, though early-stage deals dominate disproportionately.
The relative stability in funding to African startups in YoY terms which suggests a better showing compared to other regions should, however, not be misconstrued to imply that 2022 was any less challenging.
After the uneasy calm comes the raging storm
The local tech industry did come out of the first two quarters of the year looking unaffected by the global tech rout, but it would eventually feel the pinch.
While there were some talks of defiant resilience, industry insiders had maintained months before the first signs of a pullback materialised in Africa that it would be naive to expect Africa’s tech scene to remain unscathed by the upheaval unfolding in the tech industry globally.
And the storm would eventually manifest, first in the form of hushed whispers of pulled term sheets, less generous terms, and tougher fundraising conversations. Also, word got out of significant valuation slashes at Brimore, 54gene, and Chipper Cash, a fintech startup that blitzed its way to unicorn status a year prior.
Layoffs also rocked the African tech scene with startups resorting to belt-tightening measures in the face of economic difficulties. From unicorns like Wave, Chipper, and Jumia to others such as Sendy. Vezeeta, Kuda, and Twiga, job cuts have happened across many well-funded African startups in 2022 – both reported and unreported – in an effort to ride the headwinds. And it’s not clear that the worst has passed.
This year also had startups paring down or scaling back investments due to viability concerns, vis-a-vis the subdued economic/financial climate: Swvl, SweepSouth, and SafeBoda are among startups that have pulled out of a number of countries to focus on fewer markets.
Others like Kune and Kloud Commerce have been less lucky, shutting down altogether after bagging significant early-stage investments, though the circumstances of their demise may also be connected to a theme of controversies and scandals that reverberated across African tech in 2022.
A reckoning at the top of the ladder
Shining examples of progress and inspirational breakthroughs have been a staple in African tech coverage, dominating the headlines over the years. But 2022 certainly saw quite a dose of critical coverage, perhaps more than ever before.
Just as this was the year in which a multi-year run of being splashed on by the VC funding splurge amid shaky due diligence was supplanted by tighter purse strings and a greater appetite for thorough checks, the leadership at a number of African startups also faced scrutiny over ethical conduct like never before over matters of mismanagement and mal-governance.
The most high-profile case pointed a finger at the leadership at Africa’s highest-valued startup and IPO hopeful Flutterwave, with a raft of allegations against its co-founder/CEO, Olugbenga “GB” Agboola, who is accused of abusing power and unethical dealings.
The Nigeria-founded fintech, along with several other companies, would also run into some legal trouble in Kenya though that might be going away, unlike the CEO, GB, who appears to have survived the scandal and remains at the helm.
In another controversial matter, Kune; a foodtech startup that launched in 2021 to run a dark kitchen operation in Kenya shut down barely a year after it raised USD 1 M, and word got out from former executives that Kune’s demise has little to do with economic constraints (which was the official line) and more to do with the profligate calls and lavish personal expenses of the CEO/Founder, a Frenchman named Robin Reecht.
Workplace abuse and destructive culture in the African tech scene also came to the fore this year with the shocking revelations at Bento rocking the ecosystem, and explosive reporting by WT on the founder misdeeds that led to the demise of Kloud Commerce also shook the local tech scene.
Risevest, Capiter, and Healthlane are among other African startups whose Founders/CEOs were also embroiled in scandals this year, leading to changes at the helm in at least two of those as it stands.
There were other negatives that shook African tech this year and some of the more recent ones include the shuttering of Twitter’s African HQ (just days after its opening, following the takeover by Elon Musk) and the unceremonious termination of its around a dozen members of staff, as well as the crisis at African web3 startup, Nestcoin, which was affected by the much publicised FTX collapse and has laid off staff and cut pay having lost access to much of its operating capital stuck on the beleaguered crypto exchange.
The latter epitomises the series of disasters and market crashes that have ravaged the global crypto industry for much of 2022, and the general bearish outlook and lack of momentum have affected the prospects of local and global crypto startups.
Many good things did happen
As earlier mentioned, 2022 was by no means a disaster in African tech despite the challenges. The fact that the year began with the suspension of the infamous seven-month-long “Nigeria Twitter ban” on January 12 may have come across as a positive sign and good tidings did register at various points throughout the year amid streaks of negatives.
Although African tech did not manage to mint a new unicorn in 2022, big funding deals did get done: Flutterwave’s USD 250 M Series D, Moove’s USD 105 M Series A2 round, and Interswitch’s USD 110 M deal were among the biggest hits. New and interesting startups with impressive business models also sprung up with Kenya’s Badili and Nigeria’s Fluidcoins among a few to keep an eye on.
Some marquee global investors made bets in African tech ventures for the first time this year, with a16z debuting with the USD 20 M round it co-led in South African gaming startup, Carry1st. Local funders also made their presence felt more than ever by co-leading a sizeable proportion (up to 50 percent) of investments in African startups amounting to USD 1 M or more and achieving historic fund closes as in the case of Lagos-based Ventures Platform, for instance, and a number of other Africa-focused venture funds.
And while exit activity is still insufficient in the local tech ecosystem, the wave of acquisitions observed in 2022 is quite encouraging: MFS Africa completed a USD 34 M deal to acquire U.S.-based Global Technology Partners; TradeDepot acquired Ghana-based TradeLion; Morocco’s Chari bought Cote D’Ivoire’s Diago, Eden Life struck a deal to take over Lynk, and mPharma became the majority owner of Healthplus, among several other M&A deals that were recorded this year.
It makes for an even better picture when one adds those positives to the fact that African tech saw its first public listing of a startup via a SPAC as seen in the Swvl deal in March this year, as well as the scramble for data centres, cloud technology, and internet infrastructure investments in Africa and the aggressive efforts of big tech firms like Amazon, Microsoft, and Google to deepen their presence on the continent.
The actualisation of pro-startup legislation in countries such as Nigeria and DRC Congo where Startup Acts were officially signed into law in 2022, as well as other government initiatives focused on promoting digital currencies and the broader digital economy, coupled with the rollout of 5G and rising interest in exciting fringe pursuits such as the metaverse and artificial intelligence on the continent, does suggest it’s been quite an eventful year.
What does next year have in store? Well, if 2022 served up any lesson, it’s that no one can say for sure.
So, for now, here’s to more of the good stuff!
Featured Image Credits: Devdiscourse