Investors Are Divided On Africa’s Climate Tech Boom As Hopes & Hype Collide

Africa’s climate tech scene is witnessing a massive influx of capital, as billions of dollars pour into startups and solutions across the continent.

From renewable energy to sustainable agriculture, entrepreneurs and investors alike are betting big on technology’s potential to not only mitigate the devastating impacts of climate change but also create economic growth in a region increasingly vulnerable to its effects.

Yet, beneath this optimism lies a tension between hope and hype. While there’s little doubt that climate tech offers transformative possibilities, some stakeholders are cautious about whether the current investment boom is grounded in African realities or driven by global hype cycles.

Others warn that while the money is flowing, the practicality of many climate tech solutions remains unproven in Africa’s unique market.

A flood of capital

The numbers tell the story. This year, climate tech has claimed a third of the continent’s total funding with USD 413.9 M raised as of September, data from our deals database WT Elite shows. Among this year’s top deals are D.Light’s USD 176 M round,
Spiro’s USD 50 M raise and BasiGo’s USD 42 M debt and equity raise most recently.

That figure, already twice as much as the 2023 total, is a sharp rise from previous years where climate tech lagged behind sectors like fintech and e-commerce.

Maxime Bayen, coordinating partner at Catalyst Fund, a notable investor in climate-resilient tech, offers some perspective: “Climate tech funding has been growing in absolute numbers over the past five years. Yet, it didn’t benefit from the 2021 and 2022 investment booms as much as fintech. However, in 2023 and 2024, the tide shifted, with climate tech funding regaining its share,” he told WT.

Funding for climate tech startups in Africa has been steadily increasing, with over USD 1.5 B raised since 2019, per WT Elite. Africa is now home to a growing number of climate tech startups, spanning sectors such as renewable energy, sustainable agriculture, and mobility.

Some of these startups have reached later-stage funding rounds, such as SunCulture, Pula, and Roam, signalling that the sector is maturing, as Bayen asserts. He emphasises that this growth is far from a short-lived bubble: “We’re talking about an 8 to 10-year trend, quite far from a bubble. Climate tech is not new, and the growth we’re seeing is a continuation of that trend.”

But is all this money well-spent?

Not everyone thinks so. Idris Ayodeji Bello, founding partner at LoftyInc Capital, is cautious: “A lot of it is going to go down the drain. It’s great but a lot of it is not sustainable. Climate tech is still a buzzword. We see money going into sectors like EVs, but that’s not sustainable in Africa yet. There’s no FOMO for us when it comes to climate.”

Bello’s scepticism is rooted in viability concerns, exacerbated by evidence that Africa’s infrastructure is often not ready for the technologies investors are backing.

Take electric vehicles (EVs), for example. While they have become a darling of global climate tech, the reality on the ground in Africa is less promising. Nigeria, for instance, has an electricity grid with a capacity of just 5,000 MW, insufficient to support widespread EV adoption.

Beyond infrastructural shortcomings, there are concerns about whether the surge of interest in climate tech is rooted in more external pressure than calculated assessment.

“There’s no question about it, there’s a lot of potential even though the companies in this segment don’t look like typical VC businesses for a while—they are slower, they ignite later—but you have to think through what businesses can really work in the African context,” says Eghosa Omoigui, Founder and Managing General Partner of EchoVC Partners which has some climate interests.

“But I’m not sure a lot of fund managers would even be interested in climate without LP interest. And it’s interesting because Limited Partners (LPs) can sometimes help direct focus. If they’re more interested in areas like decarbonisation, for example, fund managers might shift their attention to that,” he said.

The tech investor also emphasised the need for more thoughtful, strategic investments in climate solutions that can make a difference. “We could have just sat back and said, ‘Let’s raise a bigger fund—USD 50 M or USD 70 M—talk about the game and make a splash.’ But that’s not what the market needs right now,” Omoigui told WT.

Africa’s climate vulnerability driving the boom

One reason for the surge in climate tech funding is Africa’s position at the frontline of climate vulnerability.

The continent faces some of the world’s most severe climate risks, from droughts and floods to desertification. As Tomi Davies, founder of TVC Labs, points out, “Africa is at the frontline of climate vulnerability, so it’s only natural that both local and international investors see the potential for long-term impact in climate tech solutions.”

These solutions align with urgent needs. Agriculture, which employs more than half of Africa’s workforce, is particularly at risk. Technological advancements like precision farming and digital tools are helping reduce waste and improve productivity.

Mobola da-Silva, Venture Partner at Capria Ventures, asserts that “agriculture, energy, and mobility are essential to Africa’s long-term sustainable growth and economic development.”

She cited MAX, a Nigerian mobility company backed by ~USD 100 M in funding in Capria’s portfolio, which is making efforts to tackle climate change by transitioning to electric vehicles as a key example.

“By introducing electric motorcycles, MAX contributes to lowering carbon emissions in cities and creates employment opportunities for drivers. MAX’s inclusive business model is empowering thousands of Africans with stable incomes, improving livelihoods, and driving socio-economic growth,” da-Silva told WT.

While some view climate tech investments as a necessary response to Africa’s pressing climate challenges, others raise concerns about whether this influx of capital is being directed toward the right solutions.

Carbon Capture: Hope or Hype?

Another controversial area is carbon capture and storage (CCS), which some tout as a silver bullet for reducing emissions. However, this technology has long been a subject of debate.

Rosemary Harris, Senior Campaigner at Oil Change International, an advocacy group, doesn’t mince words in a recent letter: “Carbon capture has a 50-year record of failure. The fossil fuel industry knows CCS is not the answer, yet it keeps pushing it as a distraction tactic to delay the transition to clean energy.”

Harris’ scathing critique is backed by decades of underperformance in the CCS sector, and she argues that continuing to fund it is a colossal waste of money. “If CCS is the ‘weapon’ … it is, at best, a very expensive butter knife,” Harris says.

On the other side of the debate, Martin Freimüller, co-founder and CEO of Kenya-based Octavia Carbon, is confident that Direct Air Capture (DAC), a form of carbon capture, holds promise for Africa.

His company, which recently raised USD 3.9 M in seed funding, aims to make Kenya a global hub for DAC. “Kenya has the world’s best mix of the right renewable energy, geology, and talent to win the global race to scale Direct Air Capture,” Freimüller told WT. He points out that the world needs to remove 10 billion tons of CO2 annually by 2050 to reach net zero, creating a massive growth opportunity for the technology.

However, question marks continue to trail the endeavour. Omoigui, who says his venture capital firm has made strategic climate-related bets for nearly 8 years, believes decarbonisation is one of those sexy terms that’s gained a lot of attention, but the reality is that there’s still a long way to go. 

“There are also political dimensions to this conversation. Some people argue that Africa is being made to underwrite the damage from climate change even though it hasn’t experienced the kind of industrialization that caused it in the first place. So, there’s always that tension,” he told WT.

The EV dilemma

Beyond carbon capture, another contested area is electric mobility which is among the most funded subsector alongside solar solutions. While companies like Ampersand and BasiGo are making strides in manufacturing electric vehicles for the African market, the continent’s infrastructure challenges are significant barriers.

As Bello pointed out, the buzz around EVs may be misplaced in countries where electricity access is unreliable, and consumers simply cannot afford high upfront costs.

Yet, there are bright spots. Kenya, for example, is making progress in electric mobility while Nigeria has struggled. Despite these obstacles, the sector is growing, and some investors see potential for long-term gains.

As renewable energy becomes more affordable and competitive, interest in solar and electric mobility is rising, albeit slowly. However, as Bello warned, a lot of early-stage investments may end up being lost in the rush.

Long-term impact or immediate needs?

Despite the enthusiasm, there is growing debate about whether the current wave of investment in climate tech is balanced with the continent’s immediate challenges.

Freimüller argues that Africa can’t fix its economies by focusing on “poverty tech,” which merely addresses poverty at the margins. 

“The thing is, Africa won’t get rich by being able to receive remittances slightly more cheaply – any region of the world that turned into a high-income region did so on export-led growth, of either manufactured goods and/or natural resources (especially oil), he opined.

The founder also stresses that Africa needs globally competitive companies, particularly in sectors like deep tech and industrial hardware, to create high-quality jobs and drive export-led growth. 

“We need sectors where African companies can be fiercely competitive on the global stage, instead of trying the impossible and attempting to make money by selling to very low-income consumers,” Freimüller said. “My take would be that countries like Kenya need globally competitive companies creating high-quality industrial jobs to lift people out of poverty for good. That’s about developing and building deep tech hardware, not a fancy app.”

Sola Osonuga, an Investment Associate at Ventures Platform, warns that climate tech solutions must align with economic interests to succeed. “In a price-sensitive market like Nigeria, startups that focus solely on carbon neutrality without a strong economic angle will struggle to gain traction. These solutions must clearly demonstrate financial benefits,” Osonuga argues.

She gives the example of Thrive Agric, a startup that connects farmers to off-takers, reducing waste and ensuring more produce reaches the market. This approach, Osonuga explains, addresses both climate goals and immediate economic concerns by reducing methane emissions from wasted crops while also boosting farmers’ income.

However, not all climate tech solutions are as practical or accessible. Nigeria’s energy infrastructure challenges, for example, have hindered the adoption of electric mobility, despite rising fuel prices.

Osonuga highlights that while Kenya is well-positioned for electric mobility due to its geothermal energy resources, Nigeria’s reliance on fuel subsidies and insufficient electricity generation have created significant barriers.

Omoigui, whose firm is writing small cheques to 14 early-stage African companies through its pilot ‘Eco’ climate fund closed last year, echoes this caution, noting that climate tech requires coordination across different sectors.

“Climate tech isn’t a one-size-fits-all scenario. Storage, for example, is an infrastructure play essential for reducing waste in food systems, but that kind of investment requires public and private coordination,” he says.

He also highlights the rising risks of climate change, such as the increasing frequency of extreme weather events, noting that the implications of climate risk extend far beyond the environment and into sectors like insurance and logistics.

Innovation versus Practicality

As investment floods into the sector, one key question is whether the growth in climate tech is happening in a way that can deliver both long-term climate resilience and immediate development gains.

Bello, a self-described ‘Afropreneur’ whose firm has backed over 150 African startups including two unicorns, points out the need for cautious optimism: “Africa needs climate tech solutions, but we need to make sure we’re backing businesses that solve today’s problems while also contributing to long-term sustainability.”

For some, the concern is that the rush to scale unproven technologies could distort the landscape. Davies shares this sentiment, stating, “The risk of overhype exists if investments focus too much on scaling unproven technologies or if they are misaligned with on-ground realities.”

He argues that the success of climate tech in Africa depends on whether these solutions are adapted to local contexts and address Africa’s most pressing issues.