Africa’s AI Startups Miss Out On AI Gold Rush With <1% Of Funding
The global AI gold rush is in full swing. Billions are pouring into startups promising to reshape industries. But in Africa, the flow is a trickle.
While the continent boasts over 2,400 AI companies, per a recent Afrilabs report, the sector has attracted a paltry USD 4 M across five deals in the second quarter of 2024, recent findings by business analytics platform CB Insights show. This is a stark contrast to the USD 23.2 B raised by global AI startups in the same period.
The disparity is glaring. Less than 1% of global AI investment is flowing into Africa. This is despite the continent’s immense potential, driven by a burgeoning youth population, unique challenges, and opportunities for innovative solutions.
Why the Lag?
Several factors contribute to Africa’s AI funding winter. Firstly, the continent grapples with a dearth of accessible data, a critical ingredient for AI development. Robust cloud infrastructure, essential for AI workloads, is also scarce.
Also, the funding landscape is challenging. While USD 2.02 B has been invested in promoting AI activities on the continent, 63% of African AI startups are still in their early stages, per the earlier-referenced research by Afrilabs, an innovation hub. This suggests that the journey to significant returns on investment may be longer.
The nascent nature of the regulatory landscape presents another drawback. Only a handful of African countries, including Mauritius, Rwanda, Benin, and Senegal, have formulated AI strategies. This regulatory uncertainty can deter investors in a sector estimated to potentially contribute USD 1.2 B to the continent’s GDP by 2030 if it captures just 10% of the fast-growing global AI market.
A Landscape of Potential
Despite these challenges, Africa is not without its bright spots. The education and healthcare sectors have seen significant AI adoption, with 216 and 114 AI startups respectively. This indicates a growing recognition of AI’s potential to address critical societal issues.
Moreover, there’s a growing optimism about Africa’s AI future. The average AI readiness index for African countries is projected to increase by 77% over the next five years. This, coupled with a predicted 62% growth in investment, points to a promising trajectory.
Bridging the Gap
To fully unlock Africa’s AI potential, concerted efforts are needed. Governments have role to play in prioritising investments in digital infrastructure and data accessibility. The private sector would then be incentivised to increase funding for AI startups, perhaps through dedicated venture funds. Also, the academic community has an important task in training a new generation of AI talent.
While Africa’s AI story is still largely a fledgling tale of significant potential tempered by significant challenges, a mix of the right policies, investments, and talent, could push the continent onto the global AI reckoning.
