The 10 most startup-friendly African countries for investors right now

The effect of the coronavirus pandemic is still being felt across many countries in Africa and the world. The global economy contracted by some 4.3%, according to the World Bank, and foreign direct investment to Africa fell by 18% in 2020.

In the same light, the venture funding market in Africa declined by 29% in total value, according to a new report by Partech Research. Despite the decline in the market size, the continent’s startup ecosystem recorded a higher number of deals, increasing by some 44%.

Seed round deals on the continent rose from 127 to 228 deals. The report showed that capital funding for African startups will amount to between $2.25 billion and $2.8 billion this year.

Per the report, Africa’s top-performing market is Nigeria, despite the West African nation ranking low on the ease of doing business. Africa’s second-largest is Kenya, according to the report. The two countries, Nigeria and Kenya, are the hotspots for African VC investment, raising $307 million and $305 million respectively in 2020. 

Nigeria startups, according to the Partech report, received the most investment in 2020 at a total value of $307m in 71 deals and an average deal size of $4,3m. “This is 59% lower than the $747m invested in 38 deals at an average of $19,7m in 2019m,” the report said.

Egypt also dominated the startup ecosystem in North Africa, attracting $269 million in venture funding while South Africa had $259 million. Ghana attracted $110.0 million.

Where Africa’s startup activity is concentrated:

Nigeria: $307 million.

Kenya: $305 million

Egypt: $269.0 million

South Africa: $259.0 million

Ghana: $111.0 million 

Rwanda: $11.6 million

Uganda: $11.3 million

Morocco: $11.2 million

Cote d’Ivoire: $6. 5 million

Algeria: $5.5 million

The report also projects that VC investment in Africa is expected to reach between $3.4 billion and $4.7 billion by the year 2023 and hit $10 billion by 2025. 

“While the pandemic resulted in major setbacks in 2020 with growth declining 29 percent, the good news is that major improvements are expected. In 2022, VC investment is expected to climb sharply to between $3.8 billion and $4.7 billion while the upper range is expected to be $6.8 billion by 2023. By 2025, VC investment in Africa is forecast to exceed $10 billion,” the report said.

“This is thanks to a number of factors such as an increased allocation of capital from corporates to their corporate VC activities, acquisitions of African tech companies, intensified FDIs and major initiatives from Europe such as the Enrich in Africa program.”