"Green" transition capital is becoming increasingly available to African businesses as a focus on cleantech intensifies.
Bonface Orucho, bird story agency
A surge in funding for nature-based solutions worldwide is opening opportunities for green startups in Africa, with a resultant increase in cleantech startups, according to a recent report.
AfricaGoGreen Fund (AFGGF), a pan-African fund that supports climate-friendly projects on the continent, recently secured US47 million in its second fundraising round.
The fund focuses on the installation of rooftop solar and battery storage for residential, commercial, and industrial consumers, as well as the purchase of high-efficiency appliances and industrial equipment, and retrofit existing and new green buildings.
The International Finance Corporation (IFC) provided US$17 million in equity during the round, besides committing US$30 million in debt. At the same time, the African Development Bank (AfDB), the Nordic Development Fund and the Sustainable Energy Fund for Africa each invested US$10 million in equity.
In December 2022, AFGGF closed US$10 million in debt from Calvert Impact Capital.
A number of other financing initiatives for climate tech have rolled out across Africa in recent years.
The Africa Climate Change Fund, established under the African Development Bank in 2014, has supported greening initiatives in more than six African countries by offering grants to governments, NGOs and initiatives.
According to ACCF Secretariat Coordinator Rita Effah, “ACCF provides grants from $250,000 to $1 million per project.”
The growing availability of funds offers a ray of hope to climate-facing tech startups on the continent, which often struggled to raise both seed and growth capital. Where fintech and recently, healthtech and logistics startups are increasingly well-financed, climate-tech investment has lagged, despite being sorely needed on a continent that has already felt the impact of climate change.
“Green startups are addressing the urgent need to address climate change and creating economic opportunities in Africa,” explained Ivor Price, the editor-in-chief of Ventureburn, a publication about startups, entrepreneurship and venture capital.
However, with funding programs availing the required capital for some startups, Price warns of the need to channel investments appropriately.
“There is a need to ensure that climate-tech investment is channelled towards sustainable technologies that have a real impact on reducing emissions and mitigating climate change,” he concluded.
The 2023 AfricArena’s State of Tech in Africa confirms a rapid increase in climate startups in Africa in the past 15 years.
Briter Bridges' Adapt, Migrate and Grow 2022 report shows that funding values in cleantech in Africa increased from 5% in 2021 to 15% of total venture capital funding in 2022.
While the share of venture capital deals directed to Africa remains relatively low compared to other regions, the figures are growing for clean techs.
According to Henrik Elschner Pedersen, IFC Regional Industry Director in Africa for Manufacturing, Agribusiness, and Services, funds like AfricaGoGreen are particularly important for Africa's energy transformation.
“It is also expanding access to electricity, green building, and e-mobility solutions,” he noted.
AfricaGoGreen Fund aims to raise US$250 million at a final close, with the second round raising its current funding to $138 million.
A 2022 report by the Climate Policy Initiative indicates that Africa needs US$2.8 trillion, or US$250 billion annually, between 2020 and 2030 to implement its Nationally Determined Contributions (NDCs).
This is against the current climate inflows of US$30 billion, slightly more than 10% of the required amount.
AfricaGoGreen's beneficiaries include AktivCo, an activity-driven subsidiary of Camusat Group, which received US$4 million as a debt fund to support the construction of renewable energy power plants for telecom towers, replacing diesel generators.
Through the funding, AktivCo reports, it will manage the execution of these greening projects in Niger, Chad, Cote d’Ivoire, Cameroon and Burkina Faso.
In 2022, BBOXX received financing of US$5.5 from AfricaGoGreen to aid the mitigation of 760,000 tonnes of CO2 by providing clean energy and cooking solutions. BBOX is active in the Democratic Republic of Congo, Rwanda, Togo, Kenya, Nigeria and Burkina Faso.
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