Unlocking Growth Opportunities in Africa’s Tech Ecosystem
Author: Adesoji Solanke, Head of FinTech & Banks, Investment Banking Origination, Absa
Despite facing unprecedented challenges during the early days of the pandemic, Africa’s tech ecosystem experienced remarkable growth in 2020 and 2021. The sector saw a surge in funding, leading to the emergence of unicorns and driving innovation across various industries.
However, this growth was short-lived as global interest rates rose, triggering a significant pullback of capital from large international funds. The African tech ecosystem now faces a more selective and challenging investment landscape, with a 7% drop in funding in 2024 compared to the previous year.
While the outlook for funding in 2025 may not see a dramatic rebound, there are signs of stabilization and even a modest recovery on the horizon. The gradual easing of global interest rates is fostering a renewed appetite for risk among investors, creating opportunities for high-growth ventures in Africa’s tech ecosystem.
Three key areas are expected to drive attention in the tech sector this year: the merchant acquiring space, instant payment systems (IPS), and mergers and acquisitions (M&A).
The merchant acquiring sector in Africa is poised for growth as digital penetration and usage continue to rise. Fintech companies are introducing innovative payment solutions to meet the demands of a tech-savvy population, while regulatory efforts are promoting financial inclusion and enabling merchants to integrate into the digital economy.
IPS platforms in Africa processed a record 49 billion transactions in 2023, with a total value of over $1 trillion. Central banks are expanding the reach of these systems to enhance financial inclusion, paving the way for transformative models like open banking that democratize access to financial services.
Expectations are high for increased M&A activity in the tech sector as companies look to strengthen their positions and capitalize on the pull-back in valuations. Mobile money providers, banks, and card schemes may pursue acquisitions to consolidate markets, expand into new regions, or integrate complementary services like digital lending and insurance.
As Africa’s tech ecosystem enters a new phase, the focus is shifting towards building successful businesses that address real-world challenges and deliver impactful solutions. Investors are likely to support ventures led by capable entrepreneurs tackling pressing issues with innovation and clarity, reflecting the potential for meaningful impact.
The current market climate has tested many companies, leaving behind those better equipped to navigate Africa’s complexities. The future is likely to see a cohort of stronger, more resilient businesses poised for sustained success in the region.
