According to Partech Africa's "2023 Report on Technology Venture Capital in Africa," a global technology investment firm with offices in Dakar, Senegal, and Nairobi, Kenya, Francophone African countries are now emerging as key destinations for investments, a trend observed over many years. Despite a decrease in total funding to $335 million in 2023, marking a 37% decrease from the previous year, they represented 15% of the total equity funding on the continent, a notable increase from 11% in 2022.
"In 2023, Francophone Africa stood out as a dynamic and growing force in the technology sector, defying broader market trends"
The region showed resilience in terms of transaction volume, with a total of 93 transactions, marking a 16% year-over-year increase, while the continent experienced a significant 32% year-over-year decrease. This now represents 20% of the total transactions on the continent, compared to 12% in 2022.
"In 2023, Francophone Africa stood out as a dynamic and growing force in the technology sector, defying broader market trends and being the only region to demonstrate year-over-year growth in both transaction volume and investor participation," note the report's authors.
“In 2023, five Francophone countries secured their place in the top 10 African technology financings”
"In 2023, five Francophone countries secured their place in the top 10 African technology financings: Morocco ($93 million), Congo ($42 million), Rwanda ($38 million), Tunisia ($33 million), and Senegal ($27 million)."
According to Partech, a significant share, 52%, of all African countries recording a transaction were in Francophone Africa (14 out of 27), an increase from 46% the previous year (2022). Additionally, 18 out of 21 Francophone African countries have received equity funding since tracking began in 2014. Francophone Africa accounted for 61% of all transactions outside the top four [Nigeria, Kenya, Egypt, South Africa], up from 49% the previous year [2022].
Francophone Africa saw a modest 3% year-over-year increase in investor participation, involving 152 investors. This stability in Francophone Africa contrasts with the massive decline seen elsewhere on the continent, where investor participation fell by 50% year-over-year. These data suggest that despite broader economic challenges, Francophone Africa has not only retained but also increased its appeal to investors.
"When examining investments outside the 'Big Four' of Africa, there has been a radical shift in investor focus towards Francophone countries"
As the investment environment evolves, many venture capital firms have emerged with dedicated capital for the continent, and some even with a mandate in Francophone Africa to actively explore and capitalize on opportunities in these markets. This shift towards a wider range of investment sources marks a significant step towards a more inclusive and balanced investment ecosystem. It aptly reflects the varied economic potential of the continent, leading to a more dynamic startup ecosystem fueled by fairer funding.
"When examining investments outside the 'Big Four' of Africa, there has been a radical shift in investor focus towards Francophone countries. In 2023, these countries accounted for 68% of the equity financing volume from the Rest of Africa (ROA), a substantial increase from 38% in 2022," emphasize the authors.
Moreover, Francophone Africa represented 61% of all transactions outside the top four, compared to 49% in 2022.
The Francophone African region covers 21 countries where French is widely spoken and is home to 400 million individuals. Over the years, the region has faced unique challenges that have led to a late entry into the technology startup scene, including regulatory complexities, smaller market sizes, talent shortages, and notably, the language barrier.
However, the region is now at a turning point. The IMF reports that six of the ten fastest-growing economies in emerging markets are in Francophone countries, signaling a reversal of economic conditions favorable to venture capital and technological progress.
"Wave's rise demonstrates that startups have the ability not only to thrive within a Francophone market but also to strategically expand their operations"
Highlighting Wave, the only unicorn outside the Big Four, as a success story in Francophone Africa, the report states: "Wave, the Senegal-based mobile money service, illustrates the region's potential. The company was propelled into the billion-dollar valuation club following a $200 million funding round in 2021 - a first for Senegal and for any startup outside Nigeria and Egypt. Wave's strategy of offering a better customer experience at lower cost has disrupted the market, especially in a country with just over 17 million inhabitants. While often seen as an isolated phenomenon, Wave's rise demonstrates that startups have the ability not only to thrive within a Francophone market but also to strategically expand their operations."
With economic zones like the West African Economic and Monetary Union (UEMOA or WAEMU), companies like Wave can leverage the advantage of operating within a collective of countries sharing a common language, currency, and regulatory system, underscoring the need for investors to look beyond language barriers and unfamiliarity and engage with a market that, in unity, covers a population of over 400 million individuals.
