Cleantech Deals in East Africa

Author

Lexi Lei

Summary

  • In Ethiopia, Rwanda, Uganda, and Tanzania, cleantech attracts most of the investments and accounts for an increasing share of deals.

  • Tanzania and Uganda are taking lead in cleantech fundraising. Most of the funding went to agriculture, energy and water sector.

  • Most of the cleantech startups are still in the early stage of journey. Venture capital and grant are the major funding sources to fuel cleantech growth.

Climate finance gap in Africa

  • In Africa, 600 million people are living without access to electricity and 1 billion people are living without access to clean cooking.

  • Access to electricity and clean cooking for all Africans requires $25 billion of investment per year, equivalent to merely 1% of global energy investment.

  • Private investment accounts for 14% of climate finance in Africa, of which only 1% comes from funds.

Cleantech landscape in Africa

  • Cleantech in Africa attracted $3.4 billion investment over the past five years, equivalent to just 0.2% of global cleantech investment.

  • Despite the investment downturn, It attracted 25% of total funding in 2022 and became the most funded sector after fintech, demonstrating strong growth potential.

  • Of over 600 active cleantech startups in Africa, nearly 10% are headquartered in Ethiopia, Rwanda, Uganda, and Tanzania, four of the top ten consistent growth economies in Africa.

Cleantech accounts for an increasing share of deals

  • In Ethiopia, Rwanda, Uganda, and Tanzania, cleantech accounts for 70 of the 199 deals from 2019 to 2024, representing 35% of the total deals.

  • Cleantech is now attracting most of the investments. 18 of the 40 deals went after cleantech last year. Its share in all deals has increased significantly from 27% in 2020 to 56% in 2024.

library(tidyverse)
── Attaching core tidyverse packages ──────────────────────── tidyverse 2.0.0 ──
✔ dplyr     1.1.4     ✔ readr     2.1.5
✔ forcats   1.0.0     ✔ stringr   1.5.1
✔ ggplot2   3.4.4     ✔ tibble    3.2.1
✔ lubridate 1.9.3     ✔ tidyr     1.3.1
✔ purrr     1.0.2     
── Conflicts ────────────────────────────────────────── tidyverse_conflicts() ──
✖ dplyr::filter() masks stats::filter()
✖ dplyr::lag()    masks stats::lag()
ℹ Use the conflicted package (<http://conflicted.r-lib.org/>) to force all conflicts to become errors
library(here)
here() starts at /Users/lexi/Desktop/L7/Study/SAIS/Sustainable Finance - Application and Methods/Assignment/Cleantech in East Africa
library(ggplot2)

# Read the data

data <- read.csv(file = "02_data_processed/Startups in East Africa.csv")

# Q1: How many cleantech deals are there in East Africa?

ggplot(data) +
  aes(x = deal_year, fill = climate_tech) +
  geom_histogram(bins = 11L) +
  scale_fill_manual(values = c(`Climate Tech` = "#7FC97F")) +
  labs(
    x = "Year",
    y = "Number of deals",
    title = "Cleantech Deals in East Africa (2019-2024)",
    subtitle = "Cleantech accounts for an increasing share of deals",
    caption = "Source: Africa the Big Deal | Insight: Lexi"
  ) +
  theme_minimal() +
  theme(legend.position = "none")

Tanzania and Uganda are taking lead in cleantech fundraising

  • Tanzanian and Ugandan cleantech startups have closed 29 deals and 24 deals respectively from 2019 to 2024, accounting for 75% of deals in the four markets. Rwanda had 14 deals in the same period, while Ethiopia only had 3 deals.

  • 70% of the cleantech deals were related to agriculture, energy and water. The rest 30% went to logistics, waste management, fintech, and other sectors.

# Q2: What is the cleantech landscape in East Africa?

data %>%
 filter(!is.na(climate_tech)) %>%
 ggplot() +
  aes(x = deal_year, fill = sector) +
  geom_histogram(bins = 11L) +
  scale_fill_brewer(palette = "GnBu", direction = 1) +
  labs(
    x = "Year",
    y = "Number of deal",
    title = "Cleantech Landscape in East Africa (2019-2024)",
    subtitle = "Tanzania and Uganda are taking lead in cleantech fundraising",
    caption = "Source: Africa the Big Deal | Insight: Lexi",
    fill = "Sector"
  ) +
  theme_minimal() +
  facet_wrap(vars(country), ncol = 4L)

Most of the cleantech startups are still in the early stage of journey

  • Most of the cleantech deals happened at the early stage. 29 of the 70 deals are venture round. Only 5 deals are series round.

  • Grant plays a key role in cleantech funding, accounting for 37% of the deals.

  • Two merge and acquisition deals were achieved over the past five years, concentrating in the energy sector.

# Q3: How large are the cleantech deals in East Africa?

data$type <- factor(data$type, levels = c("Pre-Seed", "Seed", "Pre-Series A", "Series A", "Series B", "Series C", "M&A", "Debt", "Venture Round", "Grant"))

data %>%
 filter(!is.na(climate_tech)) %>%
 filter(!(bracket %in% "n.a")) %>%
 filter(!is.na(type)) %>%
 filter(!(type %in% c("Debt", "Venture Round", "Grant"))) %>%
 ggplot() +
  aes(x = deal_year, fill = type) +
  geom_histogram(bins = 15L) +
  scale_fill_brewer(palette = "GnBu", direction = 1) +
  labs(
    x = "Year",
    y = "Number of deals",
    title = "Cleantech Funding Rounds in East Africa (2019-2024)",
    subtitle = "Late stage deals are rare",
    caption = "Source: Africa the Big Deal | Insight: Lexi",
    fill = "Round"
  ) +
  theme_minimal()

Conclusion

  • Cleantech has become the most promising and fastest-growing sector in East Africa. Investors particularly favor renewable energy solution and its integration with agriculture.

  • To achieve universal electricity access by 2030, decentralization, digitization, and decarbonization are the keys, respectively corresponding to distributed energy resources, digital energy platforms, and low carbon technologies.