Prior to 2022, South Africa’s funding levels had been increasing year over year; 2022 was the first time this had not happened.
The 2022 African Tech Startups Funding Report by Disrupt Africa shows that South Africa experienced a year-over-year (YoY) decline in both the number of startups receiving funding and the overall amount of funding received. In 2022, funding for South African tech startups fell.
A landmark year for tech startups in Africa, despite South Africa’s difficulties, was 2022. Throughout 2022, over 600 African tech startups raised a combined $3.3 billion, a YoY increase of 55.1%.
In light of the year’s overall global investment decline, particularly in riskier asset classes like venture capital, the growth in investment is impressive. However, South Africa had a difficult year, with only 78 startups receiving funding (12.3% of all funded ventures in Africa). Together, the South African startups raised $329.7 million, which is a 2% YoY decrease and 9.9% of Africa’s total.
South Africa dropped to fourth in both categories, behind Nigeria, Egypt, and Kenya. Prior to 2022, South Africa’s funding levels had been increasing year over year; 2022 was the first time this had not happened.
Even though its lead shrank as other sectors grew year over year, fintech is still the most important industry in South Africa. 28 fintech companies received investments last year (31.5%), raising a total of $132,582,000 (40.2%). With 14 (15.7%) and eight (9%) ventures funded, respectively, the e-health and AI sectors stood out. With $97.8 million (29.6%) in investment, e-commerce and retail technology also had a successful year in 2022.
Other investments were dispersed among the regenerating sectors. The average ticket size in South Africa was up to over $4 million despite the difficult year, indicating that there were more tickets with larger ticket sizes.
According to Disrupt Africa, 2022 was a letdown for South Africa as it was overshadowed by the vigour and zeal of Nigeria and Egypt. Despite having a higher prevalence of mid- and later-stage funding, South Africa could use some renewed vigour. 2022 was a challenging year for South African tech startups, but 2023 is off to a good start.
Tom Jackson and Gabriella Mulligan discussed how much money tech startups have raised so far in 2023 on the podcast The Month in VC. Car subscription company Planet42 raised $100 million in combined debt and equity funding.
Insurtech firm Naked received $17 million, gaming startup Carry1st received $27 million, and credit company Lulalend raised $35 million. Sendmarc, a provider of order-to-delivery services and online security Additionally receiving millions of dollars in funding were the breakdown management response app Right Now Response, the prop-tech startup Flow, and Yebo Fresh.
This is good news for South Africa’s tech startup scene in 2023, especially given that the big tech companies are having a difficult year. Amidst a deteriorating global economy and high inflation, businesses like Elon Musk’s Tesla, Twitter, Amazon, and tech conglomerate Meta have all seen upwards of tens of thousands of employees lose their jobs.
With layoffs anticipated in many industries, including technology, South Africa has a 68% chance of experiencing a recession this year. Industry insiders predict a loss of tech jobs in 2023 as a result of rising interest rates that have raised the cost of doing business, as the Mail and Guardian reported.
In an effort to reduce costs, Telkom announced earlier this month that it would lay off 15% of its workforce, potentially jeopardizing 1,770 jobs.