Agritech startups in Africa may be more likely to raise funding if they also addressed climate change, a recently published AgBase report by market intelligence firm Briter Bridges suggests.
In the last twelve months, agritech companies offering products or services that addressed climate adaptation or mitigation attracted 53% of all funding into agritech startups. In the last ten years, agri-tech companies with direct or indirect climate-smart offerings only attracted 40% of financing.
In 2023, funding for African climate-tech companies increased by 9% from the previous year to become the second-most-funded sector after fintech.
In the last decade, agricultural technology companies in Africa received $1.56 billion in investments according to data from the investment tracking platform, Briter Bridges. By comparison, climate-tech startups in Africa raised over $3.4 billion between 2019 and December 2023. Even controlling for the inevitable double-counting due to agri-tech investments that invariably fall under the climate-tech banner, it is still a significant out-performance.
But entrepreneurs and funders are leaning into an emerging agritech and climate-tech nexus to justify.
In 2023, Sanne Steemers, President, Rest of Africa at AFEX, a leading commodities trading startup in Africa argued for, “investment in the tools that allow farmers to adapt to climate change.” For Steemers, training farmers to properly use agricultural inputs would be key to reducing emissions, and that task fell squarely on the lot of agritechs. Besides, who was best placed to enforce the traceability of traded commodities to identify and mitigate deforestation risks?
Funders agree. In March 2024, the World Bank’s board of directors approved an additional $40 million in grant funding through the International Development Association (IDA) to facilitate the validation and dissemination of climate-smart agriculture technologies and methods in Ethiopia, Ghana, Kenya, Mali, Senegal, and Zambia.
In 2022, just as Egypt prepared to host COP27, Hossam Allam, a Cairo-based real estate guru and former lead negotiator who helped Shell broker Qatar’s first liquefied natural gas (LNG) export to China, and Sherief Kesseba, the Copenhagen-based veteran of Egypt’s agri-business sector announced the launch of Climate Resilience Fund Africa or CRAF, a $25 million vehicle that would exclusively focus on investing in African seed stage tech startups “at the intersection of agriculture and climate.”
The Catalyst Fund, a pre-seed accelerator which reached the first close of a $40 million climate-tech-focused fund invested in Biobuu, the Tanzanian insect-based feed and fertiliser startup because the company’s “innovative model tackles these interconnected challenges of food, waste and climate change.”
The focus is not without merit. Africa famously contributes the least carbon emissions but is also disproportionately affected by extreme (and occasionally even subtle) variation in long-term weather patterns. Agriculture—the biggest employer of the African labour force—is particularly vulnerable to severe flooding or punishing drought. Both extremes that
At the same time, the continent’s growing population continues to depend on huge food imports to make up the balance of its mostly rain-fed and smallholder-dependent food production system. Improvements are needed all across the board, especially in subtle non-obvious spaces like social norms that may hold back women smallholder farmers from becoming full-fledged food entrepreneurs.
In more ways than one, the problem with agriculture in Africa is systemic and can vary wildly from place to place. Then there is the frustrating lack of data that affects everyone from investors to farmers and even public institutions.
A common result is often that no one strategy effectively solves the food systems problem. The world of finance tends to abhor complex solutions but embraces complex financing arrangements. Tying climate and food systems together may just be the financial universe responding to a complex challenge with its own set of solutions. Or it might be a forerunner of the sort of custom-designed investment vehicles, which a growing cohort of investors like Eghosa Omoiugi, Managing Partner at EchoVC are calling for.
Whether or not climate tech and agritech should be tied this closely together might be a question for investment and impact-assessment committees. But for now, the message is clear. In Africa, the agritech money is increasingly for agritechs who can persuade financiers that they are also good for the environment.
Written by Abraham Augustine, a technology and media researcher, based in Rwanda and obsessed with digital economies in emerging markets.
As a journalist, he covered African startups their investors, and regulators. Now he combines supporting Norrsken’s mission to catalyse impact entrepreneurship in Africa with building data systems at Trendsaf and strategic consulting via Aperçu, a boutique IT firm based in Rwanda.