FoodTech Investments Help Streamline Africa’s Agriculture Trade, Connect Fragmented Supply Chains

Africa’s startup ecosystem raised nearly $5 billion in venture capital (VC) funding last year, twice as much as in 2020.

For Zekarias Amsalu, founder and CEO at investment advisory firm IBEX Frontier, that growing attractiveness can be attributed to an awakening in the international investor community as to the significant return on investment doing business on the African continent has to offer.

“The misconception about risk that is being demystified as successful international investors show [others] the record-breaking return on investments [they’ve made so far],” Amsalu told PYMNTS in an interview.

Read the interview: Global Startup Uncertainty Drives Mega Investments in Africa’s Burgeoning Tech Scene

Overall, the African FinTech players tend to dominate the space, and accounted for 41% of all mega deals inked last year — the highest across all sectors. But while the sector has been attracting the most VC funding, other industries are emerging and benefiting from rising investor interest.

See more: African FinTechs ‘Least Hit’ by Global Tech Funding Winter, but for How Long?

Overall, FinTech firms mainly dominate the African startup landscape, but apart from the continent’s booming financial technology sector, other industries are also benefiting from a rising investor interest.

The agribusiness sector is one of such and according to a report published last month by AgFunder, in partnership with the Dutch development bank and British International Investment, over $480 million was invested in African AgriFoodTech businesses last year. This represented a 250% year-on-year increase that outpaced even the impressive growth experienced by the continent’s FinTech funding in the same period.

Read also: Africa’s Startups Balance Trade Off Between Lower Valuations and Larger Funding Rounds

Some of the biggest funding rounds in the space were raised by midstream technology companies that situate their tech between producers and end-retailers, including startups that digitize food supply chains and optimize trade between suppliers and merchants.

These include a $55 million Series A round by the Egyptian firm MaxAB, a business-to-business (B2B) e-commerce platform that connects informal food and grocery retailers to suppliers.

Nigeria’s TradeDepo, which to date has raised $123 million in funding, offers a similar solution, providing a digital marketplace for importers and manufacturers to sell to merchants. At the retailer-facing end, the firm also offers buy now, pay later (BNPL) to help retailers buy more products and maintain their cash flow.

This year, the trend for supply chain tech investment has continued, with pan-African B2B firm Wasoko raising a $125 million Series B back in March. Like TradeDepot, the company, which recently relocated to Zanzibar, offers trade financing in the form of BNPL loans to merchants as part of its consumer goods marketplace platform.

Learn more: B2B Marketplace Wasoko, Zanzibar Team to Build Innovation Hub

As Wasoko CEO and founder, Daniel Yu told PYMNTS, “anything that can be done to improve the efficiency and ultimately improve the affordability and availability of [essential goods] for a billion and a half people is going to be a huge business.”

See more: African B2B Marketplace Wasoko Takes On Supply Chain Inefficiencies

Since its launch in 2016, the business has grown into a regional marketplace with over 50,000 informal retailers in its network across Kenya, Tanzania, Rwanda, Uganda, Cote d’Ivoire and Senegal.

At the other end of the supply chain, the continent’s startups are also building digital solutions to financially empower farmers and producers too.

Earlier this year, for example, Nigeria-based AgriTech business ThriveAgric secured $56.4M in debt funding to grow its 200,000+ farmer base and expand into new African markets, including Ghana, Zambia and Kenya.

Related: Beyond VCs, Public Investments Further Africa’s Digital Transformation Agenda

ThriveAgric has built what it calls an ‘Agricultural Operating System’, comprising a sales and payment system for smallholder farmers to enable them tap into local and global commodity markets while optimizing their harvest through data-driven insight and access to capital.

Ultimately, Africa’s VC landscape paints a picture of the continent’s unique Agrifood challenges and opportunities. Whereas AgriFoodTech investment in Europe and America highlights categories like alternative protein and eGroceries, these take a much smaller share of VC dollars in Africa.

More on this: Tech Creates Sustainable Food System for Green EU Consumers

Instead, tech that looks to streamline food trade and connect fragmented supply chains has proven to be the big winner in the space so far.

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