👨🏿‍🚀TechCabal Daily – Magnificent 5

Funding

The ‘Big 5’ take the lead in most private deal inflows to Africa

When you think of startup funding in Africa, you think of the Big 4 —South Africa, Egypt, Nigeria, and Kenya. These were countries where all the private capital flowed into. Think private equity, debt, venture capital deals, and mergers and acquisitions (M&As). The Big 4 raised at least 80% of all the continent’s capital since 2021.

Slowly, another West African country has risen through the ranks. In 2024, Ghana has solidified its position as a new entrant in Africa’s “Big 5” private capital destinations. Startups like Fido, Kofa, and Complete Farmer have driven this growth, raising a combined $45 million in the third quarter of the year.

Beyond startup activity, Ghana has attracted interest in private equity and debt financing, with notable deals in renewable energy and agribusiness. The country’s consistent focus on policy reforms and financial sector innovation has made it an attractive destination for broader private capital opportunities. M&A activity has also increased, particularly in consumer goods and logistics, as businesses expand regional operations.

There were 73 private capital deals in Africa in Q3 2024, according to a report by Stears. Thirty-nine of these deals were worth $2.27 billion. The Big 5 claimed 85% of those deals, reinforcing their dominance.

Financial services led the pack, accounting for 33% of investments, while consumer services followed at 19%. Notably, 90% of consumer goods investments targeted e-commerce, a promising sign for Africa’s digital trade growth.

Yet, that’s not all. Rwanda, another tech ecosystem upstart continues to quietly grow. The East African country saw more private capital deals (15%) in Q3 2024 than Ghana (12%). 

Could there be a Big 6 soon? With Rwanda’s emergence, it’s hard to bet against it.

Nigeria’s Central Bank is expected to raise interest rates on November 26 at its next Monetary Policy Committee (MPC) meeting. The MPC raised the interest rates five times this year to fight the country’s inflation rate.

Nigeria’s headline inflation quickened to 33.8% in October after a hike in fuel prices and floods in food-producing areas affected consumer prices. Analysts predict that the unrelenting inflation may cause the MPC to nudge interest rates up by 25–100 basis points.

The Central Bank governor, Olayemi Cardoso, said at the last MPC meeting that the regulator was committed to taming inflation and attracting foreign investment by implementing a positive real interest rate. While the governor has opted to continuously raise interest rates to tame inflation, analysts suggest that there might be a need for complementary fiscal measures. 

“In the long run, I don’t think continuous hiking will tame inflation significantly. There are other areas we should look at as a nation and economy to manage our inflation,” one analyst told me. 

Banks will be the biggest beneficiaries if the CBN raises interest rates. Four of Nigeria’s largest banks by market cap—Guaranty Trust Holding Co., Zenith Bank Plc, United Bank for Africa Plc, and FBN Holdings Plc—all reported that net interest income had more than doubled since the last time the CBN raised rates.

One month after it raised $33 million from investors, Yellow Card, the stablecoin infrastructure company, has secured a crypto licence in South Africa. The licence will allow Yellow Card to offer financial services related to crypto assets that are not regarded as legal tender in South Africa.

Yellow Card joins over 138 other companies with crypto licences in South Africa as the country softens its stance on cryptocurrency after $26 billion flowed through crypto between June 2023 and 2024. 

Yellow Card launched in South Africa in 2020 and operates as a payment rail across 20 African countries. The company enables users to send money using stablecoins pegged to the dollar. The startup does not charge transaction fees but makes money from FX spread during transactions. Since its inception in 2016, it claims to have facilitated over$3 billion in transactions.

While getting a licence is good news for Yellow Card, it may need to brace up for a stricter regulatory environment. The Financial Intelligence Centre (FIC), the country’s anti-money laundering regulator now mandates crypto platforms to verify the identities of both senders and recipients in cryptocurrency transactions. This is part of efforts to fight money laundering and terrorist financing since South Africa is on the FATF Greylist.

South African regulators may have welcomed crypto with open arms, but the scepticism on crypto remains.