During the first half of 2024, blockchain businesses based in Africa successfully raised $34.7 million (R620 million), which marked a 9% increase in the number of deals compared to the same period in 2023. This data comes from the African Blockchain Report, published by Swiss-based private venture capital company Crypto Valley Venture Capital (CV VC) in collaboration with Absa.
The report offers a comprehensive evaluation of venture funding activity globally, with a specific focus on Africa. CV VC’s CEO, Mathias Ruch, highlighted Africa’s vast human capital and the growing recognition of Africans’ technological capabilities, resilience, and innovative spirit. He suggested that blockchain technology could serve as a pivotal tool in supporting economic advancement across the continent. He pointed out that many Africans are already familiar with financial transformation through their experiences with mobile money services, providing a digital foundation to enhance value exchange and financial services throughout Africa. With 1.4 billion people, making up nearly 18% of the global population, and only five out of 54 countries contributing 50% of the continent’s GDP, there is an urgent need to redistribute resources more equitably.
Rob Downes, head of digital assets at Absa Group’s CIB Africa, indicated that Absa has been leveraging blockchain technology as a key area of innovation. He noted the technology’s potential to revolutionize various aspects of the financial industry, including payments, remittances, trade finance, identity verification, and asset tokenization, by providing faster, cheaper, and more transparent transactions, as well as enhanced security and trust. Downes expressed the belief that blockchain would continue to grow in significance as Absa pursues its ambition to be a digitally-powered business, expecting blockchain-enabled use cases to expand as regulations become clearer and awareness of the technology’s benefits increases among customers.
Global and African Blockchain Funding Trends
According to CV VC, blockchain businesses globally raised $10.6 billion across 1,306 deals. Despite a 64% global downturn in blockchain funding in 2023, the first half of 2024 experienced only a 9% year-over-year decline, indicating a potential rebound. Africa has also started to feel this warming funding trajectory, with the continent’s share of global blockchain venture deals growing from 1.3% in 2023 to a new high of 1.8% in H1 2024.
The report revealed that in the first half of 2024, blockchain technology accounted for 6.4% of Africa’s total venture funding and 12.5% of all deals, surpassing the global averages of 3.5% for funding and 5.9% for deals. This data underscores Africa’s stronger focus on blockchain solutions. The average blockchain deal size in Africa is reported to be 13% higher than the all-sector average deal size in the region, highlighting the technology’s vitality and utility. In line with global trends, Africa saw a contraction in funding and deal count in 2023, yet managed to raise $135.4 million from 17 blockchain venture deals.
The report acknowledged that Africa, historically following global markets, experienced a record-breaking year in 2022 but faced a recalibration in 2023 due to insufficient capital amid broader global macro-economic influences. Factors such as a strong dollar and high US interest rates led to capital outflows, exacerbating the impact of the global venture capital pullback. Nevertheless, Africa’s determination and long-term growth potential remain evident. Recent quarters have seen the region sustain a reboot, allowing existing companies and investors to benefit from a less heated landscape and reassess strategic positioning and value.
Focused Investment and Regulatory Developments
Investment in 2024 has been notably directed towards decentralized finance (DeFi), which received 42% of the investment deals, indicating Africa’s emerging role as a hub for financial tech transformation. Concurrently, there has been a continued focus on data management, verification, and analytics (16.7%), as well as the gaming and NFT sectors. Some notable companies that have secured funding include Beldex, Zone, Bidget, Seedify, Carry 1st, Shamba Records, and Scroll, each specializing in different blockchain-related fields.
An assessment of the Pan-African regulatory landscape by NODO, the report’s research partner, revealed a significant shift expected to drive innovation with assuredness for pioneers and investors. The report noted that while crypto was previously implicitly banned in 36 countries, this number has now reduced to eight, reflecting evolving stances but also leading to increased uncertainty. Limited progress has been seen in fully legalizing crypto due to concerns about fiscal control, prompting the exploration of central bank digital currencies, though launches and traction remain limited. African currencies’ devaluation in 2023 posed significant challenges to crypto legalization, with many governments fearing competition with local currencies. Over 36 African countries are now categorized as uncertain crypto markets, indicating ongoing progress in regulation despite uncertainties.
Overall, the first half of 2024 has been a period of growth and potential for African blockchain businesses, with increasing investment and a shifting regulatory landscape promising a more robust and innovative future for the industry.