During the first half (H1) of 2024, African-based blockchain businesses raised $34.7 million (R620 million), representing a 9% increase in the number of deals compared to H1 2023.
This is according to Swiss-based private venture capital company Crypto Valley Venture Capital’s (CV VC’s) African Blockchain Report, published in partnership with Absa.
The report assesses venture funding activity worldwide and presents a specific assessment lens on Africa.
“Africa’s vast natural asset, its people, coupled with the growing recognition of Africans’ technological ability, resilience and spirit, positions blockchain as a pivotal tool to support economic advancement,” says Mathias Ruch, CEO of CV VC.
He adds that Africans are already accustomed to financial transformation through experiences with mobile money services.
“This existing digital bedrock provides a foundation to enhance digital value exchange and financial services across the continent. With 1.4 billion people, comprising nearly 18% of the global population, and just five out of 54 countries contributing 50% of the continent’s GDP, there’s an urgent need to rebalance and distribute resources.”
Rob Downes, head of digital assets, CIB Africa, Absa Group, adds: “One of the key areas of innovation that Absa has been leveraging is blockchain technology, which has the potential to revolutionise various aspects of the financial industry, such as payments, remittances, trade finance, identity verification and asset tokenisation, by offering faster, cheaper and more transparent transactions, as well as enhanced security and trust.
“We believe blockchain is an important technology for Absa, and we predict it will continue to grow in significance as we drive our ambition to be a digitally-powered business. We expect to see blockchain-enabled use cases grow as regulations become clearer and awareness of the benefits grows among our customer base.”
Warming funding trajectory
Blockchain businesses globally raised $10.6 billion in 1 306 deals, says CV VC. It adds that despite a global downturn in blockchain funding by 64% in 2023, H1 2024 saw only a 9% year-over-year decline, indicating a potential rebound. Likewise, Africa has begun to feel the warming funding trajectory.
The firm points out that Africa’s share of global blockchain venture deals grew from 1.3% in 2023, to a new high of 1.8% in H1 2024.
It reveals that in H1 2024, blockchain technology accounted for 6.4% of Africa’s total venture funding and 12.5% of all deals, outpacing the global averages of 3.5% for funding and 5.9% for deals. CV VC believes this highlights Africa's stronger focus on blockchain solutions.
“Africa’s average blockchain deal size is 13% higher than the all-sector average deal size in the region. This points to the technology’s vitality and utility. In line with global dynamics, there was a contraction in funding and deal count, yet Africa raised $135.4 million from 17 blockchain venture deals in 2023,” the firm states.
It says despite historically following global markets, Africa experienced a record-breaking 2022, yet faced a recalibration in 2023 due to insufficient capital amid broader global macro-economic influences.
Factors such as the strong dollar and high US interest rates led to capital outflows, exacerbating the impact of global VC pullback, CV VC explains.
Nevertheless, it points out that Africa’s determination and long-term growth potential is palpable. “Over the recent quarters, the region has sustained a reboot, as existing companies and investors benefit from a less heated landscape, allowing for strategic positioning and value reassessment.
“2024 is witnessing investment deals flowing toward DeFi (42%). This focused investment highlights Africa’s emerging role as a hub for financial tech transformation. Concurrently, there is a continued focus on data management, verification and analytics (16.7%) alongside the gaming and NFT sphere,” the venture capital firm says.
It points out that some notable raises included Beldex, known for its privacy blockchain; Zone, focusing on payments; Bidget, an exchange platform; Seedify and Carry 1st, both within the gaming sector; Shamba Records, specialising in data; and Scroll, focusing on scalability.
Regulatory shift
NODO, the report research partner, conducted an assessment of the Pan-African regulatory landscape, which witnessed a substantial shift, expected to drive innovation with assuredness for pioneers and investors.
The report says crypto was previously implicitly banned in 36 countries, which has now reduced to eight, indicating evolving stances but leading to increased uncertainty.
It adds that limited progress was seen in fully legalising crypto due to concerns about fiscal control, prompting exploration of central bank digital currencies, though launches and traction remain limited.
“African currencies’ devaluation in 2023 posed the most challenges to crypto legalisation, with many governments fearing competition with local currencies. Over 36 African countries are now categorised as uncertain crypto markets, reflecting ongoing progress in regulation despite uncertainties,” it notes.
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