As Q1 data settles in, one thing is clear, 2020 will see a decline in new investments in almost all sectors of the economy. According to Quartz Africa, the funding for African Startups may slump by 40% or $800 million as coronavirus impacts become visible in the next two quarters.
This pastes a grim picture for African startups with the global economic recession expected to last until 2021. Venture funding in the first quarter of the year for African startups reached $350 million data from Briter Bridges revealed with South Africa, Kenya, Nigeria, and Egypt topping the funding charts. African tech ecosystem spans healthcare, renewable energy, fintech, agriculture, and logistics.
READ ALSO: African startups raise $350 Million in Q1, 2020
The Covid-19 crisis has put a high level of uncertainty and poses many challenges that will see the decline in startup funding. The forecasting is based on assumptions about the time and severity of the impact of the current COVID19 crisis. In this case, the total of the 2020 investment in tech startups will drop to between $1.2 and $1.8 billion, compared to over $2 in 2019.
VC investors may refinance their portfolios in Q2 and Q3 which may see a decline in the number of deals. The worst-case scenario ($1.2 billion) factors no significant pick up of deals this year.
“2021 remains a highly uncertain year with our forecast ranging from under $1.6 billion to over $3 billion, with worst-case scenario based on a prolonged and fragmented impact on the African economies, and the best-case scenario factoring a full recovery by Q1 2021, ” reads part of the report.
RELATED
African Startups’ Funding Crosses $1.1 Billion in 2019
