We’ve reached the end of a pretty dramatic year. Most of the forecasts experts released at the start of the year didn’t eventually hold water. We moved from peak optimism about tech’s potential to the nadir of a tech recession in the blink of an eye.
Africa’s tech ecosystem had its best year ever in 2021. Startups raised over $5 billion. It also became home to seven unicorns, five of which earned their horns in the same year. So it’s no surprise that Africa: The Big Deal predicted earlier this year that the continent could set a new record of $7 billion. But, well, that didn’t happen. Admittedly, we all had high hopes for 2022, so we’re all (sort of) disappointed.
This article spotlights the most notable trends in Africa’s tech sector in 2022. Some of them tell a happy story about the industry, but there are others we don’t hope to see again.
Valuations are less trendy, and unicorns are rare again
Across the globe, venture capital markets slowed down this year compared to the last. The 2021 bull run was supposed to open the tech sector to a heavier cascade of investments. But instead, raising money became more difficult than expected. Inflation, rising interest rates, and geopolitical uncertainties have made venture firms more risk-averse towards the industry.
As a result, we didn’t see as many mega deals as last year. In 2021, raising $100 million became normal. But in 2022, not so much. Instead, we saw big names struggle to stay afloat because of a drought of mega deals.
Still, it’s important to remember that no startup raised $100 million in 2020. So in retrospect, this mega-deal scarcity is far better than the previous non-existence.
2022 was also the year lofty valuations became less trendy. In 2021, Africa produced five new unicorns, the most ever recorded. But in 2022, there was none. We even started seeing companies like 54Gene and Brimore cut down their valuations to stay in business.
There’s a positive way to look at this. First, investors are favouring early-stage startups, meaning that there’s now more room for newcomers. Secondly, it’s refreshing that the conversation around tech is gradually shifting from funding and valuation to actual profitability.
Layoffs, salary cuts and more layoffs
Are you even a tech startup if you didn’t lay off workers this year? (Yes, you are.) Unfortunately, laying off workers became a tech trend in 2022. Many companies had to cut down their employee strength as the market conditions have tightened. Big names like Kuda, 54Gene, Quidax, Nestcoin and even Africa’s first francophone unicorn, Wave, have trimmed their workforce this year. We also saw many companies like GetEquity and Eden Life announce sizeable salary cuts for their workers.
Notably, the layoff wave in Africa was nothing compared to what happened in the global market. According to layoffs.fyi, tech companies have laid off over 138,000 workers this year, and Africa contributed the smallest number. Instead, industry leaders have added the highest numbers to the layoff pool. Meta, the largest social media company, laid off 13% of its staff — more than 11000 employees; Amazon is also parting with 3% of its workforce — about 10,000 workers; Twitter also shed nearly two-thirds of its staff and purged its entire African headquarters. Other giants like Microsoft, Coinbase, Netflix, Stripe and Shopify weren’t left out of the layoff wave.
The rise of climate tech
Saving the planet is becoming cool. Across the globe, climate tech is becoming one of the fastest-growing tech waves. Despite the worries of an economic downturn, investors have been quite bullish on climate tech. According to a PwC report, climate tech gulped more than a quarter of every venture dollar invested in 2022. Five years from now, PitchBook estimates that the climate tech market will be near $1.4 trillion, representing a compound annual growth rate of 8.8%.
The race for 5G dominance
As Africa’s digital economy expands, the race for 5G dominance is getting more interesting. Before 2022, only 10 African countries had at least started testing 5G. But in 2022, that number increased to 16. Nigeria, Botswana, Ethiopia, Egypt, Zimbabwe, and more recently Zambia, have all rolled out commercial 5G this year.
Telecom providers are pushing boundaries to accelerate 5G adoption on the continent. MTN, Orange, Telkom, Safaricom, Vodacom and many others have been setting up 5G infrastructure at a competitive pace. And they have been doing this even though 4G adoption has been slow on the continent and many Africans cannot yet afford 5G-enabled smartphones.
Analysts at PwC expect 5G’s growth to result in $13.2 trillion in global economic value by 2035. And the Africa Digital Economy Forum projects that 5G adoption will push Africa’s economy to $2.2 trillion by 2034. So it’s apparent that these telecom providers want to make the early bets to lead 5G adoption in Africa’s largest markets.
The dawn of AI
One of the apps that went viral this year was Dawn AI, an avatar-generating software. Today, millions of people use artificial intelligence to generate futuristic/fiction-like portraits of themselves and share them on social media. But this trend is just a part of a bigger wave that is happening across Africa and the world at large.
This year, AI became more popular than ever. This technology now plays a significant role in marketing, coding, art and several other professions. More so, this year witnessed the rise of OpenAI’s ChatGPT chatbot which also went viral for its style of answering questions.
Before this year, African startups struggled to be involved in the AI conversation. In 2020, when AI companies across the globe raised $36 billion, the ones in Africa could only raise $11.63 million. But this year, the narrative was different. InstaDeep, a Tunisian AI startup, raised $100 million in January. And as the world seems to be en route to an AI-led era, more African startups will rise to the occasion.
