African startups face funding challenge in pursuit of sustainable innovation

Ethiopian startup Kubik, renowned for its groundbreaking technology that transforms plastic waste into construction blocks, has encountered significant obstacles in its quest for financial support. The company, which has garnered multiple awards, including the prestigious AfricaTech award, has struggled to secure funding necessary for its expansion plans.

Kubik operates by collecting discarded plastic and categorizing them into different groups. After a meticulous sorting process, selected plastics are combined with additives, melted, and molded into desired shapes. The end result is a range of durable black beams and interlocking blocks. In a pilot project in Addis Ababa, these blocks are being utilized to construct a daycare center. The construction process involves fitting the blocks together, similar to Lego, to create walls. The absence of glue or cement is compensated by the beams that secure the structure, eliminating the need for cranes or cement mixers.

Hayat Hassen Bedane, a 34-year-old structural engineer overseeing the project, explains that the construction technique is intentionally designed to be simple and efficient, enabling inexperienced workers to assemble 50 square meters (540 square feet) of a building in just five days. The innovative use of discarded plastic not only accelerates the construction process but also significantly reduces carbon emissions compared to traditional cement-based methods. Kubik estimates that if their plant processes 45 tonnes of plastic waste daily, it would prevent 100,000 tonnes of carbon dioxide (CO2) emissions annually.

Despite these promising advancements, Kubik’s CEO, Kidus Asfaw, 36, encountered substantial difficulties in securing initial funding for the company. Asfaw, who previously worked for renowned organizations such as Google, the World Bank, and Unicef, acknowledges that his extensive network did not guarantee an easy fundraising process. Over a period of two years, he approached more than 600 potential investors, with only about 20 eventually supporting the venture.

Startups across Africa face a multitude of challenges, ranging from regulatory barriers and insufficient infrastructure to a fragmented market. However, the most persistent and significant obstacle remains the lack of funding opportunities. Sergio Pimenta, Vice President for Africa at the Societe Financiere Internationale (SFI), a private-sector unit of the World Bank, emphasizes the scarcity of business angels in Africa. In an effort to address this issue, SFI recently launched a $180-million fund to provide financial support to African startups.

Out of the global risk capital of $415 billion deployed worldwide, Africa receives just over one percent, amounting to $5.4 billion. Moreover, 80 percent of this funding is concentrated in only four countries: South Africa, Kenya, Nigeria, and Egypt. The situation reflects a bias among Western investors who tend to favor familiarity and existing networks when making investment decisions. Henry Mascot, CEO and founder of Nigerian insurance startup Curacel, a fellow AfricaTech award recipient, highlights this bias and calls for demystifying Africa to attract more investors.

Fabrice Aime Takoumbo, a Cameroonian entrepreneur and co-founder of Cinaf, a streaming platform dedicated to African content, adds that non-African investors are often deterred by negative perceptions of fraud or corruption. He warns that without timely funding, many promising African startups struggle to survive and eventually cease operations.

The African startup ecosystem demonstrates great potential for innovation and sustainable solutions. However, it is crucial to address the funding gap and dispel biases to ensure these ventures can thrive and contribute to Africa’s economic growth and social development.