Over the past decade – especially in the past five years – Africa has experienced a start-up boom. More than 2 000 new ventures have secured nearly US$12 billion (€11 billion) in funding. However, the tourism sector has been largely left behind.
Speaking at WiT Africa in Cape Town last week, Ben Peterson, CEO of Purple Elephant Ventures, highlighted the gap. Despite tourism contributing 7% of Africa’s GDP, the sector has received just 1.54% of the funding it would expect if capital was allocated proportionally. “Only 10 tourism start-ups have been funded in the past five years, receiving just US$12.9 million (€11.8 million),” Peterson said. His company has raised US$6 million (€5.5 million) – 47% of the total – despite being a small start-up.
“This is a massive, untapped opportunity,” said Peterson. He admitted that, as a former venture capitalist, he too would have overlooked tourism start-ups. “The reality is that most investors have strict sector mandates that exclude tourism but that needs to change.”
A market ready for growth
Lack of investment is surprising, given Africa’s enormous potential. By 2030, one in four consumers worldwide will be African, Chris Hemmeter, MD of Thayer Ventures, pointed out. The continent has a young population, a strong culture of entrepreneurship and a thriving mix of inbound, domestic and business tourism. “You would think these factors would lead to more start-up activity but it’s just not happening,” he said.
One reason, according to Zachariah George, Co-Founder of Launch Africa Ventures, is that tourism isn’t seen as a “need-to-solve” problem. “In Africa, venture capital goes where the biggest challenges are: financial inclusion, e-commerce and healthcare,” he said. “Tourism and travel aren’t dominant in the venture ecosystem – not by a long shot.”
George believes the tipping point for travel start-ups will come when more local investors enter the space. “Historically, US and European investors dominated tech funding here. But, in the past few years, the biggest investors in African start-ups have become African funds,” he said.
Breaking free from the Western lens
One challenge African start-ups face is investor bias. George said: “Too often, global investors try to force African start-ups into Western moulds: calling them the ‘Uber of Kenya’ or the ‘Braintree of Botswana’. But Africa needs local solutions for local problems just like India did 15 years ago before it became a global tech powerhouse.”
Policy roadblocks
Even when investment is available, some African tourism markets remain stagnant due to bureaucratic hurdles. Mike Joubert, CEO of iXperience, criticised South Africa’s sluggish tourism industry. “SA tourism is stuck in the mud,” he said. “Some regions, like the Western Cape, are better but political interference holds us back. Countries like Australia have nailed tourism branding and innovation while we’re still figuring it out.”
