Business

How To Unfold Africa’s Untapped Market Potential

When South Africa hosted the FIFA World Cup in 2010, “Ke Nako”, the Sesotho phrase for “it’s time” announced to the rest of the world that Africa’s moment had arrived. While the continent had previously lagged behind in business and technology, the trend took a definitive shift in the past few years. Investors from across the globe have started looking for opportunities in the African technology market. In 2017 alone, 159 African tech startups raised $195 million in funding.

From the total financing raised, South Africa, Nigeria, and Kenya took the lion’s share, with an astonishing $40 million raised alone by the Nigerian software training company Andela. Even though the three countries raised almost 75 percent of the total funding, investments in African startups have been on a constant rise across the entire continent. 45 technology startups, including Twiga Foods and Flutterwave, increased by approximately $1 million in 2017, which is a significant jump from the 28 startups in the previous year.

Ghana and Egypt have performed well, with the former’s funding showing an increase of 150 percent from the previous year’s figures. Technology startups based in Tunisia and Morocco have also attracted many investors, and startups in Uganda, Zambia, Angola, Zimbabwe, Ethiopia, Cameroon, Senegal, South Sudan, and Somalia have contributed to the increased funding as well.

The reason for the growing interest in African equities is that the local market has observed a relentless increase in innovative technology solutions. By focusing on social needs, African engineers and developers continuously present professional and useful technical advancements. For instance, E-voucher, an electronic voucher system which allows small-scale Zimbabwean farmers to access agricultural inputs. This program has helped over 4000 farmers in obtaining funding for farm equipment. Another example is M-Pesa, the Kenyan finance app which allows people to deposit and withdraw cash at retail stores without having to visit an ATM or a bank.

While the mobile app called iCow allows herders to keep an account of their cattle, the mobile app with the name of Kytaby enables students and teachers in underprivileged areas to lease schoolbooks on mobile devices. Car-sharing services are also becoming increasingly popular, particularly in urban East Africa. Even though Africa stands at an overall economic disadvantage, it has come up with a remarkable ingenuity in its online market. Motivated by a desire of serving local communities, such technological innovations are an accurate representation of the African spirit.

The African technology market is full of young innovators whose ideas are aimed at improving the lives of their fellow citizens. For instance, the two Rwandan pioneers who came up with SafeMotos, a motorcycle taxi service that promises efficient, affordable, and safe transport. Technologies which address problems unique to the African consumer are determining the next era of the African digital market.

The lack of existing legacy in the technological space gives new startups a clean slate to grow and develop their unique business models. Adding to this the speed in which the digital markets expand, the boundaries between industries have instantly blurred, allowing technology startups to pervade all sectors, including renewable energy, e-commerce, education, health, and mobile payment.

The next generation of digital entrepreneurs, passionate about transforming Africa’s narrative, are expected to dominate the African technology space. The arrival of high-speed internet and the extensive use of mobile phones further bolster the rise of the emerging African startup scene. In addition, the segment of the African population leading this technological change is younger than in any other continent. These young adventurers have more time and energy to innovate and invest in the digital economy.

While most African countries form relatively small markets individually, when considered collectively, they create an immense playground for clever investors. Africa is undergoing a digital revolution and the urban capitals are transforming into knowledge-based centers of technological innovation. In such untapped markets, the investment opportunities carry a vast potential and since most markets are relatively new, many goods and services are underpriced, thus raising revenue margins.

With regards to the individual industries, fintech has been the leading field for two years in a row, with relevant startups raising $57.7 million of the total investment. Energy-based startups are the second-most backed ventures, garnering a prominent market share. Agri-tech, health, and education startups are also rapidly capturing the African market. Another contender in the startup space is e-commerce.

The funding in this sector has shown a 350 percent growth compared to its previous figures, raising almost $17 million in investments in 2017. Similarly, logistics, marketing, and entertainment startups are gaining prominence.

The previously untapped digital market in Africa is not only attracting a large number of private investors and venture capitalists. For example, at the VivaTech summit of 2018, the French President Emmanuel Macron unveiled a $76 million fund for African startups. This fund will be administered by the French Development Agency (AFD) and will oversee France’s entry into the African online market.

Apart from government bodies, many angel networks, accelerators, impact funds, industry associations, corporate venture arms, and public sector agencies are constantly looking for opportunities in the African market. The Chan Zuckerberg Initiative, for instance, invested $24 million in Andela, the African startup that trains engineers and programmers and outsources them to the leading technology companies in the USA and Europe.

Although Africa has been late in shifting to the digital reality, long-term investment in this market will prove profitable. Due to the delay in turning into a digital society, African startups can benefit from the technological advances, experiences and mistakes of the Silicon Valley.

The positive signs of progress promise a bright future for the continent’s technology markets and encourage the emergence of tech hubs in countries like South Africa, Egypt, Kenya, Nigeria, and Morocco. Amongst these countries, South Africa has significantly outperformed the others with as many as 59 active tech hubs. Nigeria’s ample tech market has also started to show signs of progress. In less than two years (2016 to 2018), Nigeria has developed 55 active tech hubs, outnumbering Kenya (30) and Egypt (34).

Other Western African countries have also registered significant growth in their technological ecosystems. Ghana progressed from 16 tech hubs in 2016 to 24 active ones in 2018, while Cote d’Ivoire grew from merely 5 in 2016 to 16 tech hubs in 2018.

Since the year 2000, almost half of the world’s fastest-growing economies have their roots in Africa. By 2030, the continent will be home to 1.7 billion people, whose consumer and business spending will amount to an estimated $6.7 trillion. Africa will be home to the world’s most lucrative business opportunities, promising enormous potential for growth.

2030 will not only highlight Africa’s large consuming capacity, but more than half of its population will also be residing in the seven critical countries of Nigeria, Egypt, Ethiopia, Tanzania, the Democratic Republic of Congo, South Africa, and Kenya. Further, over 40 percent of Africans will be part of the middle and upper classes. Lucrative digital opportunities will also be prevalent in the countries of Algeria, Ghana, Angola, Morocco, Tunisia, and Sudan. In light of this excellent market potential, the ICT market in Africa is estimated to account for $65 billion by 2030.

The extensive use of cell phones in Africa has given way to widespread use of social media. These internet-based platforms allow people to interact with each other in a manner which had not been possible before. Just like in other parts of the world, the most attractive platforms for African social media users are Facebook, Twitter, Instagram, Pinterest and YouTube. Facebook, for instance, has seen massive growth in usage, and with 17 million African users it has also secured its position as one of the most visited websites of the continent. YouTube and Twitter also rank among the most popular pages in most African countries.

Many African celebrities have a significant impact on social media. Didier Drogba, the famous footballer from Côte d’Ivoire or the UN Goodwill Ambassador both have more than one million followers on Facebook. Similarly, Dambisa Moyo, economist and best-selling author from Zambia has more than 47,000 Twitter followers. The impact of social media in Africa is however not limited to celebrities. International organizations, private companies and government bodies make extensive use of social media platforms to interact with their readers, customers and followers.

With over 400 million subscribers, Africa has taken the lead in the global shift from fixed-line telephones to mobile telephones. Africa has adopted mobile phones faster than any other continent, which has created an enormous potential for the audio and voice market.

New audio and voice technologies such as Amazon Alexa and Google Home have a huge potential in Africa, not least by allowing the illiterate part of the population to get access to the internet. These voice-enabled applications are based on human voice recognition systems and are capable of performing basic actions on voice commands. Furthermore, they are easy to operate and require hardly any technical know-how.

Looking at Africa’s technological hubs, Nigeria’s capital Lagos undoubtedly stands out. Lagos has established itself as the economic hub of Western Africa and is home to more tech hubs and programs than any other city across the continent. This is a result of Nigeria’s constant efforts in improving its investment ecosystem, and making the country an active contender in the technological race.

Another popular African tech hub is Nairobi’s Kilimani area, which is Kenya’s version of the Silicon Valley. Nairobi’s leading innovation hub called iHub is an influential center for technological advancement, and home to online startups like Totohealth, an online app which helps parents to track the health of their babies.

In order to fully unfold Africa’s untapped market potential, it requires a bridge between digital solutions and the growing consumer base. While countries like Kenya and Nigeria have achieved technological pre-eminence, it is important to note that these achievements have been primarily made through venture capitals, and not from government action.

This should lead African governments to rethink their role and to become more active in promoting digitalization through reforms in government policies. For a digital economy to be sustainable, it requires a direct link between policymaking, the private sector, and academic research.

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