Despite the economic and social devastation caused by COVID-19, the pandemic provided an opportunity for African countries to innovate and go digital. African countries aim to rebuild their economies, not merely repair them, with digitalization across the continent leading the way.
African nations are collectively gaining momentum in the adoption of digital technology. With no help from their governments, the digital technology industry has grown in Africa—through incubators and start-ups, tech hubs and data centres.
Information and communication technology activities are spreading across the continent, and young Africans have responded with digital technology to solve the challenges posed by COVID-19. For example, at an information and communication hub in Kenya, FabLab created Msafari, a people-tracking application that can trace the spread of infections. A similar application, Wiqaytna6, was developed in Morocco. In Rwanda, the government is demonstrating what digital-growth-oriented policies can achieve. The country has invested heavily in digital infrastructure—90 per cent of the country has access to broadband internet, and 75 per cent of the population now has cell phones.
Early in the pandemic, Rwanda parlayed that technological prowess into developing real-time digital mapping to track the spread of COVID-19, expanded telemedicine to reduce visits to clinics, and created chatbots to update people on the disease.
These are promising endeavours, but digitalization is not widespread in Africa as a whole. Rwanda is the exception.
As the International Monetary Fund points out only 28 per cent of Africans use the internet, a digital divide that prevents the continent from taking full advantage of digital technology’s ability to mitigate some of the worst effects of the pandemic.
The African tech ecosystem is rapidly getting stronger
Africa is also on pace to be home to the world’s next mass generation of consumers and talent. Consumer spending is expected to grow by two-thirds between 2015 and 2030 – especially for Africa’s fast-growing urban population which spends 80% more on goods and services than the continent average. Even more exciting, Africa’s 522 million internet users today are expected to expand by 11% over the next decade to comprise 16% of the global total [according to Accenture].
In line with its increasingly affluent and internet-enabled consumer base, the tech talent pool is also on the rise. Across the continent, the number of software developers has increased by 4% between April 2022 and October 2021. That compares with a ~1% increase in the US over a similar period. Put another way, there are now more software developers in African countries (720K) than in the entire state of California (630K). Africa’s potential to grow this talent pool at a grassroots level is particularly exciting, especially as western talent growth is levelling out. And it comes at a time when technology, like low-code/no-code (LCNC), is enabling developers and businesses to do more with less. For example, Africa’s massive supply of SMEs and junior developer talent can now easily spin up a website, payment capabilities, or apps without having or hiring advanced technical expertise or resources.
This isn’t a far-off future scenario. It’s happening now. Companies across the globe are already tapping into Africa’s abundant supply of talent. As the global shift to remote work globalized the talent pool for software developers, Africa is now even better positioned to attract a meaningful share of global demand.
Startups take flight
Africa is also home to a flourishing startup ecosystem. Since 2020, venture capital investment bounced back emphatically, reaching over $4.3 billion in 2022. Between 2015 and 2022 investment has grown more than 10 times. [according to Accenture]
These investments are supercharging new technologies and innovative businesses on the continent. Nigeria is a particularly exciting case in point, with leading training and skills development and a thriving ecosystem of startups.
So, what’s attracting this surge in startups’ interest? Over the past two years, the relative risk of African investments has decreased as investors began to assess mature and emerging markets more similarly. As the assessment of risk in regions like Europe and the US has skyrocketed, the relative risk of investing in African countries has decreased.
Africa’s increasingly diversified economies are driving faster economic recovery as well as reducing poverty. Long-term structural trends are also playing their part. Africans are younger, increasingly urbanised and more tech-optimistic than ever. And improving infrastructure, along with positive regulatory developments, is driving down the costs of pan-continental transactions.
These are some brilliant examples of African startups that are disrupting the digital ecosystem providing people with powerful tools and making their daily lives better:
Chipper
African FinTech Superapp (p2p + Crypto + Fractional Stocks + Payments API)
What began as the “Venmo of Africa” has evolved and expanded massively. Chipper today includes Crypto, Fractional Stocks, a Payments API, Chipper Checkout, a Chipper card and they are also the exclusive African payment partner for Twitter tips.
Chipper has now been launched in the United States, unlocking a >$50B market opportunity. Chipper has been THE African startup to watch for the past 2 years and they will continue to be until they go public, which at this pace of growth, may not be very far off at all
Union54
Card Issuing API for African FinTech
The African startup ecosystem has grown incredibly quickly over the past few years, but no sector has grown more quickly or received more funding than FinTech.
Many FinTech startups want to offer debit cards to their customers, following the tried and true Neobank playbook led by companies like Chime, Nubank, Revolut, and N26.
Union54 makes that easy, with a simple API framework that can fund the cards in any currency, configure debit card rules, and design the cards to match the company’s brand (or user-provided content).
Raise
Carta for Africa
A simple way to describe Raise is “Carta for Africa,” but really, the startup is so much more. According to the founders, “Most of the equity across Africa is still stored, tracked, and updated using paper certificates, manual processes, and fragmented government databases.”
In addition to solving the problem of modernizing capitalization table (cap tables) creation and updates, Raise is striving to solve the problem of liquidity for African startup employees and founders.
Payhippo
Lending for African Small and Medium Enterprises
Payhippo provides loans to small businesses in Africa in under 3 hours. Their first market in Africa is Nigeria. SMEs are a large part of Nigeria’s economy, accounting for 96% of businesses and 84% of employment in the country. However, a lack of access to credit continues to limit their growth and contribution to the country’s GDP.
54gene
Genetics Testing, Research, and Analysis for Underrepresented Communities
Less than 3% of genetic material used in global pharmaceutical research is from Africa. This is despite Africa representing 16% of the global population. Aided by the increase in HealthTech investments post-COVID, 54gene is definitely a startup you should be watching in Africa and one that can truly change the world and the health of people across Africa.
Conclusions
According to the IFC and Google’s e-Conomy Africa 2020 report, Africa’s digital economy is one of the largest overlooked investment opportunities available, with a potential to add US$180 billion to Africa’s GDP by 2025.
Africa has the world’s youngest, fastest-growing and increasingly urbanized workforce, which is driving a rapid increase in its consumption of online services. Increased connectivity, in turn, creates more opportunities for innovative entrepreneurs with new technologies.
However, digital transformation can only be fully realized if high-quality access to communication networks and services are made available at affordable prices.
Accelerating the type and pace of investments into digital infrastructure in Africa will be critical to ensuring the growth of Africa’s economies and livelihoods for years to come.
Sources
· Statista
· Google/IFC e-Conomy Africa 2020
. Africa Business Ventures
· ITU
· Daxx.com (Evans Data Corporation)
· WorldBank
· Synced: AI Technology & Industry Review
· Daily News Egypt
· Max Cuvellier, Africa: The Big Deal
· Partech 2015-2019 and The Big Deal (2020, 2021 YTD)
· Tech Crunch
· How We Made It in Africa
· Vodafone
· The Modern Product Manager
· The rise of Africa’s digital economy – The European Investment Bank’s activities to support Africa’s transition to a digital economy. Feb 2021
