African ecosystems are significantly growing and expanding, with a bulk of investments flooding into the sector, and proving the relevance and value of timely tech innovations for Africa’s markets. The deluge of investments into Africa is touted to hit an all-time high of possibly $4 billion, with over $3 billion raised as of the end of the third quarter of the year. The amazing ingenuity of African entrepreneurs looking at practical and scalable initiatives and solutions to diverse challenges on the continent is crucial as well as socially relevant. This is because Africa’s emerging economies are filled with so many prospects, and according to Brookings, expected to provide exciting and marketable opportunities to global businesses seeking expansion and growth.
Africa’s growth opportunities
Njenga Hakeenah, in an insightful piece exposes how Africa’s emerging contactless economy is poised to generate new growth opportunities. He highlights how technology is deployed for development in Africa, contrary to its general use for disruption in the West. With the different challenges that the various economies of Africa are grappling with, from healthcare to education, to commerce and financial exclusion, it is easy to identify within these problems, the wealth and gift of opportunity. While vast sectors of the economies of Africa are grappling with the aftershocks of the COVID-19 pandemic and the erratic status of oil prices, capitalism and entrepreneurship, driven by technology, is offering salient hope for the continent’s economic recovery.
In spite of the challenges with post-pandemic economic recovery, Africa’s economic sectors are receiving a good deal of recovery boosts with the investments coming into the sectors. Fintech alone, has drawn in over $1.6 billion as one of the high performing sectors, followed by Energy and Water sectors, and the Education and Jobs sectors. Also, Africa has minted over four new unicorns this year, with Flutterwave rumoured to be in discussions to triple its valuation to over $3 billion before the year runs out. The wave of growth is sweeping across the continent drastically, and making unicorns out of innovative startups on the continent. The Global Startup Ecosystem Report by Startup Genome shows that over $1.1 billion captures the exit value of startups in Africa, with Cape Town, Johannesburg and Durban, as top three in that order.
Thriving African ecosystems
Apart from this, Africa’s ecosystems are advancing remarkably, with Nigeria leading with the highest number of startups, according to Briter Bridges. Apart from this Nigeria leads the charge this year in attracting investment, with over 44% of total funding raised this year directed towards the gentle giant of Africa. In spite of the difficulties that many ecosystems face in infrastructural deficits, regulatory burdens, and poor human capital and tech talent availability, the ecosystems are finding ways to create more conducive ambiance for growth. Part of this commitment has driven the charge in many African countries to inaugurate Startup Acts that would help to engender and solidify startup growth and engagements in the different economic sectors.
The report by Startup Genome ranks the top performing ecosystems within specific regions as: Cape Town, Lagos, Johannesburg, Nairobi, and Accra. Together, these ecosystems account for over 91% of a total worth of $6.6 billion across Africa. This implies that these ecosystems are vibrant and rich in talent and opportunities. Of Africa’s vast economies, Maxime Bayen and Max Cuvellier show that over 26 countries of the richly populated continent have recorded at least one $1 million + deal every year since 2019. However, 28 countries of Africa have as yet recorded no public VC activity or deals over $1 million in the past three years. This implies that VC activity is only happening in nearly half of the entire continent, and of this half, less than 50% record a bulk of VC activity and deals, with the aforementioned ecosystems at the forefront of this flurry of activity.
- Cape Town, South Africa
This beautiful African city, apart from drawing the cynosure of tourist attention is also a prime destination for investors looking to invest in scalable and innovative startups. The city is the leading African digitech hub, and home to nearly two-thirds of all startups in South Africa. The city boasts of a strength in the areas of fintech and edtech especially, with payments startup, Yoco and mobile financial services platform, Jumo, making significant strides within this renowned African city. In edtech, the revolutionary partnership between the University of Cape Town and Valenture Institute to offer accredited online high schooling to learners across the country has proven critical in growth of the educational sector in the country.
The city also boasts of a significant internet penetration of over 63% and a vibrant economy and social life. According to Startup Genome, corporate tax rate in South Africa is at a flat 28%, below the average for Africa, and special dispensations for different companies make it easy to do business in the country.
- Lagos, Nigeria
The bustling city of Lagos with an array of sights and sounds, is home to some of the most innovative and disruptive startups on the continent. As one of the cities with the most vibrant and robust ecosystems, Lagos is home to many African startups. A vast majority of Lagos startups are concerned about solving the city’s numerous challenges in access to finance, logistics, transportation, e-commerce, etc. Startup Lagos has featured a number of these startups in her Feature Fridays section (PricePally, Shuttlers Mobility, Findworka, ECHub, BidBuddyApp), which captures African startups making impact globally.
The Startup Act for Nigeria is also one discussion that hopes to bring light to the tech ecosystem in the country. With the blistering innovativeness of her youth, Nigeria is making giant strides in the tech industry, attracting global notice. The country also boasts a growing and massive youth population, who are more than committed to bettering their life circumstances and that of their respective communities.
- Johannesburg, South Africa
The picturesque city of Johannesburg is generally touted to be the City of ‘AI’ gold, or the Artificial Intelligence capital of Africa. This is because the city has witnessed the largest communities of tech experts in the application of AI and 4IR technologies to businesses and entrepreneurial innovations. With these crucial contributions to the tech space, Johannesburg is transforming the African landscape through the deployment of artificial intelligence solutions to business challenges across the continent.
With the proliferation of hubs and startups within the city, Johannesburg is proving to be growing a significant tech niche for innovation and startup creativity across many sectors. South Africa’s conducive tax atmosphere, and the general inclination to boost startup growth potential country-wide contributes to the development of technology within Johannesburg, and across other parts of South Africa.
- Nairobi, Kenya
Kenya is one particularly striking city, because of its dynamic digital ecosystem, and its well-defined organization. Kenya has over 48 of the total 618 active tech hubs and co-working spaces in Africa, with a large number of coding schools in the city. Within the mobile payments space, the city is making the greatest impact, with M-Pesa, the fintech heavyweight recording over 50 million active users this year.
With these deep imprints in the financial inclusion global goal, Kenya is leading Africa in the mobile payments market, determining the future of fintech on the continent, and how its adoption will drive growth across other sectors of Africa’s economy.
- Accra, Ghana
Accra is generally held as having the most supportive ecosystem for startups in the continent. With the increased desire of the government in Ghana in prioritising startup growth potential in the country, startups have been increasingly having greater leverage in building their initiatives to meet the demands of customers and the market. The country has also been keen on engendering a conducive environment for startups to thrive through favorable policies that help startup founders and entrepreneurs to drive growth remarkably across their sectors.