Africa’s big opportunity lies in data

by CNBC Africa 0

Op-Ed: Digital revolution is futile without customer focus Photo: Shutterstock

The amount of data generated every year grows exponentially. In 2015, there were less than 10 zettabytes (or 10 trillion gigabytes) of data created globally.  Estimates suggest that, by 2025, 180 zettabytes will be created annually. Big data has become an early 21st-century gold rush, and those who best know how to mine data—Uber, Airbnb and Google, for example–are the new titans of industry. For tech companies in established markets, data not only drives operations, but becomes an additional revenue stream through transactions with advertisers and other third parties.  But in African markets, long considered data deserts, data-driven strategies are not an add-on luxury to existing businesses – they are at the core of today’s successful start-ups.  The current generation of African entrepreneurs are data scientists by default, and venture capitalists looking to find African unicorns need to invest in firms with data models in their DNA.

Data is critical for good decisions, and allows for the efficient allocation of resources. Never has the phrase, “You can’t manage what you can’t measure,” been truer.  In today’s global, ultra-connected, ultra-competitive business landscape, the most successful companies not only collect large volumes of good data; they also devote resources to developing the human and technical capital required to analyze it well. Data-driven businesses have an enhanced capability to react more quickly to market changes, to find ideas for new business lines, to efficiently acquire customers, and to hone their competitive advantage.  As analytics improve, productivity and profitability gaps between companies that use data effectively and those that don’t will expand.

African markets – from Nigeria to Tanzania, Mali to Kenya – are simultaneously rich and poor in data.  Their economies remain highly informal, and, although billions of data points are created on the continent every day as billions of cash transactions are made, only a miniscule amount is recorded in any way.  Without records that can be sorted and mined in meaningful ways that would allow for lending and borrowing, African markets such as  Lusaka City Market and Abidjan’s Adjame neighborhood remain teeming pools of information that immediately disappears after transactions are made.  In informal cash-based systems, data from vendor sales is rarely translated into an accessible and manipulatable format, rendering it effectively useless.  Even in formalised and regulated African sectors, like banking and telecoms, where some aggregated data does exist on customers, it is owned by the individual companies and usually inaccessible to businesses seeking growth.

A new generation of entrepreneurs across Africa, however, are forging a path through the data desert and aiming to make it green by collecting, analysing, and monetizing data.  Nigeria, a key market for the Africa Internet Group, the continent’s first data-driven tech unicorn, is a hotbed of entrepreneurial activity.  Cars45 uses technology to gather and pool data every time a client brings a used car to one of its inspection and sales centers in Lagos, Abuja, and Port Harcourt. The company is on its way to having enough data points to create an African version of the Kelley Blue Book. Cars45 can not only leverage data to optimise used car transactions in its own marketplace, the company can also sell its data to other parties interested in the used car market. DeliveryScience, a Lagos-based logistics firm, is using its own data on distribution routes, restocking habits of distributors, and payment terms to help major consumer goods companies become more efficient.  Clients such as Dangote Group and Nestle use the real-time transparency, tracking and invoicing information to limit pilfering, improve distributor financing structure, and manage production schedules.

In East Africa, where Kenya’s burgeoning tech community has earned the nickname of “Silicon Savannah,” mSurvey is unlocking consumer data by leveraging mobile subscriber networks. Over 10 million consumers engage with mSurvey through structured conversations collecting information on demographics, consumer preference, and geolocation.  The company also integrates with mobile wallets and payment platforms tracking purchasing habits. Kytabu, a Nairobi-based education technology company, provides access to digital textbooks by leasing content paid for by mobile money. In addition to providing basic statistics to publishers, it is using data it collects to understand how its customers like to read, learn, and search for content, allowing it to adapt publishers’ materials for each individual user’s learning style, reinventing the way education-publishing works.

As the amount of minable data grows around the world, there is no doubt that Africa will continue to contribute an ever-bigger share and be a source of reverse innovation. Governments, international organisations, and companies all need to continue to support the building of data infrastructure and push for data-friendly policies that can help formalise markets and make it easier to create, collect, aggregate, and, most importantly, share relevant data all over the continent. But, in the meantime, the most talented entrepreneurs are creating products and platforms that embed data solutions in their business models.  Venture capitalists not only need to understand this reality, but seek out the best African data scientists who will build the billion-dollar success stories on the continent.

*Aubrey Hruby is co­founder of the Africa Expert Network and co­author of “The Next Africa” (Macmillan, 2015). Lexi Novitske is the Principal Investment Officer at Singularity Investments.  

Google hopes to train 10 million people in Africa in online skills: CEO