Lexi Novitske | Singularity Investments.
A decade ago, mobile phones propelled the beginnings of Africa’s tech wave through the arrival of mobile money – today, the mobile revolution has applications across every sphere of modern life in the region. With a young population of early-adopters and an improving infrastructure from telecommunications to payments, investment in Africa in 2018 is likely to eclipse record-breaking growth, and be driven by more post-seed capital. Investors and entrepreneurs alike building on the foundation of a rapidly expanding tech ecosystem will tap into success in four key trends:
#1 Global tech brands adopt a local approach
Eighty-five percent of the world’s population now lives in Asia, Africa, and Latin America. As these regions emerge as the future of the world’s growth, global brands are now in a race to capture developing-world consumers. American and European companies vying for global-market dominance are fast understanding the products which work for Western markets may not always resonate with an emerging-market audience. Consumers prefer local content, while domestic influencers drive engagment from social trends to purchasing patterns – a trend that will only become more previlant this year. Google is one company focusing new products on Africa’s growth. Realizing that building an African consumer base will require data optimization in a world where 1GB costs 9.3% of average monthly income across the region, and following a launch in India, Google expanded its data-friendly YouTube Go app in Nigeria enable consumers to save videos for offline viewing. The tech giant also recently announced the launch of Android app Datally, which helps consumers see which apps consume the most data and provides suggestions on how to conserve data usage.
#2 Blockchain drives solutions across sectors
Cryptocurrency may be the most well-known application of blockchain, but the technology’s numerous applications from cross border payments to energy investment to land rights, is a promising tool to improve quality and reliability of data across emerging markets like Africa. Trust is hard to come by in Africa where citizens express more faith in informal institutions, like religious and traditional leaders, than formal ones like the state. As a shared public ledger, blockchain decentralizes processes so that the people can make exchanges without relying on a neutral central authority. The secure, encryped technology not only tackles issues surrounding trust, but also fills data gaps by eliminating asymmetric information and increasing reliability. Over the next year, the greatest impact will likely be felt in sectors such as digital identity, fintech, and legal contracts across public and private players.
#3 Africa’s informal economy goes digital
From street vendors to artisans, farmers to taxi drivers, the informal economy represents nearly 72% of Africa’s economy, and around 38% of regional GDP. For investors and entrepreneurs in Africa’s informal economy, opportunities abound for those capable of uniting fragmented markets and using data to improve productivity. As large African e-commerce companies retrench in 2018, there is likely to be greater engagment and investment in large agent networks to bring goods and services to an underpenetrated informal market. Enhanced rollout of infrastructure also paves the way for startups marketing right-priced software-as-a-service platforms allowing informal merchants to have access to the same services as their structured retail partners: point-of-sale systems, simplified accounting portals, access to credit, and inventory management. Similar SaaS will also benefit farmers. Likewise, more companies will emerge to provide opportunities to tap an under-pentrated informal job market through digital platforms like Lynk or Max which provide access to larger customer bases.
#4 Corporate investment in African technology increases
Africa’s late arrival to the digital economy is an opportunity in disguise. With a rapidly-expanding population looking to technology to solve an array of problems, left unmet by legacy players, the continent could be the first truly digital-first region — and more corporations are scrambling to be a part of the growth story. During 2017, a plethora of accelerators and incubators have emerged. Ecobank launched a fintech challenge in January to identify innovators across the continent. In June, French telecommunications giant Orange pledged EUR50 million (US$56 million) to the creation of Orange Digital Ventures Africa, a new arm of its early-stage investment program. In July, Alibaba founder and executive chairman Jack Ma announced the creation of a US$10 million African Young Entrepreneurs Fund during his first official visit to Africa. Honeywell in partnership with the African Economic Revolution Fund, Google, Facebook, and Nigeria’s Access Bank have all announced their own accelerator and community-building platforms. While start-ups gain access to mentorship and larger corporate customer bases, this expansion of investment in early-stage African tech is a play for talent and innovation among corporates, some of which may be seeking to acquire digitally-savvy newcomers. With such a wave of activity in the past year, 2018 will likely experience moderate growth in exits driven (at least partially) by these corporate players. Even smaller corporates will begin to think about their innovation strategy, or be left behind.