7 — How Africa is becoming an innovation powerhouse
Something very promising is also happening in Africa. Today, Silicon Valley, European Tech Hubs and the likes in so-called “Developed countries” no longer have a monopoly on innovation. Although the amount of money injected in African startups is still very modest in comparison to its western counterparts, it is growing fast.
African start-ups raised $2.02 Billion in 2019 (+74% YoY). From the number of deals (427) to the first Fintech unicorn in Africa (Interswitch) to $210MM in funding for two new payment companies (OPay and PalmPay), records were simply being broken everywhere across the continent last year.
Nigeria led the investments with $747 million, followed by Kenya, Egypt and South Africa.
With 442 active incubators and accelerators and 62% of the population under 25, Africa produces more IT developers than any other place on earth. From the Maghreb to Anglophone and Francophone sub-Saharan Africa, African tech is a land of superlatives.
When a factory in Rwanda’s capital of Kigali debuted Africa’s first made-in-Africa mobile phones in October 2019, their provenance wasn’t the only surprise: the devices also came loaded with higher-end features like fingerprint sensors for unlocking the screen that many rival phones used across the continent lack. It wasn’t just a push for African tech but also for African quality.
Mara Group CEO Ashish Thakkar said it is targeting customers willing to pay more for quality. “We are actually the first who are doing manufacturing in Africa. We are making the motherboards, we are making the sub-boards during the entire process,” he said. “There are over 1,000 pieces per phone”. Thakker said the plant had cost $50 million and could make 10,000 phones per day.
Mara Group hopes to profit from the African Continental Free Trade Agreement, a pact aimed at forming a 55-nation trade bloc, to boost sales across Africa. The factory, owned by Rwandan company Mara Group, was a major milestone for Kigali, which has spent a generation emerging from the ashes of the nation’s genocide in 1994 by refashioning itself as a tech hub. The first “Made in Africa” phone models are giving a boost to the country’s ambitions to become a regional technology hub. Already, the city is home to several tech incubators, a Carnegie Mellon University engineering campus, and local startups that produce such items as drones and cashless payment systems.
The Senegalese technological ecosystem is also very active and diverse: fintech and blockchain, healthtech, clean tech, logistics, e-commerce, agritech, edtech and legaltech. Senegal aims, through its “Digital Senegal 2025” strategy, to increase the contribution of digital technology to 10% of GDP by 2025, with a target of 35,000 direct jobs. In order to support this ambition, the President of the Republic established in 2018 a fund of 1.5 million euros to support digital startups. This is how 45 innovative companies were funded in 2018.
But digitization in Africa is not limited to government decisions, it is a whole new generation of Africans who have decided to take their destiny in hand, driven by an impressive demographic dynamic. From 1.3 billion in 2019, the continent is expected to reach around 2.5 billion inhabitants in 2050. While one in six human beings lives in Africa today, more than one in three would live there in a century.
For instance the case Jumia (dubbed the Amazon of Africa) shows that there are plenty of ways for investors to tap into the emerging tech and innovation ecosystem in Africa. Nigeria-based Jumia Group was founded in 2013 and is valued $3.5 Billion as of December 17th 2020. With over 5,000 employees in more than 10 countries in Africa, Jumia is led by talented leaders offering a mix of local and international talents and is backed by very high-profile shareholders such as Baillie Gifford & Co., AXA and Lazard Asset Management, just to name a few. With an African population of well over 1.3 billion and growing fast, achieving the necessary scale is within reach.
At the end of September 2020, Jumia had just 6.7 million customers, a 23% year-over-year increase. The tools of the trade are in place. The company has transitioned its business to become a third-party marketplace and also has its own digital payments service, JumiaPay, live in eight countries.
However, there are still challenges to be overcome: adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was negative 91.2 million euros (negative $110 million) on revenue of 97.9 million euros ($118 million) through the first nine months of 2020. Anyway, investors seam confident in the future of the company. Following a revamp of its strategy and operations, on top of Covid-induced changes in consumer behavior in Africa, Jumia stock is up 500% this year.
Microsoft invested $ 100 million to open two development centers in Nigeria and Kenya
Young Africans are getting involved body and soul to imagine innovative solutions to the continent’s many challenges. For example, the annual report of Microsoft’s Github platform (a benchmark platform for storing and sharing computer code online) revealed the astonishing dynamism of African developers.
Proof that this African dynamic has been noticed by GAFAM, in May 2019, Microsoft invested $ 100 million to open two development centers in Nigeria and Kenya because now Africa produces more IT developers than any other continent in the world. The trend is confirmed: in 2018, African developers deposited 40% more repositories (= personal spaces where you can keep your code online) on GitHub than in 2017. Growth is such that Andela, a startup which connects African developers with US tech companies, raised $ 100 million in January 2019.
No doubt that African entrepreneurs — thanks to their incredible creativity in overcoming the economical and logistical challenges of the continent — will come up with amazing innovations in the years to come as the African startup ecosystem grows and strengthens.
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7 — How Africa is becoming an innovation powerhouse
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