Six Sectors Ready To Rise In Africa
Africa has long been a continent full of ingenuity and innovation. But investors have historically been put off by a number of issues, including political instability, gaps in infrastructure and the cost of doing business.
But times are changing. And investment opportunities are increasing.
As the graph below shows the number and value of deals done have been climbing sharply in recent years. This is partly due to stabilising institutions such as the African Union and the African Development Bank, alongside a digitally savvy younger population, growing prosperity and the rise of increasingly diverse economies in major countries such as South Africa, Kenya and Nigeria.
Admittedly, VC investment is still tiny compared to the US, Asia and Europe and it varies dramatically from country to country. But it is expected to hit $10bn by 2025, which is an impressive rate of growth.
So where is the money going right now and where are the key opportunities in the near future? Here are six sectors to keep a close eye on in the coming years.
Digital innovation can plug the gap that traditional banking infrastructure isn’t filling. 57% of Africans do not have a bank account, but 50% have a mobile phone, a figure which rises to 80% among young Africans. There are challenges, such as unstable local currencies and a still heavy reliance on cash, but the direction of travel is clear. The next generation is online and they’re eager to take advantage of the financial services they can now access, both for their personal needs and to start businesses of their own.
One company to watch out for: OPay, set up in 2017 they’re Africa’s fastest growing unicorn. Now worth $2bn, they offer services such as peer-to-peer lending and point of sale machines.
Many of the world’s fastest growing economies are in Africa, Africa aims to establish the world’s largest free trade bloc, and Africa has the fastest growing middle class so many on the continent have increased access to disposable income. All of this is good news for both traditional commerce and eCommerce retailers who are benefiting from the continent’s expanding digital capabilities. Logistics can still be a problem in harder to reach areas, but last mile distribution innovations are gradually changing the landscape.
One company to watch out for: Afrikrea, a sales platform for African designers that also provides distribution solutions and digital infrastructure support for other retailers.
The continent has the third largest area of arable land in the world and 52% of its workforce is engaged in agriculture. But it only accounts for 14% of the continental GDP and food insecurity is a widespread problem. 80% of the farming community are smallholders, often using inefficient production methods and at the mercy of an increasingly unpredictable climate. Harnessing innovations such as automation and artificial intelligence, as well as greater access to finance, can open up huge potential for growth that boosts prosperity for some of the poorest in the region.
One company to watch out for: Apollo Agriculture, based in Nairobi, Kenya, it helps small-scale farmers with financing, farm inputs such as seeds, insurance and market access.
Health and medical
Only 2% of all mapped genomes are African, despite the huge genetic variety on the continent, and around 400m people have little or no access to healthcare. Add into this mix a persistent brain drain of skilled medical staff and it is no surprise some countries find it hard to meet the healthcare needs of their people. In other words, there are lots of gaps waiting to be filled in the health sector and innovation can help close them.
One company to look out for: 54Gene is on a mission to unlock the genetic DNA of Africa’s diverse population to identify and analyse ways to better treat them.
Half of all Africans are under 18 and there is widespread enthusiasm for learning and development. But many school-age children face barriers to education. Some are too far from school, others are required to earn money to support their families. The gender gap is also significant, with girls in some areas facing additional cultural obstacles to education. But the internet is bringing schooling into the home and providing curriculums built from a local, rather than western, perspective.
One company to look out for: Kukua uses inspiring storytelling and games to educate and entertain children wherever they’re able to get online.
592m Africans aren’t connected to electricity, and many of those who are can’t rely on a consistent supply, 24 hours a day. But the continent has numerous sources of renewable energy that could combine to meet its needs. The most obvious is solar power, but there is also potential for offshore wind farms on the west coast, hydro power in the continent’s great lakes and rivers, and geothermal possibilities in the Horn of Africa.
One company to look out for: Easy Solar, based in Sierra Leone, aiming to provide affordable solar electricity and equipment for every day, but vital necessities such as charging a phone.
Clearly, there are challenges to overcome in each of these sectors and the existential threat of climate change, which disproportionately impacts Africa, could disrupt even the best laid plans. But there is a lot to be optimistic about.
Continent-wide structures are giving confidence to investors while the digital revolution continues to reach across the map, opening up opportunities to eager young innovators. One of them right now will be working on Africa’s next unicorn. And we can’t wait to see it.