A tidal wave of tech investment is transforming Africa
“I grew up in the slums of Lagos, Nigeria. But I was afforded one of the best educations and had the opportunity to work in different banks on Wall Street,” says Wemimo Abbey. “What was striking during my transition was that when my mother and I immigrated to the US, we didn’t have a credit profile. That meant we didn’t have access to capital. It was a struggle. The only alternative was to go through payday lenders with insane interest rates.”
That’s how Abbey came to co-found Esusu Savings, a fintech platform helping users to save more easily and build their credit profile. He’s one of a generation of African entrepreneurs driving innovation across the continent, using technology to help people on some of the world’s lowest incomes to access essential services and improve their lives.
The world has taken notice. “There’s so much momentum happening across Africa,” says Sundar Pichai, Google and Alphabet CEO. “Increasingly we are seeing innovation begin there, and then spread throughout the world. For example, people in Africa were among the first to access the internet through a phone rather than a computer. And mobile money was ubiquitous in Kenya before it was adopted by the world.”
The sentiment mirrors soaring optimism among investors for markets in which leapfrogging Western economies on tech adoption is increasingly common. Nations which had never been linked by landline phone are now connected by mobile. Brand new smart factories are built from the ground up, rather than in redeveloped, existing facilities. Digital transformation is flourishing in almost every industry.
Why Africa’s demographics catalyse innovation
Average incomes in most African countries are rising (albeit having lost momentum during the pandemic), freeing up disposable income. And the population is the world’s youngest; almost 60% of Africans are aged under 25. That means a higher proportion of people who grow up with new technologies, increasing the chances of adoption at scale.
Access to the internet, too, is on the rise. In 2010, just 6.8% of people in Sub-Saharan Africa were online. By 2019, that number had reached 28.9%. Tech talent, meanwhile, is burgeoning; millions of young people - often educated by prestigious universities in Ghana, Nigeria, South Africa, Tanzania, Uganda and Zimbabwe - now aspire to join a growing community of coders, developers and other high skill, high value tech professions. These are the people building the Africa of tomorrow, and it could look very different to the one of today.
African tech startups are already becoming unicorn
While the vast majority of the world’s firms valued at a billion dollars or more are listed on the West Coast or in China, seven more have emerged in Africa. Fintech is, the valuations suggest, the most investable proposition; five of the continent’s unicorns are simplifying or increasing access to payments. Between 2015 and 2020 the number of African tech startups winning outside funding grew by 46% year on year - six times the global average. In 2021, African startups attracted $906m in funding in a single quarter - 60% of which flowed to fintechs.
Opay, which began as a ride hailing app, has metamorphosed into a fintech offering interest free credit for those unable to access more traditional routes to finance, potentially opening up opportunities for millions of African entrepreneurs to launch their own businesses for the first time. The firm wants, it says, “to be the power that helps emerging markets reach faster economic development”; a 2021 valuation reached $2bn after a $400m funding round.
Senegal’s Wave Mobile Money, a fintech founded by two US entrepreneurs in 2020, charges users just 1% per transaction to pay bills and send money to others in Africa and Asia, a significant reduction on the high costs levied by traditional banks. Chipper Cash, another cross-border payments company, also achieved a $2bn valuation in 2021 with the backing of Amazon’s Jeff Bezos.
And Nigerian startup Flutterwave, which gives small businesses a cheaper way to make and accept payments from anywhere in the world, now has infrastructure in 33 African countries following a successful $170M investment round in the middle of the pandemic.
Lesser valued firms in other verticals, too, have the potential to make a real impact on Africans’ lives. Firms like Tambua Health in Kenya, which is revolutionizing the diagnosis and treatment of cardiopulmonary devices with machine learning, and Gidi Mobile, which helps low-income students access online learning, are no doubt only the forerunners in a period of widespread change.
The big players see big potential
As interest in African tech stocks builds, so too does the flow of direct investment from Big Tech. Google this year confirmed $1 billion in fresh investment to fund Equiano, a subsea cable from Portugal to South Africa to boost internet speeds and increase reliability, and reduce latency (in 2020 the company wound down its project to connect Africans to the internet using a series of stratospheric balloons, citing affordability issues).
Facebook, meanwhile, has also invested $1 billion in a second cable, named 2Africa and set to be the world’s largest, designed to ‘increase internet penetration on the continent while making it easier for the company to distribute its services’. The transformation will add a forecasted $57 billion to African economies by 2024.
And the $70M IBM Digital - Nation Africa program provides a cloud-based learning platform designed to provide free skills development programs for up to 25 million African youths over five years, enabling digital competence and nurturing innovation.
Entrepreneurs are building for a bright future
For Abbey Wemimo, Esusu Savings was just the beginning. He’s already launched Esusu Rentals, a new fintech helping renters in the US to build their credit scores by reporting their payments history. The new startup raised $10M in a funding round earlier this year with high-profile backers including tennis star Serena Williams.
“For the first time, this isn’t just a service to nickel and dime people [take many small amounts of money from them],” he says. “It’s a service that can help them be more financially prosperous. And because of that, we’ve seen exemplary growth.”