With nearly 200 million people between the ages of 15 and 24, Africa has the youngest population in the world. This figure is set to double by 2025, ushering in a new generation with the potential to understand and solve pressing social and economic challenges by harnessing the power of digital innovation.
At the same time, entrepreneurship is forging its own identity across the region – where an exciting new generation of African start-ups are developing solutions and services for African problems. Across each sector, start-ups are unearthing new ways to do business. From finance and energy through to agriculture and healthcare, entrepreneurs are developing solutions, services and platforms that are helping to refine the supply chain and drive efficiencies.
In the process, they are creating a better flow of information across the entire region, which is empowering businesses and consumers to make more informed and accurate decisions. It is starting to shape the way people interact in the region’s rapidly growing urban areas, while bringing untold benefits to underserved rural communities.
They face many challenges. But for African start-ups every challenge is also an opportunity – insufficient power supplies? Hello solar energy. No access to formal financial services? Welcome mobile money. Limited access to mobile broadband? Enter SMS-based solutions. Yet the tech ecosystem remains at an early stage of development.
In many markets, the start-up scene is little over five years old, and requires careful nurturing over the coming years. Funding and access to other critical resources is required to support start-ups who have little to no previous experience in the market. While governments and academic institutions will also have a valuable role to play, particularly in attempts to engage with those living under the poverty line.
High-speed, reliable connectivity underpins innovation, and the rollout of new networks is an important enabler for start-ups and the advancement of digital services. It is why through this report, Liquid Telecom is showcasing the region’s latest innovation and talent, which it supports through Africa’s largest independent fibre network.
The world is still waiting with anticipation to see the emergence of Africa’s first “unicorns” (start-up companies valued at over $1 billion). It is a story that is capturing the imagination of the business community at large, as these start-ups are poised to bring serious disruption to the market, while potentially changing consumer behaviour forever.
Going for the first Indigenous Africa Unicorn
Continent continues to innovate while waiting for the first US$1bn company. Africa is still waiting to meet its first ‘unicorn’ (start-up company valued at over US$1 billion), according to a recent report by Liquid Telecom. The ephemeral one achieved by Jumia does not count because Jumia is not an African company.
The Africa innovation report highlights how five countries known as the ‘Africa Kings,’ namely; Kenya, Ivory Coast, Nigeria, Ghana and South Africa, have been leading the way in digital innovation. and will produce the continent’s first unicorns.
This will be as a result of increasing innovation and a growing African population of about 200 million young people between the ages of 15 and 24, expected to double by 2025
“At the same time, entrepreneurship is forging its own identity across the region – where an exciting new generation of African start-ups are developing solutions and services for African problems” the report states.
According to the report, the Africa Kings have well-developed telecoms markets and all are connected to multiple submarine cables and enjoy satellite connectivity. They have multiple telecoms operators competing to offer innovative new products to consumers, with a strong demand from consumers for new digital services.
Together these five countries share an estimated 324.4 million mobile subscribers and 177.7 million internet subscribers. Kenya has a strong reputation in leading tech start-ups, earning the title of Africa’s “Silicon Savannah” over the past 10 years, triggered by its mobile money network called M-Pesa, in 2007.
Ivory Coast, said to be the least advanced of the group, has developed several innovative strides to improve – despite socio-political unrest.
Nigeria’s population of over 182 million provides many opportunities for development and the West African country is seen to be increasingly digitally-equipped, in tech skills and access to the internet.
Ghana has shown a high economic growth, coupled with a developing tech start-up scene attributed mainly to the Meltwater Entrepreneurial School of Technology which launched in 2008.
South Africa, said to have the oldest tech start-up ecosystem in Africa, has a start-up scene that can be traced back to 1994, according to Ian Merrington, CEO of the Cape Innovation and Technology Initiative (CiTi).
SA tech entrepreneur and venture capitalist Mark Shuttleworth founded digital certificate and internet securitycompany Thawte when he was 22, selling it in 1999 to Verisign for US$575 million in an all-stock deal.
His proceeds saw the birth of HBD Capital (now Knife Capital), a Cape Town-based investment fund. In 2001, he founded Ubuntu Linux maker Canonical, his example is the closest to a venture reaching unicorn status.
Over the years, the continent has earned the mobile first tag line. Other initiatives include Kenya’s mobile money revolution, the subsea cable boom and recently, a visit from Facebook’s Mark Zuckerberg who met with local entrepreneurs and developers in Lagos and Nairobi.
With an estimated 65% of Sub-Saharan Africa’s labour force coming from the agriculture sector, more innovative opportunities have been realised to support smaller farmers including the use of data and drones for irrigation.
According to Dobek Pater, MD at Africa Analysis, the number of global start-ups that grow into US$1 billion companies is very small, “I don’t think we are likely to see a lot of companies out of Africa turning into unicorns over the next decade, although we may perhaps see one or two. The last one I am aware of was Mark Shuttleworth’s company and that was some 15 years ago.”
Pater believes start-ups in Africa are facing challenges in receiving proper funding, government support and a relocation of entrepreneurs
“There is a small possibility of any startups in the mould of American style unicorns shortly in Africa,” says Strategy Worx CEO, Steven Ambrose. “There is not the same level of digital maturity in Africa as compared to other developed nations where the internet and technology is far more integrated into the mainstream of society than in Africa.”
He adds that SA, even as “Africa’s most developed country” has low digital maturity, only limited to a certain portion of the population and concentrated in a few urban areas. “This potential size of the market just does not support the growth of start-ups on the same scale.”
Ambrose also mentions that brilliant and innovative ideas have come out of Africa, “M-Pesa is one such, but scale will always be a challenge.”
The Emergent Unicorn
- zManager: an electronic farm diary to record all phases of farming activities
- zPrices: provides real-time produce prices across major Nigerian cities
- zCapital: a marketplace where farmers raise capital from investors
- zCrowdfund: farmers raise capital from local donors in exchange for produce
- zInsure: a marketplace to buy farming insurance for farmers
- zMarkets: a digital platform for farmers to sell their produce