African economies are being transformed by the soaring adoption of digital technology and mobile platforms.
In November, Rwanda-based Mara Corporation announced the production of what it claimed would be the first smartphone to be made in Africa. The firm will produce its device at plants in Rwanda and South Africa, targeting customers who previously have never owned a smartphone.
Mobile technology has helped to transform the lives of people across the continent – this is exemplified by the growth of mobile money services since the launch of Mpesa in Kenya in 2007.
Digital revolution in Africa
The African Development Bank (AfDB) estimates the value of Africa’s mobile money industry will be more than $14 billion by 2020. “We need African-developed mobile phones to leverage this potential,” said the AfDB president, Akinwunmi Adesina, speaking at the Mara Phone launch.
But digital disruption encompasses more than mobile money. The development of off-grid solar power systems by the likes of Kenya-headquartered D.light and Nigeria’s Tizeti means that households and small businesses now have access to reliable electricity for small monthly payments, often paid for using a mobile phone.
Such developments are encouraging the creation of new business sectors, but digital technology is also transforming activities that are already important. Drones, for example, are now being used to monitor crops and the future of African agriculture may be one of driverless combine harvesters and tractors.
Local transport systems are also being updated. In the Rwandan capital, Kigali, for example, Yego has set up a digital payments system based on the connected fare meters it has provided to the city’s 20,000 motorcycle taxis, buses and taxi cabs. “By organising all the informal means of transportation, we are creating an integrated logistics and payments platform,” says Chief Executive Karanir Singh. “We are creating an ecosystem that can be leveraged by other start-ups to create marketplaces and provide last-mile delivery of food, groceries and even bring individual contractors to people’s doorsteps.”
Barriers to entry
At the same time, a shortage of funding is proving to be a hindrance. In 2017, 159 early-stage businesses secured funding, making it a record year for fundraising according to the Disrupt Africa Funding Report. However, the total raised by these startups was just $195 million. The most active markets in terms of the number of deals and the amount raised were South Africa, Nigeria and Kenya, but there was activity in a further 15 countries, including Egypt and Ghana.
This is symptomatic of a lack of venture capital across Africa and is not unique to the technology industry. The situation may be improving, however. A recent survey of private equity firms by the African Private Equity & Venture Capital Association found technology was the third most popular investment sector after financial services and consumer goods. Of those surveyed, 53 per cent said they planned to increase their allocations to Africa over the next three years, and 65 per cent said Africa was a more attractive opportunity than developed markets over the next 10 years. The most attractive country for investment was Nigeria, followed by Kenya and Egypt.
Basic infrastructure can also be an issue, although it is improving with the growth of technology hubs around the continent. The GSMA, an industry body for the mobile sector, estimates there are 442 hubs around the continent, some of which are backed by global industry giants. For example, Facebook opened the NG.Hub in Lagos, Nigeria, in May, to provide work and event space and host training programmes for startups wanting to plug into the digital economy.
There are some other significant barriers to entry, including a lack of competition in the telecoms sector in some countries, which can make accessing the internet prohibitively expensive. This, combined with political repression, explains why nine of the 10 countries with the lowest internet penetration rates in the world are in Africa. According to the Digital in 2018 report by Hootsuite and We Are Social, the African country with the lowest internet penetration is Eritrea, where just 1 per cent of the population had internet access in January 2018.
But these very difficulties also demonstrate the vast potential for further development. In 2013, McKinsey estimated that the digital economy in Africa could add $300 billion to Africa’s GDP by 2025. This was based on an assumption of 600 million internet users by that point. The continent is still some way short of that figure, with about 435 million users as of January, according to the Digital in 2018 report, but there are already more than 1 billion mobile users.
Not all of that latter group will have access to the internet via their phones, but the development of a home-grown smartphone might help to change that. As Mara Group founder Ashish Thakkar quipped at the recent launch event for his group’s latest foray: “China has Huawei, the US has iPhone and finally, Africa has Mara Phone.
This article is sourced from Power Technology sister publication www.meed.com, a leading source of high-value business intelligence and economic analysis about the Middle East and North Africa. To access more MEED content register for the 30-day Free Guest User Programme. https://www.meed.com/registration/