The key tech trends shaping Africa in the next 5 years
Chika Nwobi and Kresten Buch of Nigerian startup accelerator and funding programme 440ng discuss the key tech trends which will shape Africa in the next five years
Africa is standing on the precipice of an economic boom. According to World Bank projections for global growth, out of the 20 fastest growing economies in the world right now, 11 are in our continent.
While the African growth story is far from homogeneous and some serious socio-political challenges need to be overcome before talk of economic success is possible, positive signs from the technology sector are giving hope. The strength of the technology and startup sector across Africa is reflected in the startling fact senior executives are starting to leave secure positions in banking and telecoms in order to start their own businesses. With the West facing continued economic uncertainty and stagnation, the next five years are set to be an instrumental period in the development of Africa’s economy.
The declining cost of high-speed internet across the continent is ensuring that more businesses and individuals than ever before are connected. Although infrastructure costs are yet to reach the competitive levels of the West, the next five years will see prices drop further, resulting in millions of individuals coming online.
From the rise of smartphone use across the continent, to fintech innovations and the increase of early stage investment funds, a number of key tech trends are exerting a positive influence and we should pay close attention to how they play out in 2015.
Last year, Africa saw the fastest uptake of mobiles in the world and mobile subscribers are set to hit half a billion by 2020, according to the GSMA. This increased demand isn’t just benefitting the telecoms giants and foreign manufacturers; local entrepreneurs have also been quick to respond.
Nigerian based Obiwezy, an online marketplace for refurbished mobiles and gadgets, was founded by Tosin Ajibade and Obafemi Onanuga to provide thousands of individuals with affordable smartphones. The company’s growing success is both contributing to and benefitting from the mobile explosion, while helping more Africans gain access to new services and information via devices they can afford.
The proliferation of this hardware is not only leading an information revolution, but disrupting financial and retail sectors too. Innovations in mobile banking and transfers are giving people the tools they need to safely manage their money, while opening up a whole new digitised marketplace for businesses to target.
Kenya’s online transfer tool M-PESA alone has over 18 million active users, while Nigeria’s Paga is similarly popular. The rise of mobile payments is not only providing smaller businesses with stable platforms to conduct financial deals but is also leading to the growth of mobile commerce across the continent.
M-commerce, driven by technological advancement, is set to have a big impact on the development of Africa. As summarised in a recent CNN article, the development is helping African retailers leapfrog the need for capital-intensive mall infrastructure and quickening the establishment of robust logistic networks.
Further examples of services enabling businesses to reach new customers include mobile ad network Twinpine and content discovery platform 8bit. These both bring down the cost and time required to bring a product to market.
Demand for new products is high, driven by a growing and youthful middle-class and this isn’t set to slow anytime soon. In 14 years alone, Nigeria’s middle class has made a six-fold increase to 23 million people. It is these expanding middle classes that are going to fuel the economies of African countries for future decades. The youthful populations of countries such as Kenya and Nigeria are also key users of new mobile services and products. As well as being key consumers, they offer a huge opportunity to any startup able to train and educate them. This is important as talent is still a big barrier to growth.
For the countless African startups benefitting from these technological developments, growth isn’t simply hinged on a burgeoning smartphone-carrying middle class. Many of the small startups and businesses which are driving Africa’s technological revolution are heavily reliant on capital investment. Thankfully, early stage funds headed up by plucky investors are growing fast.
In the last year alone the number of early stage funds operating in Nigeria has jumped from zero to seven. In 2015, funds like 440.ng will distribute financing to over 100 startups. These funds aren’t unique to hotspots such as Nigeria, Kenya or South Africa. Uganda, Ghana and Senegal all have their own tech communities.
Due to the sheer scale and diversity of Africa it is very hard to make sweeping statements about the future of the continent. However, one thing we can be sure of is that growth in areas such as banking, retail and telecommunications will largely stem from an increasingly healthy ecosystem of tech startups and early stage investors. As the continent’s infrastructure improves this will further boost the growth of this ecosystem.
Kenya and Nigeria, with their respective locations in East and West Africa, are natural hubs for business and as a result are already well on their way to being tech hotspots . In the next five years we will see many more African countries join them. Whether the full potential of this moment is realised remains to be seen, but the impact of these trends in 2015 will give us a good idea.