A new report from Endeavor Nigeria reveals that Africa’s digital economy and tech ecosystem are set to see periods of exponential growth. The report is titled “The Inflection Point: Africa’s Digital Economy Is About to Take Off”.
It highlights important events in the continent’s tech ecosystem so far, compares its journey with other emerging markets and provides advice on opportunities in various sectors. The report, which included analysis from McKinsey & Company, says its claims are supported by an acceleration in strong market fundamentals and the impact of the pandemic.
The market size of Africa’s digital economy is huge and, if projections go as expected, is expected to surpass $712 billion by 2050. Dynamics playing into this forecast, aside from the impact of COVID, include a young population (the youngest in the world), increasing smartphone adoption and internet penetration, which has led to a thriving tech ecosystem backed by local and international venture capital dollars.
While numerous publications and reports have done an excellent job of outlining the opportunities that abound on the continent, a few stakeholders like Endeavor believe a more accurate picture needs to be painted.
New York-based Endeavor is a global community of “high-impact” founders in nearly 40 underserved markets across Africa, Asia, Europe, Latin America and the Middle East. The company also has a fund, Endeavor Catalyst, which has supported many unicorns outside of the United States and China.
“From my conversation with many entrepreneurs, we kept hearing the same thing that while we talk about African history and opportunities, not everyone has the African background,” said Tosin Faniro-Dada, managing director and CEO of Endeavor Nigeria, to TechCrunch. on a call.
“Entrepreneurs will say to me, ‘when we have to go beyond our local markets and get into rooms to meet investors in San Francisco, New York and London, most of them don’t even know what we’re talking about. ; they don’t understand the African opportunity.
The organization’s report aims to shed light on the dynamics of the African market. For investors, he hopes to help them develop local market intelligence. And while they’re inclined to follow the money, Endeavor wants them to look beyond the usual market opportunities and plot ways out.
Here are some highlights from the recently launched report.
Africa’s digital opportunity
The continent’s $115 billion digital economy is in its infancy. For example, 33% of people use the Internet, compared to a global average of 63%. The report also identifies other metrics such as fixed and mobile broadband connections and mobile cellular network coverage.
So far, much of the growth has been concentrated in four key markets: Nigeria, South Africa, Kenya and Egypt. These markets represent 32% of Africa’s population, 51% of the continent’s mobile network connections, 50% of its professional developers and 51% of its GDP.
Africa’s GDP has tripled since 1990; it recorded a CAGR of 4% compared to 1.7% in Europe and Latin America from 2010 to 2019. The report also indicates that Africa is also registering faster growth in consumer spending than the most other regions: 9.4% CAGR from 2018 to 2023 compared to 6.9% in Eastern Europe. %, Asia-Pacific 6.8%, Western Europe 4%, North America 3.5% and Latin America 2.8%.
“By 2030, Africa is expected to have a total of $2.5 trillion in consumer spending from over 1.7 billion consumers,” the report states.
When it comes to talent, Endeavor’s report indicates that 2 of the 5 fastest growing markets for GitHub contributions are in Africa: Nigeria and Egypt. According to the report, African developers created 40% more open source repositories in the software engineering market in 2019 than in 2018, registering a higher growth percentage than any other continent in the world.
Other statistics include job projections from various channels: 44 million jobs if internet penetration reaches 75%, 3 million jobs in online markets by 2025, and 1.7 million jobs. jobs thanks to Google’s $1 billion investment in the continent.
The continent’s investment history
The report first highlights the growth of venture capital on the continent over the past six years; during this period, African startups grew 18 times. From 2020 to 2021, it grew 2 times faster than global startup funding, he said.
Endeavor also highlights the widely held theory that Africa is five years behind other emerging markets such as Latin America and Southeast Asia. According to the firm, the continent’s financing trajectory from 2015 to 2020 is similar to the 2010 to 2015 periods of Southeast Asia and Latin America. “Going forward, Africa’s trajectory looks in line with ESA and faster than Latin America,” he said.
But as more global investors pay attention to the African tech scene and local investors step up their game, what is becoming evident is a shortage of capital in the early stages of growth, particularly around the Series A investments. According to the report, there is an 84% decline in Series A versus seed series in Africa, compared to 37%, 70% and 66% in the United States, Southeast Asia and in Europe, respectively. There is an opportunity here for local funds to invest beyond seed rounds, for large Africa-focused companies to double down on Series A, and for global funds to go lower than Series A. B, C and D.
The report also highlights how the continent is taking less time to produce unicorns, the increase in mega-towers, liquidity events and exits (there are examples of local and international acquisitions, IPOs traditional and PSPC).
Sector transformation
There are five main sectors in the startup landscape in Africa: financial services, commerce, transport, health and education. Endeavor’s report outlines why these sectors are vital to Africa’s growth, the various pain points that startups are trying to address, and how they go about it by providing a “corner” – like market entry – and building around that corner to offer more services that meet other consumer and business needs. Examples highlighted in the report include M-Pesa in fintech, Yoco in commerce, Kobo360 in transportation, Helium Health in healthcare, and uLesson in education.
“The data collected in this report is clear – Africa is the next digital growth frontier,” Faniro-Dada said. “The combination of our young and digitally savvy population, an emerging tech ecosystem, and the impact of the COVID-19 pandemic on behaviors should trigger an inflection point in our digitization journey. We’ve been excited about the increased levels of funding our entrepreneurs are attracting, but we want to make it even easier for more investors to pull out their checkbooks to catalyze the growth we think is waiting.”
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