The #Africawedeserve is a hashtag campaign that seeks to encourage the continent to become the architect of the future it desires. And entrepreneurship, not the world’s pity, is the key to achieving this goal. Organisations such as the International Institute of Family Development and charities such as International Volunteers are now actively working to connect diaspora businesses with the continent
The African continent is brimming with business opportunities for entrepreneurs – opportunities to invest their time, their money and their resources. The continent’s population is projected to surpass 2 billion by the year 2050. And Africa, as well we know, is blessed with natural resources; has some of the fastest-growing economies in the world; and huge gaps and opportunities for smart entrepreneurs who wish to pursue business success on the continent.
Priorities for African Leaders
Of urgent priority is for the continent to reduce its reliance on commodities. African leaders must commit to investing profits in building infrastructure and developing the potential of the continent’s highly educated and untapped young workforce. A strong private sector, helped by effective business regulation and a much-improved architecture will be central to drive integration into global supply and value chains.
Read on for the business opportunities to invest in Africa and the organisations that are facilitating bridging bridges to the African continent.
Where Are the Business Opportunities in Africa?
Here are four attractive sectors worth considering, if you are looking to invest in Africa:
Fintech sector
According to Statista, as of 2021, there were 576 fintech startups with their headquarters in Africa. The number of companies increased from 491 in 2019, a growth of 17.3 per cent. Fintech is the most populated sector in Africa’s tech scene, and it also receives the highest share of funding among other startups’ categories. (Read about the $200 million acquisition by Stripe of Nigerian payment platform Paystack here.)
More than half of Africans do not have access to traditional banking. This presents fintech companies with the opportunity to include the ‘unbanked’ in the banking ecosystem. The evolution of Africa’s payment ecosystem will play a significant role in exploiting these opportunities, and the increasing popularity of online payment systems will mean that entrepreneurs in the digital payment sectors will see an increased demand for their platforms. A key area of opportunity is increasing access to finance for women. In Africa, women have less access to financial services than men. This is one reason why the number of ‘challenger’ players such as Shecluded, which provides loans, financial education, and wealth management services only to women is likely to increase.
The recent implementation of the African Continental Free Trade Area will also help the sector by reducing trade barriers across African nations.
Key drivers of growth:
- The increased use of smartphones and the need for financial inclusion. Africa has an 80% penetration of mobile subscriptions.
- Increased internet use. A recent report by Statista found that Africa has an internet penetration rate of 43% (December 2020)
Currently, there are four tech start-ups with unicorn status ( a privately held startup company with a value of over $1 billion), and three of these are fintech companies: Egypt’s payment platform Fawry and Nigeria’s Interswitch and Flutterwave. Opay and Chipper Cash and South Africa’s Yoco are poised to gain unicorn status, too.
In short, Africa is ripe for investors and entrepreneurs who can deliver the best financial solutions through technology – in areas such as payments, remittances, insurance, lending and Blockchain
Packaged Food Manufacturing
Most of the packaged food sold across Africa is imported from the West, although Africa has the food resources to feed its growing young population. As an example, Africa produces more than enough tomatoes to feed its people but imports tomato paste. The same goes for cocoa beans (chocolates are mostly imported). Why? Because there are not enough manufacturers of package foods. Another important reason is too much focus on food production and not enough on value addition – processing and packaging, branding, marketing etc, creating problems of oversupply and food waste.
The trend towards urbanisation will mean consumers will pay more attention to these value-added services. Africa needs more visionaries like Tanzania’s Jessica Bash, founder of Alaska Tanzania Industries; Senegalese chef Pierre Thiam, whose brand, Yolélé, packages fonio (a local cereal) into shelf-ready formats targeted at the US market; and Zambia’s Monica Musonda, founder of Java Foods.
There is a significant opportunity for entrepreneurs in the area of manufacturing infrastructure to process raw materials and prepare and package food products. In addition, entrepreneurs will benefit from establishing sales and distribution networks and partnering with local retailers. Startups such as the chocolate brand FairAfric and Garden of Coffee, a coffee brand from Ethiopia and The Gambia’s Tropingo Foods are making significant strides in this respect. For a continent that has an abundance of fruits, produces over 70% of cocoa beans for chocolate and approximately 11% of coffee beans, Africa is in a unique position to develop strong product brands that can command premium prices from foreign consumers.
Healthcare
There are simply not enough medical facilities to meet the growing demand for healthcare services across the continent, and the Covid pandemic has proven just how fragile Africa’s healthcare systems are. It is increasingly common to seek treatment abroad, including in Europe, India and the Middle East. Millions of dollars that would otherwise be invested into Africa’s economy are instead invested abroad.
Brain drain is another significant challenge for Africa. Every year, Africa loses far too many talented medical practitioners who go abroad in search of better opportunities for their talents, resulting in a significant skills shortage on the continent.
To explain why this is significant, currently, Africa carries 23% of the world’s disease burden but makes up 16% of the world population. Healthcare in Sub-Saharan Africa remains the worst in the world, with few countries being able to spend the$40 per person the World Health Organisation recommends as a minimum. (In per capita terms, the rest of the world spends approximately 10-times more on health care than Africa.) Despite entire populations living in poverty on the continent, half of Africans self-finance their healthcare.
As Africa’s economies improve, the demand for quality healthcare will increase. The International Finance Corporation estimates that over the next decade, up to $40billion will need to be invested to meet Africa’s healthcare demand. This will go towards funding hospital beds, better production facilities, retail and distribution facilities for medical supplies and pharmaceuticals. An important area for investment is in human capital: community healthcare workers, doctors and nurses – to meet the expected demand over the next decade.
Investors and entrepreneurs who can develop healthcare solutions for the poor and middle class will reduce the financial burden on African governments. Solutions that appear to be gaining traction include telemedicine, which allows patients to be seen virtually by a doctor. One success story in Nigeria is The Helium Health company, which digitizes patient data and has created a virtual platform that could empower telemedicine throughout the continent. The emerging telemedicine field in Africa is filled with other promising players: Tenacare in Ethiopia, Vezeeta in Egypt, Redbird in Ghana, Ilara Health in Kenya, and others.
E-commerce
E-commerce is a promising sector to investors. Countries at the vanguard of the digital revolutions are Nigeria, South Africa, and Kenya, which have all been particularly successful in this space. Success stories include Nigeria’s Jumia (unicorn status) and Konga, South Africa’s Takealot, Kenya’s Kilimall, and Zambia’s BidorBuy. The growth of the sector is unlikely to slow down and is driven in large part by the increased use of smartphones and the increased internet penetration, both of which have boosted online consumerism. According to the United Nations Conference on Trade and Development, Africa has seen a year-on-year increase in online shoppers since 2014.
However, logistics, poor infrastructure ( poor roads, poor address systems, heavy traffic), weak internet connections and low trust in online providers present challenges for entrepreneurs.
Entrepreneurs with an innovative bent should take advantage of Africa’s opportunities by finding ways to meet these challenges creatively, for example by using unique delivery techniques such as drones. They can also work to boost customer trust, for example by pursuing reputable accreditations to show their legitimacy.
Agriculture
According to the World Bank report Growing Africa: Unlocking the Potential of Agribusiness, Africa’s agribusiness industry could be worth £1 trillion by 2030. Apart from huge, untapped water resources, Africa has more than half of the world’s fertile land, about 450 million hectares. The continent uses only about 2% of its renewable water resources, while the global average is 5%. So, Africa’s agricultural potential is largely untapped. The World Bank report stresses the need for agro-industries to undergo what it describes as a “structural transformation” if Africa’s potential in this sector is to be realised.
There are at least three reasons for the attractiveness of the agricultural sector to investors and entrepreneurs. These include the following:
- The relatively low cost of leasing land compared with other parts of the world – a hectare of land can reasonably be leased for around $100/year.
- Currently, Africa imports much of its agricultural products such as flour and grains – both of which can be produced within the continent. This also presents a huge opportunity for investors and entrepreneurs who can provide similar or superior alternatives to imported produce.
- Scalability – there are different options for different levels of investment. It is not unheard of to start with a few hundred pounds and grow your business into a million-dollar venture.
- It is possible to take a relatively hands-off approach to investing in the sector – for example, by investing in value-added services such as enhancing supply chains, providing training and development for farmers or manufacturing competitive end products.
Watch – Mambilla Plateau, the largest highland tea farm in Africa
This shortlist barely scratches the surface of the business opportunities in Africa. Other interesting areas include online education, affordable luxury housing, gaming and urban logistics.
Have I left any sectors out? How do you feel about the business opportunities in Africa? Let me know in the comments below.
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