Africa on the cusp of a tech boom
A recent piece by Rick Rowden suggests that Africa’s boom is over. He couldn’t be more wrong. By Eric MK Osiakwan.
A recent piece by Rick Rowden in Foreign Policy suggests that Africa’s boom is over. He couldn’t be more wrong.
Rowden argues in his article that due to the collapsing commodity prices and the lack of industrialisation, the boom is over. Everyone assumes that what Africa has to offer the world is oil, gold, minerals and that industrialisation is the only path to a boom. Building an industry is good and Rick makes some important points about how to do that, but he misses the real point — that Africa’s boom is just starting and it’s a boom that will be fuelled by technology.
The World Economic Forum is taking place in Davos, Switzerland this week, with the question: “Is Africa leading the innovation revolution?”. Fortune has detailed, “Why Africa maybe on the verge of an Internet boom”, the Wall Street Journal has suggested that Africa may be hiding the next Mark Zuckerberg and Quartz Africa has evidence to support how “African startups are defying the global tech slowdown”.
Twenty years ago, Africa started charting a different course for its boom in the tech industry. It went from having no landlines to mobile, which made the continent not only a mobile first but also a mobile-only and mobile Web continent. The years between 1995 and 2010 saw the establishment of mobile companies and Internet service providers such as MTN, Celtel (now Airtel Africa), Glo and Econet by private entrepreneurs like Phuthuma Nhleko, Mo Ibrahim, Mike Adenuga and Strive Masiyiwa, who connected Africans to mobile and the Internet.
Of all the regions in the world, mobile’s impact is greatest in Africa. Mobile phone services account for more than 6% of the continent’s GDP, according to the GSM Association in its report, Sub-Saharan Africa Mobile Economy 2013. A 2009 report by the World Bank, entitled Information and Communication for Development, stated that mobile and broadband has more impact in developing than developed economies.
A research report published by Freshfields revealed that investments in the telecoms, media and technology (TMT) sector in Africa over the last decade made 19% annualised returns, far higher than the African MSCI Index of 11% and the oil and gas sector of 6%.
People like Rowden focus on Africa’s growth in natural resources, and we all know the commodities boom and bust, so that’s misleading. What he is missing is the bigger story that the TMT sector made more than double the returns compared to commodities.
The title of the Freshfields report is “Africa is poised for tech take-off”. That’s apt, because the growth in mobile has laid the foundation for a tech renaissance. The “Africa rising” narrative is underpinned by an Africa tech rising. The BBC submitted that Africa’s mobile boom is powering an innovation economy.
The arrival of submarine and terrestrial cables between 2010 and 2015 brought broadband to the masses and catalysed the emergence of the digital economy. Africa’s millennials and digital natives, instead of looking for job or a way to leave the continent, have caught on to the development of mobile Web applications and are unleashing their creativity and entrepreneurial prowess to disrupt traditional markets and address key pain points for both rich and poor customers.
Africa’s 70% youth population is turning into an asset. Instead of asking who will help them, youngsters are asking more and more about what problems they can solve and which businesses they can build. As a consequence, they are creating employment and paying taxes.
By leveraging the Internet, this generation is developing programming and business skills — sometimes without any formal education — and, coupled with their need to survive, they are expressing themselves through inventive software and other product solutions. Economist George Ayittey calls these individuals the “cheetah generation” and he reckons the salvation of Africa lies here.
The rest of the world is over-indebted and has an ageing population, while Africa has lots of room for productive investment and growth. In his article, Rowden points to the risks, but he misses how entrepreneurship and the tech revolution are fuel that transformation.
The Internet has significantly reduced the barriers to entry to starting tech companies. Entrepreneurs are building the next generation of start-ups that are turning into new small and medium enterprises — businesses that in any economy are the true engines of growth and the main creators of jobs. In developing economies, SMEs are a critical part of reducing poverty. As incomes increase, this will in turn increase the demand for products and services, generating a virtuous cycle.
This phenomenon is currently prevalent in the economies of Kenya, Ivory Coast, Nigeria, Ghana and South Africa, the “Kings” of Africa’s digital economy. The Kings countries lead the rest of the continent because of the greater penetration of broadband and development of pro-innovation public policies. They all have mobile penetration rates above 90%, with broadband available to many citizens right on their phones. They also have centre of innovation like the iHub in Kenya, Orange Fab in Ivory Coast, Leadpath in Nigeria, MEST in Ghana and 88MPH in South Africa, where millennials and digital natives are unleashing their innovations. Chika Nwobi and Kresten Buch made an assessment in this piece.
Kenya leads the Kings with its innovation in mobile money, which is become a global phenomenon. The Kings economies will produce Africa’s unicorn businesses, companies with almost vertical growth rates. A recent Harvard Business Review article had Kenya, Nigeria and South Africa as three African countries where the digital economy is moving fastest in the world.
Steve Case, the co-founder of AOL and now chairman of Revolution, along with his wife, Jean Case, who heads the Case Foundation, recently visited three of the Kings countries: Kenya, Ghana and Nigeria.
Steve Case said: “The most exciting thing I’ve seen [in Africa] is great entrepreneurs… They really have great ideas. Some of them are going to be great businesses that change the world and create a lot of value and create a lot of jobs. It has been encouraging.”
Jean Case said: “You know I have also tried to underscore that the other area that is very impressive here, is the degree of participation by women in the entrepreneurial sector. Everywhere we’ve gone, we’ve seen amazingly talented, strong women really … building some great new enterprises.”
Of course, Africa has its problems — national security concerns, balance of payment crises, lac of infrastructure, poor education and weak leadership among them — and technology alone can’t transform the continent and provide for all the jobs needed, but tech can be a critical catalyst and it’s importance must not be overlooked. What is needed is for Africa’s leaders to build and implement comprehensive strategies that make technology as an integral part of national development. Whether this happens or not, though, Africa’s tech transformation is racing ahead and leading the way.
Some African-born tech companies will one day become global giants, in the same manner Asia produced Alibaba. Africa stands to produce some of this century’s dramatic success stories – and it will happen in the digital space, not in commodities.
- Eric MK Osiakwan is managing partner at Chanzo Capital