Africa, with its huge opportunities for tech growth, has been speeding over traditional forms of development and leapfrogging into the digital era. From minuscule landline connections to a burst of mobile phone service subscriptions, from lack of access to age-old, brick-and-mortar banking to digital financial services, Africa, with a population of 121.6 crores, has come a long way.
The continent has now become the hub of fintech innovation with over half the world’s mobile money users. The entrepreneurial spirit of the young working population here is indomitable as over 22% of youth started their businesses before the Covid pandemic set in and disrupted normal life across the world two years ago.
Funding Was the Key
The rate of funding for African startups is over six times the global average. Last year, $4.9 billion was raised, which was more than three times the investments that came in 2020. The business environment too is improving with countries agreeing to set up the African Continental Free Trade Area in 2018, with an aim to boost the economic output by $26 trillion by 2050.
The big boost to the tech sector came during the pandemic when strict social distancing norms were introduced, and people were not allowed to venture out. With this, the majority of the population was compelled to use digital solutions to make purchases, access goods, and communicate.
The biggest push came to the e-commerce sector and saw the birth of many startups. It is projected that this segment will see revenues of $43.89 billion in 2022 and annual growth of 18.07% over the next three years to reach $72.24 billion by 2025.
Startups That are Leading the Way
There have been many initiatives to build and strengthen the startup ecosystem. The World Economic Forum recently picked 100 companies from across the world. Of them, six were from Africa – Okra (fintech), Access Afya (healthcare), Sendy (e-commerce infrastructure), Pula Advisors (insurance for farmers), Ejara (investment), and Ampersand (battery-swap network).
WEF described these companies as being at the forefront of their industries, leading change and solving some of the world’s problems, including climate change, poverty, food security, cybersecurity, etc.
In South Africa, AlfaCode, an incubation initiative, identified five startups for funding of 50,000 rands ($32,000 approx). These firms included Abela (fintech), BriefCo (legal tech), Sizanani (fintech), Vocalysd (data tech), and Welo (healthcare).
Getting venture capital funding is the most important milestone for any startup. The number of companies that have become eligible for funding over the years has grown multifold. In 2015, 55 early ventures received funding, and the number grew to 359 by 2020. And 2021 turned out to be a phenomenal year for the continent with startups raising $4.33 billion, nearly a three-fold jump from $1.5 billion in 2020. Of the total VC funding, fintech startups received 62 % in 2021, up from 31% the previous year, indicating the interest and growth potential the continent offers in the segment. As of 2021, Africa had 571 fintech companies, increasing from 491 in 2019.
The top six tech startups in Africa are mPharma (healthcare), Eversend (eWallet), Ordera (food delivery), Amitruck (logistics), Sokowatch (e-commerce), and Komaza (tech-based sustainable forestry).
There is still large, untapped potential in Africa that needs clear policies by countries, public-private partnerships, and leaders aiming at a network that covers the entire continent to support tech startups.
