Leveraging the potential of technology in the wake of COVID-19 was top of mind for the more than 400 investors, market leaders and senior decision-makers from across different industries who joined in The Africa Debate. The debate, held this year in October via an online interactive platform, is the annual flagship event of Invest Africa, which has recently formed an alliance with YPO Africa led by YPO member and FoodCo Director at EXEO Capital Riël Malan.
“This year’s global pandemic has pushed global economies to a breaking point, but technology in Africa has allowed businesses to thrive amid unprecedented challenges, placing the continent head and shoulders above other markets for growth and innovation,” says YPO member and CEO of 4G Capital, Wayne Hennessy-Barrett who moderated the technology panel.
According to the World Bank, 83% of global population growth between 2015 and 2100 is expected to come from Africa, with demand for everything from food to health care expected to increase exponentially. While continuing to respond to the immediate health crisis from coronavirus, the debate focused on the potential of technology to accelerate economic recovery and solutions to the most pressing problems in Africa.
Investment in technology companies on the rise again
Rob Withagen, CEO of Asoko Insight, predicts that while 2020 has been a year of unventured territory, there is a sense that fundraising for technology companies is entering a second phase this year.
“During the initial months of the pandemic, the immediate reaction from investors was the wait-and-see approach. There was a slowdown in the deal investment space because the first priority was to look after portfolio companies, focusing on recovery rather than deal making,” says Withagen. The second phase has begun “a determined recovery, driven by a lot of pent-up demand coming from that initial pause, and by a validation of digital solutions. We are starting to see deal flow going toward business models that may have needed more time pre-coronavirus but are now on top of investor attention.”
Citing Stripe’s recent acquisition of the Nigerian startup Paystack, Hennessy-Barrett adds that even amid this slowdown, investor appetite is still there. Like Stripe, Paystack provides a quick way to integrate payments services into an online or offline transaction by way of an application programming interface (API).
Andreata Muforo, Partner at TLcom Capital LLP, a venture capital fund, concurs. “Investment is picking up,” says Muforo. “Local-based investments remain active. We can put on our masks and do the due diligence.” However, Muforo adds that there is a different kind of investor now. “The fly-in and fly-out investors are less, but investors committed to the continent continue to be active.”
Technology that meets Africa’s needs
As with the rest of the world, Africa has witnessed an accelerated rate of adoption of technology as a result of COVID-19. Emphasizing this exponential digital transformation across Africa, Amrote Abdella, Regional Director for Microsoft 4Afrika Initiative, says this period has witnessed “a force functioning of change management not only in industry verticals, but also as part of recovery and business continuity, enabling businesses to continue as close to normal as possible.”
But affordability, accessibility and availability are preventing technology from meeting social and economic needs at a large scale. Juliet Anammah, Group Head of Institutional Affairs at Jumia explains, “For technology to unlock demand, these (affordability, accessibility and availability) are aspects we have to consider. Demand is there, but there are certain hidden wires around these three factors.”
Using technology to create aggregation of assets is seen as a way to build technology around these “hidden wires.” Anammah gives an example of health care, where health records are sitting on dusty shelves in hospitals and physicians’ clinics. “Stage one is how to aggregate all this information using technology to create value for the wider population. That creates demand for hard infrastructure like cloud services. Aggregating assets that already exist and expanding reach will drive the other effect on infrastructure.”
Adding to the consensus that technology, not in of itself but as an enabler, can play a significant part across all sectors on continent, Muforo says, “In most of our investment, we don’t see a lot of new technology. Instead we see the use of existing technology to provide services, with innovation more around the business model. As an entrepreneur, understand who your customers are and how to put technology to provide services they need at the right price point.”
Quantifying the market opportunity
Regardless of COVID-19, general sentiments during the debate were that the fundamentals of the continent in terms of demographics, population size and GDP growth remain very much in Africa’s favor compared to other countries in the emerging world.
“What is exciting particularly about Africa is the significant room for growth that still exists,” says Withagen. “There is so much more scope of adoption of technology in daily life. E-commerce is only scratching the surface, more and more services are becoming available online, people are becoming more comfortable with it, and the regulatory environment is becoming more conducive.
What is exciting particularly about Africa is the significant room for growth that still exists. There is so much more scope of adoption of technology in daily life. E-commerce is only scratching the surface, more and more services are becoming available online, people are becoming more comfortable with it, and the regulatory environment is becoming more conducive. ”
— Rob Withagen, CEO Asoko Insight share
Abdella also emphasizes the importance of looking beyond the numbers. She says, “Numbers in terms of sheer size mean nothing if they can’t attach to the potential spend by the population … sheer volume with low-spending power is neither here nor there, so you need to be careful of how you frame the opportunity.” Toward that end, she identifies the need to put in place a clear roadmap with aligned policies and procedures to allow for scalable solutions across the continent.
The digital skills gap
Unlocking opportunities and accelerating the economic recovery in the post COVID-19 world through data-driven solutions will require new skills in digital learning and STEM (science, technology, engineering and math). The Africa Debate presenters offered the following insights:
- Prioritize developer talent. For Withagen, talent is the ultimate priority, as there is competition for the limited pool of African talent, particularly in the technology development stage.
- Create a robust and reliable infrastructure for affordable and reliable connectivity. Muforo stresses that the enabling environment for technology entrepreneurs needs a robust and reliable infrastructure, including affordable and reliable connectivity in partnership with governments because these are large infrastructure projects.
- Nurture skills on the ground. “We can dream of vibrant ecosystem, but if we don’t have skills on the ground, we can’t move forward,” says Abdella. “Even in more mature markets in Africa, there is a shallow talent pool, so we have to go back to universities and try to feed in that pipeline.”
- Build your own model. For Anammah, there is a clear need for companies to build and develop their own talent as part of their business model. “It is not possible to assume you have a ready talent pool. Part of the business model is to build talent internally,” she says.
- Encourage female founders. There was agreement that the low representation of female technology founders is getting in the way of progress. While specific programs and mentorships help, Anammah mentions an important cultural element to consider. “I think founding itself is about risk taking, and there is a large cultural aspect raised for women to be nurturing, more defensive, preventing women from taking risks.”
Logistics, education and health care are sectors that are most ripe for disruption and growth. Muforo also includes fintech, which is seeing some of the largest number of deals, while Anammah highlights opportunities for “open table solutions” for services like hair salons and spas, small businesses that are still hurting and trying to survive.
Echoing the general mood of the debate, Muforo summed up the day’s thoughts for the post-COVID-19 future for African business. She says, “For investors and entrepreneurs, COVID-19 has accelerated investment opportunities around digitalization and technology enabled businesses. Now is a good time to jump in and invest.”