Innovation Is Africa’s Most Exciting Story - By Melissa Cook
This period of unprecedented economic and societal upheaval is accelerating development of Africa’s digital future. What’s happening? What kinds of opportunities are out there for investors? Clearly, risk has risen. Nobody can predict what level of earnings companies in any geography will be able to generate when the COVID-19 crisis eases. However, we are encouraged by some of what we are hearing from sources around sub-Saharan Africa. I am advising clients to look closely at trends being accelerated as a result of the pandemic. Some African innovations will have global impact—we refer to this as African solutions to global problems.
Hard-won experience from HIV/AIDS, Ebola, tuberculosis and other diseases prepared African officials for rapid and strict containment of the novel virus. Contact tracing, mitigation, and reporting systems are already in place. So far, there’s no indication that the coronavirus has infected very large numbers of Africans—particularly the urban poor—although this could still happen. I think the most interesting part of this story is the aggressive and coordinated action being taken by African officials, businesses, entrepreneurs, and charities determined to prevent this virus from destroying the continent’s future. Technology innovation is the big story here. This arena is wide open for investors looking for financial and social returns.
If you haven’t invested in Africa before, you might be surprised to learn that 60% of the continent’s 1 billion people are under the age of 25. This explains why the continent leapfrogged past legacy systems and quickly adopted mobile communications. Industry association GSMA sees mobile subscribers in Africa reaching 600 million by 2025, generating $51 billion in mobile operator revenues. Private-sector investments in subsea cables, terrestrial fiber, mobile broadband, and data centers—plus the arrival of cheap smartphones—have created the perfect platform for innovation.
Young, tech-savvy Africans are devising solutions to the continent’s problems using the resources at hand, rather than waiting for the rest of the world to import global systems. The continent’s Android app developer ecosystem is vast and growing rapidly. Solutions can work on 2G feature phones or on advanced smartphones running on 4G networks. Apps are transforming the way Africans shop and find customers, make payments, look for work, access healthcare services, find prices for agricultural commodities, and receive information, entertainment, and educational content. These trends have been in place for a number of years—but the need for rapid and effective solutions to the COVID-19 has put everything into overdrive.
Innovation is the most interesting part of the COVID-19 story in Africa right now. When global supply chains can’t meet the needs of the richest nations, where does that leave Africa? Rather than waiting for the developed world to provide solutions, African university students, entrepreneurs, venture investors, and businesses are developing solutions for their own markets. Locally-designed and manufactured ventilators, personal protective equipment, diagnostic systems, and product distribution processes are all coming to market at a rapid pace.
Africa leads the world in the breadth and sophistication of mobile financial services. Kenya’s M-Pesa is the most mature and best-known example of a highly successful and transformative mobile money platform. Nearly every Kenyan uses this SMS-based service to send money to family members, pay school fees, buy goods in the market, and submit government fees. M-Pesa has cut fees for even the smallest payments during the COVID-19 crisis—making it possible for Kenyans to avoid touching cash.
Agriculture has started to benefit from digital services—but there’s much more to be done here. Existing systems including mobile transfer of subsidy vouchers for seed and fertilizer, access to weather forecasts, market price indications, and payments for goods are well-established in certain markets. Blockchain is emerging as a way to trace goods and payments. There’s plenty of room for investment in technology to help boost yields, improve farm incomes, enhance financial performance, and upgrade the overall productivity of the sector. With an estimated 70% of Africans working in the agriculture sector—most at the subsistence level—improved incomes here can lift hundreds of millions out of poverty.
The healthcare sector is already benefiting from many digital innovations—with more ideas emerging every day. For example: African medical workers in some countries already use digital health records and text-based communication to track disease, send vaccination or medication reminders, and determine when more aggressive intervention is necessary. This crisis is pushing developers to roll out systems for disease mitigation, testing, patient isolation and treatment, telemedicine, consumer education, and deploying financial resources where they are most needed. Africans have fought hard to reduce the impact of communicable tropical diseases, even as non-communicable diseases become more prevalent. This emergency puts even more pressure on nations to find financially sustainable ways to keep their citizens healthy and productive.
Communications companies are working on a wide array of solutions, some more traditional than others. Mobile service providers are bulking up networks to move data traffic to from spectrum to fiber as quickly as possible, ensure that essential infrastructure is resilient to power supply interruptions, and expand data capacity for enterprises and consumers. Efforts to bring affordable broadband to far-flung communities—via satellite, balloon, and many other systems—now look even more urgent than before. Access to data—at the right price—will be essential for innovations in finance, agribusiness, healthcare, education, commerce, and government service delivery to be viable.
Africa has many more opportunities to implement digital solutions to new challenges—without the need to replace or modernize legacy systems. I’m looking at developments in delivery of government services, education, cross-border trade and finance, better voter/government engagement, and much more. The one thing I am sure of: Africans are not sitting idly by while the world economy crumbles around them. They are taking charge of their own destiny—while generating ideas that the rest of the world can benefit from. It’s an exciting time to be looking at the continent. And I’m always happy to talk to investors about these and other ideas.
Melissa Cook, CFA, is the Founder & Managing Director of African Sunrise Partners LLC, a research and advisory firm dedicated to bringing investment to Africa.