Considered to be the fastest-growing continental economy in the world, Africa’s socio-economic and political climate has fostered a culture of entrepreneurship and enterprise. The surge in successful African start-up businesses has become a driving force behind the continent’s economic growth with favorable business conditions encouraging increased investment in the region. With a wealth of natural resources and a “young, urbanizing population“, Africa has become the global focal point for developing business and innovation.
A Formidable Market
Africa’s relatively young and growing population constitutes a growing market of consumers ready to engage in innovative goods and services. The young population also delivers plentiful labor for new businesses. The continent is rich in natural resources, a further advantage for the development of lucrative businesses. The goal of attracting increased foreign direct investment (FDI) encourages the authorities within Africa to invest in policies that will decrease investment risk such as tackling corruption, improving education and boosting technological innovation. The wave of start-up businesses emerging into the economy, alongside government strategies to encourage FDI, could improve the quality of life and reduce poverty across Africa.
New businesses create jobs, diversify the economy, attract FDI and encourage the development of new infrastructure.
In the midst of global economic turmoil, many African businesses saw impressive growth during the COVID-19 pandemic by adapting to changing global market conditions to become more dynamic and innovative. Existing companies and startups in various sectors successfully transitioned to online operations.
Startups dominate Africa’s fastest-growing companies, with Nigerian trade finance services company, AFEX Commodities Exchange, holding the top position. The company generated impressively high revenues of $102 million in 2021.
Other companies featured on the top 100 list include the e-commerce company Wasoko in Kenya and the Egyptian company Globe Medex, established in 2017, which distributes ophthalmology equipment.
Female entrepreneur Talash Huijbers from Kenya founded InsectiPro, a company harvesting insects as a more sustainable and cost-efficient source of protein that is used for animal feed as well as crickets for human consumption. Elements of the harvested insects are also used for fertilizers and pharmaceutical production, minimizing waste. The innovation from InsectiPro has provided a possible solution to improve food security and nutrition in Kenya and beyond.
The African health care sector is also evolving through innovation from start-up businesses such as Jamii Life. The company developed a technology platform providing a virtual health care system aimed at increasing “accessibility, transparency, quality care and peace of mind” across South Africa, particularly benefitting low-income communities.
In April, the NewSpace Africa Conference aimed to promote continued investment and development in the African space and satellite industry. The 2021 valuation of the African space industry was $19.49 billion and it could grow over the coming years, driven by pioneering startups and creating the potential for further economic growth, innovation and sustainability in Africa.
Alongside this conference, GMES & Africa launched a Startups Development program to support research and development in the African NewSpace sector, where it chose 15 businesses to showcase their innovation in the sector and encourage further investment.
The Africa Startup Initiative is a program supporting new businesses in various technological sectors such as AgriTech and Digital Health. The program connects startups with corporate partners, investors and the media. Startups in the program get access to workshops, mentoring and the opportunity to showcase their innovations to industry associates.
African start-up businesses are attracting increasing levels of investment from within Africa and across the globe. These startups raised more than $4 billion in funds in 2021, and investment remains on the rise, particularly within Africa’s developing technology industry. According to the U.N., “Africa is the most profitable region in the world,” generating the highest rate of return on inflows of FDI between 2006 and 2011.
However, business venture capital is not evenly distributed across the continent, and around 80% of the continent’s FDI goes to the “Big Four” African countries: Egypt, Nigeria, Kenya and South Africa. Sizeable populations, strong GDP growth, and eager innovation, particularly in tech-based industries, make the ‘Big Four’ countries more attractive to investors.
Global venture capital firms investing in Africa include New York-based Tiger Global, which has invested in various African businesses – one being Wasoko – from industries such as software and financial technology. Y Combinator, a Silicon Valley company accelerating technology businesses, invested in more than 95 African startups between 2015 and 2022, according to Benjamindada.com.
On the Right Track
In recent years, Africa has been forging a new development path, harnessing the potential of its human and natural resources to drive a new era of business. The growth of investment in African startups has opened up the realms of innovation in the continent to provide solutions for its biggest problems. Successful investment in startups is also helping to drive economic growth, improve quality of life and move toward eradicating poverty across Africa.
– Sophie Sadera