By May 30, 2018

VivaTech USD 76 Mn Announcement For African Startups – Four Reasons Why They Get This Attention

By May 30, 2018

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As the youngest French President to inherit the hot seat, Macron has not only brought in revitalized energy and modernity to France’s global perceptions but looks to do that by working with a continent that has some of the highest rates of youth entrepreneurship.

Macron has since his inauguration been adamant that although France’s ties with Francophone countries as well as its relationship with the wider continent were paternalistic, he’s looking to build mature relationships that display Africa’s growth and potential for true independence. During his tenure as President, Macron has made seven visits to the continent, been to nine countries all in the space of 12-months – a sure sign of intent.

But perhaps the surest sign of intent is that macron has put his money where his mouth is.

The French President has made massive guarantees both to the continent and to individual countries. As Gambia begins to rebuild its foundation after Yahya Jammeh was ousted from power, France will not only be reopening an embassy in the country – that was shut down in 2013 – but will also contribute to the USD 1.6 billion ask. In Brussels, Gambian president Adama Barrow appealed to international donors for assistance in meeting the country’s National Development Plan (NDP), Macron obliged and announced a USD 58 million packages to be dispensed until 2022.

At Vivatech’s most recent trade exhibition, Macron was also a central figure and his support for African startups was evident. He toured the packed Paris exhibition with Rwanda’s Paul Kagame making it a point to show African entrepreneurs some love. This was also followed up by a bold USD 76 Mn announcement that French development agency AFD will be pivotal in, “[filling] the gaps in the support with small sums ranging from 30,000 to 50,000 euros, which is what startups need.” He continued to add that, “African startups have energy, but the big providers of development aid and financiers have not adapted to that. We ourselves are too slow, too hesitant.”

According to a report on disclosed funding, Africa continues to display stellar growth year on year. In 2017, South Africa had the most funded startups with 74 startups getting funded last year, followed by Kenya, which counted for 46 startups and the third spot being grabbed by Nigeria with 34 startups. The three countries have together made up 77 % of the total number of funded startups (disclosed), in the last two years. There’s no doubting the capability of Africa when it comes to innovation and the following reasons make her especially attractive to investors.

Four reasons make Africa a ripe option for investors like Macron, a growing middle class, continent-wide digital transformation, sustainable development and political shifts toward democracies. Together these features not only make a considerable case for investment but they speak to the future of the continent, shaping a legacy long after the likes of Macron, Kagame, and Barrow have left office. There is a need to look at the continent with optimism because often the stereotype of a poverty-stricken, war-torn, disease-ridden continent persist and it is in these moments that the real rather than the perceived operational risks need to be considered.

Growing middle class

In 2013, Nigeria had a population of 160 million people with a median age of 19, showing that in one of the fastest growing economies not just in West Africa but the continent – youth is a significant driver. According to Deloitte, in 2017, 200 million Africans were aged between 15-24, a figure expected to rise to 321 million by 2030. This not only points out a younger generation more inclined to adopt the use of technology but also speaks to a young African workforce that in a few years will number some 1.1 billion people, surpassing China and India.

Sustainable Development

Gone are the days when the only foreign investment was in the form of aid or through public financial markets, Africa is undergoing a renaissance that has seen a rise in investment through private equity and Venture Capital. Now, investors no longer need to compete in a saturated market with companies that have shown longstanding growth, they can now pick their own horses to determine their growth and scalability potential and cheer them on into the big leagues. The startup tech ecosystem in Africa is not just a for-profit landscape, real problems are being solved, lives being saved and access is granted. Agritech startups are at the forefront of cutting-edge technology, healthtech startups are making use of AI technology to bypass centuries of diagnosis methods and perhaps the most significant and longstanding tech developments, fintech startups across the board are leading the way in giving previously unbanked populations access and financial tools to compete in their respective markets. A look at this report highlights some of the startups contributing to the Renaissance.

Digital Transformation

One of the reasons fintech startups have picked up in Africa over the last decade is the rate at which mobile adoption is sweeping through the continent. This is not only a good indicator for access but also a good foundation for “cross-sectoral economic opportunities”. East Africa has been a major protagonist when it comes to leveraging mobile technology. Mobile platforms like M-Pesa have not just been instrumental in serving unbanked populations but have been key to aggregating these population to a wider global economy. According to Deloitte, 97% of Africans have leapfrogged landline infrastructure jumping straight into digital mobile technology. Of the Africans surveyed, most credited their mobile devices as being their main source of access to the internet. One in five young Africans surveyed had purchased a service through the use of their mobile device and seven in ten use their mobile devices for social media interaction.

Political Stability

Any media outlets that still portrays the African investment landscape as insecure due to political instability, is outdated and displays the kind of bias that distorts the African renaissance. There are no large-scale wars on the continent, save for individual hotspots much like you would find in the Middle East or Europe and this does not negate the entire continent’s potential. To add to that, there is a shift in politics with most countries tipping the democracy scale. This not only gives investors the kind of assurance they need but democratic markets will often open doors to wider economic improvement, feeding small businesses and startups in the ecosystem. Additionally, the continents bloc regions are beginning to take shape in strategic and meaningful ways. Egypt, Nigeria, Kenya and South Africa have all taken the mantle when it comes to leading their respective regions. There has been unprecedented growth and consolidation in these markets like we have never seen before over the last few years and it leaves investors salivating at the prospect of a truly Continental Free Trade Area.

 

Image courtesy: Flickr

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