For smart investors, Africa presents a wealth of opportunities, underpinned by strong economic fundamentals and a young, tech-savvy population. According to a report by the International Finance Corporation (IFC), “With Africa’s digital economy projected to reach $180 billion by 2025 and $712 billion by 2050, the time is ripe for intelligent investors to explore this growing development.” Africa is rapidly emerging as a significant player in the global tech landscape, the continent is now at the forefront of a digital revolution, characterised by an explosion of tech startups, increased mobile penetration, and innovative solutions tailored to its unique challenges.
This article outlines 12 strategic insights for investors looking to capitalise on Africa’s tech boom, here are some sectors they must never overlook;
- Fintech
Africa’s fintech sector is growing rapidly, with companies like M-Pesa in Kenya becoming global leaders in mobile money services. According to McKinsey, the sector could reach $150 billion by 2025. In 2022, African fintech startups raised $3 billion in funding, making up over 60% of the continent’s total tech investment. The potential for innovation in areas like remittances, microloans, and insurance tech is immense. The founder and CEO of BitPesa, Elizabeth Rossiello once said, “Africa’s fintech sector is just getting started. The potential for innovation in this space is immense, particularly in areas like remittances, microloans, and insurance tech.”
- Edtech
“Education is a critical sector in Africa, and technology is playing a key role in bridging the educational gap. Investing in edtech is investing in the continent’s future leaders.” — Iyinoluwa Aboyeji, Co-founder of Andela and Flutterwave. Edtech is revolutionizing education in Africa, making learning more accessible and affordable. Companies like Andela and uLesson are leading the charge in providing tech-driven educational solutions. The edtech market in Africa is expected to reach $3 billion by 2025, driven by the increasing demand for online learning. Investing in edtech is seen as investing in the continent’s future leaders, as technology plays a key role in bridging the educational gap.
- Demographics
Africa’s young population, comprising over 60% under 25, is driving the continent’s digital revolution, creating a robust market for tech products and services. With an expected population of 2.5 billion by 2050, Africa’s young population offers a substantial user base for tech companies in sectors like education, healthcare, and e-commerce. Investing in Africa’s tech sector is a key investment in the future, as the continent’s young population fuels innovation and adoption of new technologies at an unprecedented rate, according to Jake Bright, Tech Investor and Author.
- E-commerce
Africa’s e-commerce sector is still in its early stages but holds significant promise. The rise of mobile internet and improved logistics are facilitating the growth of online retail. Jumia, Africa’s leading e-commerce platform, has been at the forefront of this shift, serving millions of customers across the continent. The e-commerce market in Africa is projected to grow to $75 billion by 2025. E-commerce penetration in Africa stood at 12% in 2022, with a projected annual growth rate of 17% by 2025, according to Statista.
- Mobile Penetration
Mobile technology is the foundation of Africa’s tech boom, with mobile phone penetration reaching 50% in 2020 and projections to reach 67% by 2025. This widespread access has led to the growth of mobile-based services, including fintech and e-commerce, creating a fertile ground for tech startups. As of 2023, Sub-Saharan Africa has over 600 million unique mobile subscribers. Investors should focus on companies leveraging mobile platforms to deliver services to underserved populations, as per Andreata Muforo, Partner at TLcom Capital.
- AgriTech
Africa’s agriculture sector is thriving, employing over 60% of the workforce. Agritech startups like Twiga Foods and Farmcrowdy are revolutionizing food production, distribution, and sales. The Agritech market is projected to grow at a 9.6% CAGR from 2021 to 2026. Kola Aina, Founder of Ventures Platform, believes that technology is transforming agriculture, offering a unique opportunity to make a significant impact while achieving strong returns. This growth is expected to drive Africa’s economy forward.
- Infrastructure
Africa’s tech sector growth is largely attributed to infrastructure development, particularly in Kenya, Nigeria, and South Africa. Improved electricity, internet connectivity, and transportation networks are crucial for scaling tech solutions. Africa’s internet penetration rate reached 43% in 2022, with significant variations across regions. Venture capitalist Michael Jordaan emphasizes the importance of investing in markets where infrastructure is improving, as it is where the most significant opportunities will arise.
- Government Support and Regulation
Government policies and regulations are crucial for Africa’s tech sector development. 70% of African countries have implemented policies to support digital innovation, according to a 2023 World Bank report. While regulatory risk is a significant factor in Africa, it also presents opportunities. Markets with clear, supportive regulatory frameworks are particularly attractive to investors, as noted by Ken Njoroge, Co-founder of Cellulant.
- Healthtech
Healthtech is transforming healthcare delivery in Africa, with startups like mPharma and Zipline enhancing access to healthcare through telemedicine services and mobile health apps. The market is expected to reach $11 billion by 2025, with Africa’s healthcare challenges providing significant opportunities for innovation. Investor Clara Wanjiku Odero, a tech consultant and investor believe healthtech is a promising sector for investors looking to make a meaningful impact in the continent’s healthcare sector.
- Diaspora and International Investment
The African diaspora and international investors are playing a significant role in the continent’s tech growth, directing remittances and foreign direct investment into tech startups. This trend is helping to globalize Africa’s tech ecosystem and create connections with global markets. Remittances to Sub-Saharan Africa reached $48 billion in 2022, with a growing portion directed towards tech startups. The African diaspora’s unique perspective and deep connections to the continent make them powerful investors in the tech space, crucial for the continued growth of Africa’s tech ecosystem.
- Innovation Hubs
Innovation hubs and tech incubators are crucial in Africa for nurturing tech talent and startups. They offer resources, mentorship, and networks to early-stage companies, helping them scale and attract investment. Cities like Nairobi, Lagos, and Cape Town are emerging as major tech hubs, driving regional growth. Africa has over 600 tech hubs, with Nigeria, South Africa, and Kenya having the highest concentrations. Investors should pay close attention to startups emerging from these hubs, as they are the lifeblood of Africa’s tech ecosystem.
- Venture Capital
Venture capital (VC) has been instrumental in fueling Africa’s tech boom. In recent years, the continent has seen a surge in VC investment, with 2022 marking a record year with over $5 billion raised by African tech startups, according to Partech Partners. This influx of capital is driving innovation and growth across the continent. Venture capital investment in Africa grew by 104% between 2021 and 2022, making it one of the fastest-growing regions globally, according to Briter Bridges. “Africa is the next frontier for venture capital. The growth we’ve seen in the past few years is just the beginning, and the potential for returns is significant.” — Eghosa Omoigui, Managing General Partner at EchoVC Partners.
For smart investors, understanding the nuances of Africa’s tech spheres is crucial to capitalising on this growth. By focusing on the above-mentioned sectors and paying close attention to them, investors can position themselves to benefit from Africa’s tech revolution. As the continent continues to evolve, those who invest strategically and with an eye toward the future will undoubtedly reap the rewards of Africa’s digital transformation. No wonder Yemi Lalude, the Managing Partner at TPG Growth stated that “Africa is not just a market of the future; it is the market of now. The tech boom we are witnessing is only the beginning. For those with the foresight and courage to invest today, the potential returns are immense.”
