Africa Leading With Innovation

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Impact Investing Africa

In recent decades the African continent has faced more than its fair share of challenges. While impact investment in Africa may still be in its infancy, the continent’s emerging economies are driving progress in many parts of the world. Africa is now embracing technological change that is reshaping the continent, and even leading the way with innovation.

Traditionally, Africa has suffered from seemingly insurmountable instability. As the benefits of independence began to emerge, however, so an African economic boom began, which has been likened to the growth of Asia in the 1970s. By  2013 this process had evolved to such a degree that Africa was home to seven of the world’s most rapidly growing economies.

To date, the most prosperous nations in Africa are economically thriving at a pace that surpasses almost all other countries.

Welcoming Change

The most vital factor in Africa’s transformation has probably been its eagerness to welcome change. Over more than a decade, Africa has been home to a vast technological revolution, with organizations prepared to innovate, and people enthusiastically embracing this innovation.

Demographic indicators also point to Africa’s growing prominence. According to Pascal Gerken – the 2018 – 2019 YPO chairman – YPO believes that Africa is a continent of the future. Organizations such as the United Nations predict that by the turn of the next century, Nigeria will be the third largest country in the world with a population exceeding one billion. “Africa has enormous growth, and as a continent, it is truly rising at the moment. So it’s a unique market that’s untapped in many areas, but it also needs help. For this reason, I believe countries don’t need lessons; what they need is Impact Investments”.

Africa’s innovative spirit has already given rise to mobile platforms becoming highly established on the African continent. It is estimated that by 2020, sub-Saharan Africa will exceed half a billion unique mobile subscribers, making the continent the fastest growing area for mobile technology, and establishing Africa as an emerging platform for social and commercial innovation. This enhances its appeal among those considering opportunities when it comes to impact investment in Africa.

Africans are Early Adopters

While more established economic areas have been slower to adopt banking innovation and technologies such as mobile money, Africa has less to lose by embracing it. At present, 66% of sub-Saharan Africans have no access to banking services and do not hold bank accounts.

In such an environment, there’s simply no necessity for the general population to remain tied to traditional ways of doing things. This offers an explanation as to why Africa is ahead of Western countries in adopting P2P finance, and why mobile banking services such as mPesa have experienced successful uptake by African consumers.

Meanwhile, Africa has also been establishing trading agreements with the increasingly prominent BRICS nations, meaning that African countries can benefit from some of the innovations emanating from this loosely-tied group of countries. This is driving the direction and pace of economic development in Africa, and such trends led David McDonald, founder of The Global Millennial, to comment that “Africa will change more in the next century than it has in the past ten.”

Regulatory Environments that Foster Innovation

Of course, it would be wrong to pretend that everything is suddenly rosy. There are still massive socio-economic challenges in Africa, and poor governance has definitely not helped the situation. Nevertheless, weakness and lack of insight from governments has presented opportunities for companies to gain access to fertile economic environments, unburdened by regulation, and in which populations are highly receptive to an improvement in living standards. This makes business genesis and impact investment in Africa even more attractive prospects.

As a result, many startups have headed straight to Africa, and found that the region is thoroughly ready to accept them. Silicon Valley startup Zipline, is one such example. The company was initially turned down when attempting to test fixed-wing drones in US airspace. Rwanda welcomed the company with open arms, and Zipline is now pioneering the time-critical delivery of blood and medical supplies to remote areas.

Founder of the Design Indaba conference, Ravi Naidoo, is a strong believer in this paradigm shift and comments that Africa is able to offer some very unique opportunities, partly due to the unique political and relatively relaxed regulatory environment, and partly due to the many issues that need to be solved. Naidoo describes this as a “beautiful, symbiotic relationship.”

African countries offer the ideal scenario for startups – offering new challenges, unexplored potential and then actually becoming a vendor financier.

The Shift Towards Opportunity

While Africa continues to pose unique challenges, the balance between challenge and opportunity is now beginning to tilt in favour of the latter. Still, understanding the cultural, economic and logistical difficulties involved with investing in Africa is vital to success, according to Yariv Cohen, the founder of energy startup Ignite Power, who spoke at the recent Africa Family Office Summit in Cape Town.

“The key to success is providing quality at an affordable price, then it is about patience. If the value proposition is right, and you have the right local team, it is just a matter of time — they will solve all the challenges on the way,” Cohen asserted.

As Africa’s growth story unfolds, investors are inevitably looking to the continent as a space for innovation. And with impact investment being such a prevailing trend currently, this means that Africa is in the perfect position to benefit. The private sector will undoubtedly drive growth in Africa, as the continent continues its process of evolution in the years to come.

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