Taking advantage of tech

Taking advantage of tech

Dale Mathias, Chairman Partners Forum, Africa Private Capital Group, USAID

Technology holds the key to realising Africa’s growth potential – and the continent’s SMEs are well-positioned to grasp the opportunity.

Africa is distinguished by the enormity of the scope, range and size of commercial opportunities available to technology-based companies. This stems primarily from the continent’s growth potential, its lack of commercial sophistication and the sheer size of its markets. Technology can provide the solution to widespread African economic inefficiencies. Technological solutions will significantly enhance access to many types of products and services that businesses and consumers require, but that are not yet available, accessible or affordable.

With African mobile phone penetration exceeding 50%, numerous entrepreneurial tech companies have launched throughout Sub-Saharan Africa by creating products and services built upon the continent’s established mobile phone infrastructure. Increasing access to the internet has resulted in the building of numerous such businesses across a broad range of verticals that include logistics, FinTech, agriculture, marketing, media, education and healthcare. Many of these companies have expanded operations into multiple countries. This is despite the limited availability and access to investment capital that confronts African entrepreneurs. In general, these companies typically face few, if any, competitors.

“Local businesses are well-suited to designing and introducing products that consumers at the lower end of the market want, need and can afford”

Since small and even mid-size African businesses are not adequately financed for growth, the sector is highly inefficient and conducive for investment, especially for targeted or niche strategies based on technological applications. There are few structural impediments to replace or overcome, and markets, businesses and governments are relatively open to the introduction and application of new technologies. Harvard Business School Professor Clay Christensen (‘Africa’s New Generation of Innovators’, Jan/Feb 2017, Harvard Business Review) recently cited the value of local businesses that are well-suited to designing and introducing products that consumers at the lower end of the market want, need and can afford. Market research on such consumers is now becoming more available. Technology can be employed to permit rapid assessment of the appetite and interests of such consumers.

  • 50%+ of africa’s population now have mobile phones

Opportunities abound that relate to using technology to address systemic and business problems as well as major commercial opportunities. For instance, the high costs of doing business are pervasive across Africa’s value chains. These inefficiencies, including in logistics, are ripe for innovation. Similarly, many African companies have not been tech-enabled: that lack of digital solutions leads to high transaction costs for both B2B and B2C businesses, resulting in multiple opportunities to invest in tech companies that have developed products and services that provide the missing ‘backbone’ needed to support all types of commerce.

Africa is poised for tremendous growth, and investment capital is becoming more available. Awareness of the region’s potential is increasing and there exists today an abundance of capable and highly motivated entrepreneurs. Sub-Saharan Africa is truly an area of great investment opportunity, with technology destined to lead the way.