Author: Favour

Why Africa’s digital boom is only just getting started

A Jumia courier makes a delivery by motorcycle in Lagos, Nigeria.

Image: REUTERS/Joe Penney

Africa is digitizing rapidly – but this trend has been hidden from the view of many global investors and executives. For example, Africa already has 122 million active users of mobile financial services, more than half the global total, and smartphone connections and mobile data traffic are increasing rapidly.

Digital technologies allow innovative businesses to address massive unmet demand. Consider retail: There are 60,000 people per formal retail outlet in Africa, compared with just 400 people per store in the United States. E-commerce start-ups such as Jumia – which already has over 4 million customers in 14 African countries – are turning that gap into an opportunity. The company is betting that online sales will grow from 1% of total retail sales in Africa today to as much 15% in 10 years. Jumia’s listing on the NYSE in April valued it at over $1 billion, giving it claim to be Africa’s first technology unicorn.

Another of Africa’s successful digital start-ups is Interswitch – founded by Nigerian engineer Mitchell Elegbe after he observed people carrying piles of cash to pay for everything from groceries to cellphone airtime to utility bills. Today, Nigerian consumers and businesses make more than 300 million digital transactions a month across a suite of Interswitch-enabled channels. Interswitch, too, plans a global listing.

There is room for many more such digitally driven innovations in Africa. Consider higher education, where Africa’s rate of enrollment is half that of India’s. One tech-enabled innovation to close that gap is the African Leadership University(ALU), whose campuses in Kenya, Mauritius and Rwanda empower students to manage their own education using technology – so bringing costs down to less than 10% of traditional universities. The ALU was recently named one of the 50 most innovative companies in the world.

To scale and replicate such innovations, much greater investment will be required in the African technology sector. Although investment in African tech start-ups reached a record $1.2 billion in 2018, it still lags other regions such as south-east Asia, where tech start-ups attracted more than $10 billion in financing in 2018.

Annual VC investment in African start-ups

Image: Partech Africa

Shortages of digital talent can be a further barrier to growth for technology firms. That calls for innovative approaches – such as that taken by Andela, another fast-growing start-up. It recruits African software engineers, staffs and trains them in its campuses in Nigeria, Kenya, and Uganda, then hires them out as full-time “distributed teams” to companies across the world. Andela has hired 1,200 African developers over the past four years and supplies their services to 200 companies worldwide. The company is also headed for unicorn status: It is already valued at as much as $700 million.

Last but not least, technology firms in Africa must navigate some big infrastructure challenges – including the fact that internet data is still significantly slower and more expensive in Africa than on other continents. Although penetration is growing fast, two-thirds of Africans still lack internet access altogether. Even in this arena, though, some firms are recasting challenges as opportunities. For example, Loon, a sister company of Google, is building a network of high-flying balloons to connect people in rural Kenya to the internet. That is an apt metaphor for Africa’s digitization, where the sky is indeed the limit.

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Written by

Acha Leke

Tawanda Sibanda, Partner, McKinsey & Company

The views expressed in this article are those of the author alone and not Salt Talks Africa.

These 5 start-ups are shaping the future of Africa’s cities

Adetayo Bamiduro Co-founder/CEO of Max.ng explains his company operations during an interview with Reuters in Lagos, Nigeria May 6, 2019. Picture taken May 6, 2019
Adetayo Bamiduro Co-founder/CEO of Max.ng explains his company operations during an interview with Reuters in Lagos, Nigeria May 6, 2019. Picture taken May 6, 2019

By the end of the century, it is estimated that 13 of the world’s 20 largest cities will be in Africa – and none of them will be in the Americas, China, or Europe.

More than half the world’s population live in cities, and sub-Saharan Africa is urbanising faster than anywhere else on the planet. Sub-Saharan Africa has an average urban growth rate of 4.1% a year, over double the global average. Most of the growth occurs in informal slums in which about half of Africa’s urban population already live.

While it is clear that Africa’s future is urban, much more needs to be done to shape the evolution of its cities, foster collaboration among stakeholders and fund its urban infrastructure. Globally, urban start-ups like Uber and Airbnb are drawing in billions of dollars in venture capital while organisations like Sidewalk Labs, URBAN-X and Urban Us are changing cities and helping to scale urban innovations across North America. Africa also needs urban innovation groups actively reminagining its emerging cities and their slums. We aim to establish urban venture studios – CITYLabs – in Lagos and Nairobi, and to launch a 2020 Africa Megacity Prize to catalyse the African urban innovation ecosystem.

We define urban innovations as those making cities better for the many, not just the few. This could be in terms of service or product innovations across different sectors, productivity gains, and cost savings or revenue-generation opportunities, as long as they have a significant impact on the lives of city dwellers across Africa. We are spotlighting some companies that are already making a significant impact and we have prioritized companies that are considered high-potential, headquartered in Africa and with a primary focus on Africa.

Here are some of the start-ups shaping the future of cities across the continent.

Max.ng

Max.ng is a motorcycle taxi service operating in three Nigerian cities. It has completed over 1,000,000 rides and is one of Jumia’s largest delivery partners in West Africa. There are tremendous opportunities for motorcycle taxi services in Africa due to inefficiencies in mass transit and growing urban populations. Their model provides safe and affordable transportation by offering trained, accountable drivers and the convenience of booking rides through a mobile app. They recently announced $7 million in funding and are the only motorcycle taxi service positioning themselves for Africa’s electric vehicle future by investing in infrastructure for solar charging stations. This could potentially revolutionize urban mobility as they plan to expand to 10 West African cities.

Twiga Foods

Food prices are over 30% higher in sub-Saharan Africa than prices in the rest of the world at comparable GDP levels per capita. Much of this is due to inefficiencies in supply chains and farming practices. Twiga Foods is a digital marketplace that lets grocers in cities order farm produce from smallholder farmers in rural areas across Kenya and have it delivered at competitive prices. This eliminates the inefficiencies of sourcing mostly perishable foods daily, while guaranteeing farmers consistent income and timely payments. According to a recent report, Twiga Foods is the largest domestic distributor of food produce in Kenya, servicing 10,000 vendors in Nairobi and neighbouring counties through a network of 13,000 farmers.

mPharma

mPharma is eliminating inefficiencies in the pharmaceuticals supply chain across Africa. These inefficiencies lead to consumers paying up to three times as much as patients in western countries. After food, medicines make up the largest family expenditure for most developing countries. This leads to patients’ inability to buy the drugs they need when they need them. mPharma solves this by sourcing and procuring medicines and stocking pharmacies across Africa at no cost to the pharmacies. They negotiate lower prices with the best manufacturers and also provide flexible payment options for patients. Currently operating in five African countries, they manage inventory for a network of over 200 pharmacies and serve more than 40,000 patients each month.

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LifeBank

Two-thirds of the world’s maternal deaths per year occur in sub-Saharan Africa. Most of these are preventable, and many are partly due to a shortage of blood supplies. LifeBank was founded by Temie Giwa-Tubosun to deliver much-needed medical products such as blood, blood products, oxygen and vaccines to hospitals across Africa. They have partnered with Google to cut down delivery time to less than 45 minutes using Google Maps and, since 2016, have moved over 12,000 units of blood to hospitals and screening centres, thereby saving almost 5,000 lives.

An AirBank by LifeBank Dispatch Rider carrying a 1m3 cylinder of oxygen to his dispatch bike for delivery

Sendy

Sendy is a parcel delivery service that operates across Kenya, Uganda and Tanzania, and links more than 1,000 delivery drivers to customers. The service is used by over 5,000 businesses and 50,000 individuals to make deliveries which are insured and can be tracked in real-time from a mobile app. This leads to greater efficiency and reduced costs as it leverages a network of otherwise informally employed motorcycle, pickup, van and truck drivers. It also recently launched a freight service for domestic cargo transport.

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Written by

Jonathan Hursh, Founder and Executive Producer, Utopia

Emmanuel Adegboye, Managing partner, Utopia Lagos

Africa can rise – if our leaders end extreme inequality

Africa is ready to rise. This is what we will keep repeating as Africa’s government and business leaders meet in Cape Town this week at the World Economic Forum (WEF) Africa Meeting.

Rarely have we felt such fiery potential on Africa’s horizon. Consider how Africa’s best-educated generation ever is coming of age – by 2025, half of our continent’s population will be under 25. These young women and men are by far Africa’s best natural resource, more valuable than all the gold, copper, oil and gas that lies under African soil – though we have a lot of that too!

Consider how Africa is readily seizing renewable energy – the speed at which off-grid solar is expanding is exhilarating, for example. Consider how our people are pioneering technologies to solve problems. Or indeed the opportunity of the new Africa continental free trade are, set to be the world’s largest.

This is reason to hope. And yet we must sound caution. There is no avoiding one inescapable truth: that Africa is not really rising yet. Oxfam arrives in Cape Town with new data that tells a story of:

• A divided Africa – in which inequality is spiralling. That is now home to the world’s four most unequal countries.

• An Africa for the ultra-rich. Where three African billionaires – all men – now hold more wealth than the poorest half of Africa, or 650 million people on our continent.

• An Africa racing to the bottom. Despite having some of the fastest growing economies on the planet – the latest World Bank data shows us that extreme poverty is once again rising in Africa. Hundreds of millions more Africans are just a medical bill or a crop failure away from falling into extreme poverty.

Two Africas

Welcome to a Tale of Two Continents, an Africa that’s tailored for the super-rich, while hundreds of millions of people are stuck in poverty without a chance of a dignified future. Even the great new opportunities of digital technologies and continental trade risk being captured by the old entrenched wealthy interests.

We can do far better. It’s a broken and rigged economic system that must change.

We can start by investing in public services like health and education: the clearest path to reducing inequality and investing in Africa’s people, our most important asset. Ethiopia is a standout example here: Though a poor country, Ethiopia has committed to social spending and has raised its education spending to 23% of the budget – the sixth highest in the world. In a decade, it brought 15 million more children into school. That is leadership.

Mostly girls have benefited from this. The opposite is true when education, health and social protection system are underfunded and of poor quality. In Kenya, a boy from a rich family has a one in three chance of continuing his studies beyond secondary school. A girl from a poor family has a one in 250 chance of doing so. And when healthcare systems fail, women and girls are left with the task of caring for loved ones, diminishing their opportunities.

This will get worse unless governments rise to the challenge of a new continental debt crisis. African and world leaders must play their part in pushing for an early solution to restructure debt – one that prevents a cascade of countries falling into default and economic depression and carving down essential public services. We’re already seeing spiralling debt repayments putting social spending at risk in countries from Angola to Ghana.

Yet let us be in no doubt: Africa has the wealth to invest. We can fund Africa’s rise by taxing the rich so they pay their fair share – not squeezing the poor woman fruit-seller through indirect taxes like VAT. Challenging global tax rules would also help tackle the theft of wealth from the continent: Super-rich Africans are holding 75% of their wealth in offshore accounts, denying Africa $14 billion annually in tax revenues.

A recent Oxfam and Tax Justice Network Australia report exposed how one foreign mining power was costing the continent around $300m in lost tax revenue. That’s enough money to fund malaria control – an essential part of health programmes in the nine sub-Saharan countries in which Australian mines operate, almost seven times over.

With some imagination and courage, African leaders can fight this crisis. We can look to countries like Namibia, which has reduced inequality since 1993. Or Sierra Leone, now increasing the minimum wage and personal income tax. Or how South Africa ensures everyone over 60 years old receives a pension, except the very richest. All can do more – but they prove action is possible.

African political and business leaders must feel the heat about the choices they are making. They can stay on the path of ever-spiralling inequality and poverty. Or they can start building another path to a more prosperous, equal Africa built for the many and not just for the few. Surely, there is no other way.

Written by

Winnie Byanyima, Executive Director, Oxfam International

Peter Kamalingin, Pan-Africa program director, Oxfam International

The views expressed in this article are those of the author alone and not Salt Talks Africa