Africa’s technology ecosystem is set for a period of exponential growth, accelerated by strong market fundamentals and the impact of the COVID-19 pandemic, a new report has showed.
The report, titled “The Inflection Point: Africa’s Digital Economy Is Poised To Take Off”, from Endeavor Nigeria, the leading community of high-impact entrepreneurs in Nigeria, reviewed key events in Africa’s technology ecosystem from the last few years, identified patterns (especially in the context of other technology ecosystems across the world), and offers a roadmap to successfully navigate the opportunities that are emerging.
According to the report, which drew on multiple sources, including analysis from McKinsey & Company, Africa’s digital economy is approaching its S-curve, a period of rapid, significant growth that will positively impact the continent’s GDP, job creation, and overall economic outlook.
Africa’s digital economy is large and growing, with an estimated market size of $115 billion, is m expected to reach $712 billion and the continent will be home to a third of the world’s young people and the continent is urbanizing faster than other regions by 2050, the report revealed.
Additionally, the report stated that 1 in 6 of the world’s internet users will be in Africa in 2025, adding that, the COVID-19 pandemic is also driving digitisation on the continent, encouraging more Africans to engage in digital activity. As a result of these dynamics, more investors are paying attention to the potential of African technology, the report said.
“However, there remains a ‘white space’ for investors to consider. Due to the quantum of deals in the $1-5 million range in the last year (600), relative to the $5 to 50million range (~150), it is unlikely there will be sufficient supply in the market as companies from the $1 to $5 million range graduate to larger ticket sizes. With the right financial support, the current excess of innovation can be more effectively leveraged to drive even more development and prosperity on the continent,” it stated.
Commenting on the report, CEO and Managing Director of Endeavor Nigeria, Tosin Faniro-Dada, said, “The data gathered in this report is clear – Africa is the next digital growth frontier. The combination of our young and digitally savvy population, an emerging technology ecosystem, and the impact of the COVID-19 pandemic on behaviours is set to trigger an inflection point in our digitization journey. We have been excited by the increased levels of funding that our entrepreneurs are attracting but we want to make it even easier for more investors to bring out their cheque books to catalyse the growth that we believe is pending”.
Partner at McKinsey and Company, Topsy Kola-Oyeneyin, said, “We’ve seen a few eye-catching funding rounds and acquisitions in Africa’s technology ecosystem in recent years but the findings of this report suggest that we barely scratched the surface. A number of sectors across the continent are still underpinned by informality and fragmentation, limiting the availability and affordability of products and services. These opportunities for disruption abound across the continent and this report will make it easier for interested investors to adjust their business models effectively to capitalise on these opportunities”