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04/06/2018 15:50 SAST | Updated 04/06/2018 15:50 SAST

Africa’s Greatest Opportunity Lies In An Industry Requiring Trade

'Investment in Africa is not country-based, at least not when it comes to the international press, and sometimes investors.'

Thomas Mukoya/ Reuters
Entrepreneurs work on their projects at Nailab, a Kenyan firm that supports technology startups.

Unpacking Africa as a startup

"Africa is rising." "Africa is the next frontier." "The growth potential in Africa makes it an attractive destination for foreign investment." These are just some of the ways Africa is currently described.

"We want to get into Africa", an investor will tell you. Investment in Africa is not country-based, at least not when it comes to the international press and investors. After looking at the whole continent, a country is picked, usually one with minimal barriers to investment and without obvious conflicts. Then the move into Africa begins.

Investors analyse the continent in the same way they would a startup. This makes perfect sense. When investing in a company, it's not just the business potential that you look at, you explore the market, the industry and the current economic climate.

STEFAN HEUNIS via Getty Images
Comic Republic is one of a handful of comic startups founded by Jide Martins in Nigeria making African superheroes for stories set in Africa. / AFP / STEFAN HEUNIS /Getty Images)

If we are to turn that thought around and explore the treatment of African startups, then likewise we must examine Africa, the continent, as a startup or business. If we define a startup as a business in search of repeatable and scalable business model, one that needs to find a product market fit, you begin a scale up. According to Keet van Zyl of Knife Capital, this analogy raises a far more complex, if not troubling, notion.

"Is Africa in search of comparative advantage or is it executing a model?" he questions. "In certain areas, we are executing quite well, if not better than more established markets. If you look at the successes the continent has had in Fintech, especially around payments, it is remarkable."

However, he's worried that "we [Africa] are running in all directions", there is a lack of focus. He argues that strategic thinking is sorely lacking on how to pivot, iterate and scale. He is not alone in his thinking but perhaps things are changing.

Africa is like "a startup whose founders don't realise that they always had the ability to bootstrap as they have reserves".

Victor Asemota, a seasoned entrepreneur and investor agrees with van Zyl. He argues that as a continent, when it comes to startups, we are lacking direction, but who will give it one?

"Looking at Africa as a 'meta startup' that encompasses all other startups, we have to agree that we are lost," Asometa says. "Our biggest market is Africa. Informal trade in the Ghana, Togo, Benin and Nigeria corridor was put at $10B (~R120-billion) by The United States Agency for International Development (Usaid) in 2008."

Africa's greatest business and scalable opportunity could very well lie in an industry that requires "zero technology", just trade. Asometa worries that as a continent, Africa is like "a startup whose founders don't realise that they always had the ability to bootstrap as they have reserves". Is that all that is needed? Direction? What about the infrastructural challenges?

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Solar panels on the roof of shack at Informal settlement - Enkanini, on the outskirts of Stellenbosch, Western Cape, South Africa.

For ten years Africa has been rising and on the cusp of decent access to the internet. I guess that is the question we keep asking ourselves, are we ever going to actually rise? According to economist Nonso Obikili, we are and we have been to some extent.

"If you look at telephony, a big challenge in the 80s, Africa was too big and too poor to lay all the copper wires that were needed to connect people with a simple landline. The innovation? Telephony without copper wires. The same goes for electricity. We don't have enough resources to connect all these people to the grid. The innovation? Generators and off-grid/mini-grid power. This is currently happening," Obikili says.

His point is a valid and important one when we look at Africa's story. It is the innovation that is the key driver. Mobile first, leapfrogging, upcoming growth and consumerism. These are the areas in which Africans and Africa are currently succeeding. Asometa does worry that Africa is not where it ought to be, comparing the continent to India and China, where there is "more mobility because they are at scale". "They have figured the world out. More Starbucks outlets are opening in those places than anywhere else in the world. Their middle class is growing and thriving, while ours is under siege."

The big argument for why Africa isn't scaling comes down to one thing: infrastructure.

Obikili's observations of the India story are a tad different. He sees it as "weird" because, during the first dot-com boom, more than enough IT infrastructure was built for the purpose of connecting the far east to the west. India was well set to take advantage of that, in his opinion. Since the dot-com boom, India has rebranded itself as the outsourcing capital of the world, though it is still plagued by social and economic issues, it has benefited from the technological boom. The big argument for why Africa isn't scaling comes down to one thing: infrastructure. "Africa's infrastructure is not where it ought to be compared to other parts of the world," says Obikili.

So how do we scale the startup that is Africa? Hotels.ng founder, Mark Essien seems to have an answer to this question. He argues that Africa has not found a business model or a niche just yet. He worries that Africa's reliance on "living off the land" through farming and oil will not force people to become more technologically advanced.

"What can we do to find a product, market fit? I believe we have a lot of small product-market fits here and there. Take a look at Ethiopian Airways, it seems to be growing as an airline. Ivory Coast seems to be exporting a lot of cocoa. What we need to do is take those 'tiny startups' and make them big with the investment of time and money. We offer value to the rest of the world, but that value needs to be made to work better and become more seamless," he says.

Scaling Africa will require time and investment, but also key stakeholders, such as governments, corporations and the entrepreneurial communities, need to rally behind a common goal. The biggest challenge the continent faces, according to van Zyl, is our silo mindset.

He believes there is a lack of collective effort in Africa. There are world-class innovations around mobile and Fintech but there is no cross-border integration.

"There is no collective 'we' trying to work behind a common theme. In Africa, it's every person for themselves believing that somehow things will work out. Governments need to rekindle the African spirit of Ubuntu and think about comparative strengths, to harness the best resources and engineer growth because of who we all are. A collective," he says.

Mich Atagana, public affairs and communications head, Google South Africa