Seeds of Opportunity: The African Growth Series
June 2022 | Issue 5
In this week's issue, you will learn more about:
- Global Demand for VRFBs and Africa’s Involvement
- 3D Printing in South Africa
- Trans-Saharan Gas Pipeline
- The Future of Technology in Africa
- Drops of opportunity in South Africa's Water Infrastructure
- Transport start-ups: A growing industry in Sub-Saharan Africa
Global Demand for VRFBs and Africa’s Involvement
Frost & Sullivan has published a report on the Global Power & Energy Decarbonization Technology Innovation Growth Opportunities. The report highlights the disruptions caused by the world is increasingly changing its generation portfolio from away fossil fuel power to low-carbon technologies, batteries are becoming a crucial storage tool to facilitate this energy transition. While Lithium-Ion Batteries (LIBs) first appeared in the early 1990s and have established themselves as the go-to choice to power everything from consumer goods to commercial equipment and industrial-sized operations, new battery storage technologies are emerging, such as the Vanadium Redox Flow Batteries (VRFB). Alternative and advanced storage technologies reduce dependencies on rare earth materials and reduce geopolitical challenges. Alternative energy storage technologies offer end-users more efficient, durable, sustainable, safe, and scalable energy storage options. Redox flow batteries are an alternative technology to LIBs, making up 5% of the battery market as of 2020. These batteries are particularly suitable for energy projects where continuous power supply is needed and energy storage times are typically longer than LIBs can supply. Among companies driving the development of VRFBs is Bushveld Energy in South Africa. The company is building a value chain around VRFB battery production and has established a factory in East London to process vanadium into electrolytes for storage, planning to begin operations in March 2023. The project aims to establish an African-based manufacturing hub to produce VRFB batteries for the global market, supplied with vanadium from local mines, helping the African economy develop and integrate itself into the global battery manufacturing value chain. The opportunity for Africa to establish itself as a key supplier of both raw materials and finished products vital for the global energy transition is there, it just needs to be taken advantage of.
3D Printing in South Africa
Africa has an enormous housing crisis where millions are forced to live in crude, informal settlements. In South Africa, the reconstruction and development (RDP) program aimed at addressing the housing crisis only yielded 3 million units in 2016 and to date has a backlog of 2.6 million units. The government has since looked for innovative methods to address the housing crisis while affording people the basic human right of shelter. Accordingly, researchers from the School of Civil Engineering at the University of Johannesburg have found a way to create a 6-roomed RDP house with the use of 3D printing technology. These RDP houses are constructed in just 5 hours, making use of wood to mark the doors and windows and corrugated iron or any other cheap material used to build the roof. Furthermore, the cost analysis of the 3D – printed wall plates and block work used to create the structure costs 32% less than conventional building materials making it an attractive alternative for the construction industry.
This technology can be used to provide millions with decent housing that is fast and reliable. It can further be scaled up and adapted to meet any issues surrounding the weather and stability.
Trans-Saharan Gas Pipeline
Countries from the European Union (EU) have been dependent on Russia for between 150 billion to 190 billion cubic meters of natural gas per year, but in April this year, Russia cut its gas supplies to Bulgaria and Poland because they both refused to pay in roubles. This has made the EU notice Russia's threats to cut off supply to more EU countries and these countries are desperately looking for alternative energy sources. Africa may be the area of choice due to its proximity to the EU and its abundant reserves of 190 trillion cubic metres of natural gas in 2021. In 2020, Africa exported 95 billion cubic meters of natural gas, with Algeria and Nigeria contributing to 80% of those exports. However, the export volumes were under 40% of that year’s production volume of 255 billion cubic metres. The deficit between gas production and export volumes is due to the lack of capital invested in improving the continent's infrastructure to better extract and export the gas. However, these funds could be sourced from EU investors looking to diversify their natural gas supply from Africa. To access this capital Algeria, Nigeria and Niger have revived their 40-year-old Trans-Saharan gas pipeline, which is a USD 13 billion project that could supply up to 30 billion cubic metres a year to other African countries and Europe. The pipeline plans to go from Nigeria across the Sahara and connect to Algeria's existing Maghreb–Europe Gas Pipeline. This connection to Nigeria’s natural gas is projected to almost quadruple the Maghreb–Europe pipeline’s current throughput of 12 billion cubic metres a year. This is an attractive opportunity for European investors who are looking to fund projects that improve Africa’s natural gas infrastructure and increase export volumes to their continent.
The Future of Technology in Africa
It is indisputable that men in prominent senior and c-suite positions have historically dominated the STEM industry. However, a tangible shift is noticeable in Sub-Saharan Africa, where women comprise 30% of the tech industry and are increasingly placed in positions of power and influence to pioneer innovation in this sector. This impact is tremendous; women are taking up more leadership roles in technology departments and, in turn, encouraging young women to engage in careers in tech. In addition, several programmes are geared toward teaching girls the skills to enter careers in this sector – such as Women in Technology Uganda (WITU), where over 75% of its alumnae either begin their own businesses in tech or secure jobs within the STEM industry. In Rwanda, Miss Geek Rwanda allows young women the opportunity to pitch their tech ideas to public sector representatives in order to help break down the barriers to women entering tech. This trend is evidenced in Africa, where this year, Meta hired Kendi Ntwiga (the former Kenyan lead for Microsoft) as its global head of misrepresentation, as well as women in top roles in Cellulant and IBM East Africa. While the continent, and the world at large, still have a long way to go, the encouragement and education of women will lead to a massive opportunity for growth in Africa and a positive start to gender equality and development.
Drops of opportunity in South Africa's Water Infrastructure
South Africa's water challenges have been ranked as the third-highest risk of doing business in the country, alongside unemployment and energy challenges. Yet, this, in turn, is also an area of opportunity for companies and investors alike with solutions for the sector, as highlighted by GreenCape. In 2021, the challenges were noted to be high, mainly at municipal water levels around water and wastewater management infrastructure. A reported 56% of more than 1,150 municipal wastewater treatment works in the country are in a poor or critical state, leading to significant environmental, health and socio-economic risks, particularly for vulnerable communities. As the water sector is directly linked to the progression of South Africa's economy, the South African government is targeting change in the industry, as outlined in the Economic Reconstruction and Recovery Plan. As per the plan, a total of R90 billion per year of investments is required over the next decade to ensure reliable water supply and waste treatment. Implementation steps taken by the Department of Water and Sanitation include prioritising medium-term projects, with increases expected for the 2024/5 budget for municipal water and sanitation projects. Currently, the Western Cape has made the highest progress in investment opportunities based on expenditure plans to address the critical highlight issues.
Transport start-ups: A growing industry in Sub-Saharan Africa
A wave of innovative transport start-ups is helping to keep Africa’s heartbeat sector growing. In the past year, the transportation sector achieved an impressive record of 21 start-up companies, the majority of which were aimed at unlocking new growth opportunities through software, internet-enabled solutions, and alternative e-mobility solutions. With roads being the arteries through which the African economy pulses, the ongoing challenges have been key hindrances to sustainable economic growth and global competitiveness and trade. However, the spark of positive change being driven by recent start-ups in markets like Nigeria, South Africa, and Kenya has the potential to continue being driven by global trends/shifts but will require the continued support of innovators by both the private and public sectors. Furthermore, this startup wave is one step closer to achieving the estimated jump of $16 billion in intra-regional trade that economists and trade experts expect to be possible through the African Continental Free Trade Agreement (ACFTA).
Though plagued with several challenges, including an infrastructure investment shortfall of US$67 billion and US$107 billion annually, according to the IFC, a look at recent start-ups and their funding avenues in Africa points to a growing attraction of the continent as the last growth frontier for investors. In 2021 alone, the continent attracted about 564 start-ups (Figure 1), with fintech accounting for the majority share. For transport start-ups specifically, the records show a proactiveness by innovators to help solve Africa's connectivity predicament, where supply chain challenges and limitations in physical infrastructure network limitations amount to about 40-60% surcharge costs on goods on the continent. The record of companies included in Figure 1 also points to an industry gearing up for global trends that are likely to leave lasting changes in the industry. These trends as recognised by the Association of African Exhibition Organisers (AAXO) were likely noted to be around technology and automation and Environment Social Governance (ESG). In the African context, these have already been adopted and are surfacing through a rise in the e-logistics and e-mobility sectors.
2022 is expected to follow the growth trajectory seen in 2021, through several ongoing joint efforts to support innovators. Among these are incubation and accelerator platforms like the Baobab Network (which raised funding worth $200 million in just eight months); private sector participation like Toyota's Mobility 54 venture unit and several more new financing options offered to solutions targeted at reaching the untapped markets in Africa, particularly in the key markets highlighted in Figure 2. South Africa saw an impressive 7 start-ups in 2021, with the 'WhereisMyTransport' company raising about US$14.5 million.
With Africa's population expected to nearly double by 2050 (to 2.5 billion), achieving efficiency in the connectivity of goods and people will be critical, which begs the importance of supporting current business avenues that are proving to work well. The transport start-up industry is evidently one of them, particularly in Nigeria, South Africa and Kenya, and North African countries. Moreover, with the ongoing challenges around fuel hikes, and disruptions caused by the Russia-Ukraine conflict, African nations have a keen opportunity to strengthen their networks through forward-thinking solutions, but also to leverage the potential of the AfCFTA through collaboration.
To find out more about opportunities in Africa, please contact Lynne Martin.
