Seeds of Opportunity: The African Growth Series
January 2023 | Issue 1
In this week's issue, you will learn more about:
- Africa: Innovation in Agribusiness
- Africa's burgeoning digital health industry
- Digital Twinning for Sustainable Infrastructure
- Eskom’s continued struggles to keep the lights on
- African Investments: Positive Estimates on FDI in 2023
- Africa's Investment Giants
- 2023, the year of more growth in Africa's fintech Segment
Africa: Innovation in Agribusiness
2023 is the year of agribusiness development and innovation in Africa. The continent’s population has been forecasted to grow to 3.9 billion by 2100, increasing 2.5 billion from 2022 and indicated to be the only region in the world where the population will continue to increase by more than 150 million between 2022 and 2100. However, the number of undernourished people within Africa has been forecasted to continue to grow, reaching over 433 million people by 2030, with Eastern Africa representing 40.9% (191.6 million). As such, while the population will continue to drastically increase, access to food will become more scarce. One area in which this may be tackled is in the local development of baby food. Subsequent to the COVID-19 pandemic, the world saw global supply chains grappling to maintain resilience, clearly indicated in developed nations, such as the United States of America, through the baby food crisis of 2022. Importing over USD 570 million of baby food per annum, and expected to reach USD 1.16 billion by 2026, Africa is beholden to global logistics for the nourishment of infants. This represents a significant investment opportunity in the baby food value chain. Local entrepreneurs have already established projects, such as Baby Grubz and Lemana which take advantage of this gap in the market by producing high-quality baby food made with locally-sourced ingredients. These projects indicate the growth opportunity within Africa and the local capacity to innovate.
Africa's burgeoning digital health industry
In Benin, as in the rest of Africa, waiting lines at clinics are notoriously long and even after hours of queueing, patients have no certainty that they will be treated. The high cost of accessing healthcare – in terms of time spent and travel costs – means that patients with chronic diseases such as tuberculosis (TB) are more likely to be inconsistent with their treatment and therefore increase their risk of developing drug-resistant TB.
GoMediCal is disrupting the status quo through its mobile application that connects doctors to patients. The platform allows patients to make appointments with nearby doctors, decreasing the total time the average patient spends seeking medical care from hours to minutes. Across Africa, patients and healthcare workers alike are using digital health solutions such as mobile applications to connect and learn. In South Africa, Hello Doctor allows patients to talk to a registered doctor over the phone at any time of the day and on any day of the week. In addition to increasing access to healthcare, digital health solutions also have the potential to improve the quality of care. About 800 preventable deaths occur every day due to pregnancy and childbirth-related complications, and two-thirds of these deaths occur in Sub-Saharan Africa. The Safe Delivery application aims to address this through providing digital training for midwives and other healthcare workers in resource-scarce communities.
As the continent grapples with the growing double burden of chronic non-communicable and infectious diseases, digital health solutions also have the potential to serve as diagnostic tools for identifying early signs of diseases and for disseminating accurate, up-to-date information during outbreaks. Over the next five years, it is estimated that the African digital health market will grow to US$10.42 billion as digital health solutions become more accessible in Africa through increasing mobile phone and internet penetration.
Digital Twinning for Sustainable Infrastructure
A digital twin is the creation of a detailed digital replica of a physical asset, such as a road or an underground water distribution system, by using a sophisticated network of sensors. By continuously transferring information between the physical and virtual environments, this technology enables companies to anticipate and plan for issues. It is especially useful for identifying when components need to be replaced, which helps reduce risks and unplanned downtime. In addition, urban planning schemes can be simulated using this software to evaluate their potential efficiency and problems.
The failure of infrastructure in South Africa leads to a loss of up to 30% of clean, drinkable water each day. This accounts for 70 million litres of water every day. This could become a very serious issue with the rapid increase in urbanisation and the corresponding increase in demand for water infrastructure. The water crisis in Cape Town in 2017/18 serves as a textbook example of what should be avoided. Through digital twinning, decision-makers would be able to see, in advance, when specific parts of the water supply infrastructure, such as pipes, valves, or pumps, need maintenance. Doing so would resolve issues before they become apparent to the general public.
Potholes are another issue that causes a great deal of frustration in South Africa. The South African National Roads Agency (Sanral) reports that the country's roads now have an estimated 25 million potholes, an increase of 67% since 2017. The use of digital twins can provide insight into the weaknesses of roads, which will enable municipalities to identify where potholes are likely to appear. In addition, digital twinning can quickly determine the most efficient way to divert traffic to repair the pothole. The testing of variable speed limits is another practical intervention.
The IGlobe Group, CITECH Kenya, Digital Twin Services (DTS), and Digital Twin (Pty) Ltd. are among the African companies providing digital twin services.
Eskom’s continued struggles to keep the lights on
South Africa’s power utility Eskom continues to face increasing pressure from the public to sort out its inability to keep the lights on. However, it’s looking gloomy as analysts and Eskom agree that loadshedding will still be around for a while. After a brief period of consistent power supply in 2016 and 2017, since 2018, sub-Saharan Africa’s most developed nation has plunged more and more each year, with a record of 2,881 hours of loadshedding over 120 days in 2022 (until November 2022). Over the past decade, there has been a clear and concerning trend of a rapid increase in load-shedding caused by breakdowns at power plants, with 2022 marking the worst year to date. Eskom’s energy availability factor approached 50% dangerously close in 2022 (until October 2022), resulting in Stage 6 loadshedding for the first time and narrowly avoiding stage 8 loadshedding. The outlook for 2023 is not looking any better. The CSIR expects a minimum shortage of 2 GW or higher for 49 out of the 52 weeks. To make matters worse, Eskom’s CEO, Andre de Ruyter, resigned in December 2022 and is expected to leave office in March 2023. South Africans must prepare themselves for a dark year, with hopefully some relief toward 2025, should President Cyril Ramaphosas’s plan to end loadshedding be a success.
African Investments: Positive Estimates on FDI in 2023
A positive leaf is predicted to turn for international business in Africa in 2023, following weaker investment inflows in 2022. The early predictions are banking on several lucrative energy and mining projects across the region. For energy, investment attraction is expected from both green and blue economies, with highlight deals including exploration of oil and gas in Nambia, LNG projects in Mozambique, and several clean energy projects in South Africa, Morocco, Kenya, and Egypt. The growing interest in African oil and gas is also spurred by the need for alternative suppliers to Europe due ongoing Russia-Ukraine crises, which saw the downturn of 2022 economic predictions. Mozambique alone is expecting to close $55bn in investments for three LNG projects, which will boost the economy valued at $18 bn in 2022. Leading stakeholders include international giants like TotalEnergies, ExxonMobil, and Eni. Within the global green economy, Africa is also robustly pushing for larger deals with about 71 renewable energy projects in 2021 (including a $20 bn deal in Morocco). These however account for 0.6% of the $434bn invested in renewables worldwide in 2021. Aside from energy, an increase in FDIs is expected in extractive industries from regions like Ghana, while Senegal and Ethiopia are also on the sheets of target countries. The interruption of 2022, is expected to result in only 3.6% economic growth, from 4.7% in 2021. For 2023, the IMF only predicts a 3.7% growth, but with resilience to the present challenges (higher debt), implementation of tools like the AfCFTA, and new market opportunities (oil and gas) there can be positives for Africa.
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Africa's Investment Giants
The year 2022 hosted rising temperatures, geo-political tension and a struggling global economy. Startups worldwide recorded a 55% decline in funding in Q3 2022 compared to Q3 2021. Yet, African startups continued growing by raising U$4.85 billion by December 2022, a 4.75% increase from 2021. Although not as impressive as the investment growth of 120% between 2020 and 2021, it was still another record-breaking year for Africa regarding the amount raised, number of deals, and number of investors. Nigerian, Kenyan, Egyptian, and South African startups accounted for 75% of the funds raised, with West African startups leading the region at US$1.8 billion in funding. FinTech cemented its dominance in the startup scene by accounting for 37% of the total funds raised, followed by the logistics and transport sector. Opportunities, innovation and leading startups in these sectors are attracting investors and creating jobs whilst improving access to services and financial inclusion. All necessary to help Africa mitigate the global economic crisis.
2023, the year of more growth in Africa's fintech Segment
Since 2020, the fintech industry has continued to be Africa’s fastest-growing start-up industry, with over 5,200 companies spread across the continent in 2022. This industry's growth is driven by the increasingly young, tech-savvy and urban population seeking user-friendly and advanced digital finance solutions rather than traditional slow-paced services. As Africa continues to be a hotbed for investments, the start-up landscape continues to mature, with forecasts suggesting that by 2025 the revenue generated by fintech start-ups will grow by eight times, reaching USD 30 billion. This, in part, is being driven by banks and government organisations creating enabling mechanisms that support the start-up community. Further facilitating growth in this industry is Visa, which has pledged to further scale its African operations through collaborations with strategic partners (potential partners include governments, financial institutions, mobile network operators, fintechs and merchants). As part of this pledge, Visa is investing USD 1 billion in Africa over the next five years to advance “resilient, innovative, and inclusive” economies and strengthen the payment ecosystem through new innovations and technologies across the continent. This investment will support the digitisation of economies and invest in upskilling, talent development and capacity building in Africa.
Supportive regulatory frameworks, increased investments and funding suggest that African fintech markets may be at the beginning of an exponential growth period similar to that seen in more mature markets such as Vietnam, Indonesia, and India. As smartphone ownership increases, decreasing internet costs and expanding network coverage, the fintech industry in Africa is forecasted to continue to grow and, in some cases, be successful.
To find out more about opportunities in Africa, please get in touch with Lynne Martin.
