Seeds of Opportunity: The African Growth Series
January 2023 | Issue 2
In this week's issue, you will learn more about:
- 5G to drive Africa’s growth in the Fourth Industrial Revolution
- Water and Renewable Energy Infrastructure Development in Africa
- Venture Capital Africa
- eHealth Startups in Africa: Innovation & Longevity
- A solution to Africa's medical waste problem
- Sustaining Africa's Private Capital Boost
5G to drive Africa’s growth in the Fourth Industrial Revolution
Africa's economic growth is expected to be catapulted by the fourth industrial revolution (4IR). The 4IR is distinguished by the fusion of the physical, biological, and digital worlds and the growing use of new technologies. These technologies include autonomous vehicles, smart cities and factories, and the metaverse. A prerequisite for these technologies is the availability of ultrafast and ultrareliable wireless internet, which could be achieved with 5G technology.
It is expected that 5G networks will provide a data rate of 10 Gigabits per second (Gbps), representing a 100 times improvement over current 4G networks. 5G networks also offer lower latency, which is the time a signal takes to get from the server to a device and back. This lower latency of 5G networks allows doctors to perform remote surgery using a surgical robot without being concerned about signal delays injuring patients.
A recent report by the GSMA estimates that 5G will contribute USD 26 billion to Africa's economy and will account for 20% of Africa’s mobile connections by 2030. In Sub-Saharan Africa, 5G subscriptions will grow at a compound annual growth rate (CAGR) of 85.18% to reach 104 million subscribers by 2027.
In August 2018, Vodacom Group launched Africa’s first commercial 5G fixed wireless access (FWA) network in Lesotho. The country of 2.3 million was considered a testing ground for larger operations on the continent. Since then, 8 other African countries have launched commercial 5G networks. The most recent is Botswana, where Orange Botswana launched 5G commercially in November 2022. This development is closely aligned with the government’s ambition to leverage 4IR innovation toward transforming Botswana into a knowledge-based economy.
Water and Renewable Energy Infrastructure Development in Africa
Africa faces a water crisis as the African population grows and climate change strains the region’s resources. According to UNICEF, 418 million people still lack clean drinking water, 779 million lack essential sanitation services (including 208 million who still practice open defecation), and 839 million still lack essential hygiene services. By 2025, close to 230 million Africans will experience water scarcity, and up to 460 million will live in water-stressed areas. Alleviating some of these water stresses will require a dramatic acceleration in the current rates of progress in terms of infrastructure development and water accessibility. Accordingly, the Opec Fund for International Development (OFID) has recently approved loans totalling USD 500 million for several countries worldwide, including Africa, to develop renewable energy, provide access to water and improve food security in the face of external constraints.
In addition to financing water infrastructure projects in Madagascar and Mauritania, these loans will enable the implementation of a Solar Power Plant Development and Electricity Access Improvement Project in Nigeria. In collaboration with the Nigerian government, OFID’s financing will allow the construction of a 10 MWp solar photovoltaic plant and a transmission line in the southern part of the country, allowing 80,000 people to be connected to the electricity network.
Venture Capital Africa
Despite surging inflation and an unfavourable global macroeconomic climate, Africa’s venture capital (VC) ecosystem has grown fivefold, from US$0.6 billion in the first half of 2020 (H1) to US$3.5 billion in 2022 H1. Over a third of African startup investments were for fintechs in 2022, this trend is shifting as funds go to companies using healthcare, climate and farming technology. Africa-focused VCs are investing in startups that aim to build solutions to improve the resilience of climate-vulnerable communities. The inaugural cohort of Catalyst Fund’s new $30M VC raised US$2 million for 10 African startups, using agricultural, healthcare, insurance technologies, waste management, disaster response, and carbon financing to help communities build resilience to the impact of climate change. COP27 called for an increase in private sector financing for innovation and technology to help fill the >US$330 billion funding gap for adaptation and resilience by 2030. Africa’s entrepreneurial innovation and rising population bode well for the long-term increase of venture capital in Africa.
eHealth Startups in Africa: Innovation & Longevity
In Africa, it has been estimated that out of the continent’s 1.3 billion people, only 615 million (52%) have access to healthcare. This is against the backdrop of diseases, such as cholera, HIV, Ebola, malaria and their continued threat (619 000 malaria-related deaths in Africa in 2021). In addition, local government budgets do not reflect urgency in this field, dedicating less than 10% of their gross domestic product (GDP) to healthcare – such as Nigeria (3.7%), Tanzania (5.6%), and South Africa (9%). However, outside of the public arena, private companies have thrived within this sector, with startups flourishing during the COVID-19 pandemic due to the market acceptance of online consultations, telemedicine, and remote treatments. In fact, according to Advantage Health Africa, there was a tenfold increase in direct-to-consumer online pharmacy services between 2019 – 2021. While the immediate threat initiating the design of vital eHealth startups is not as prevalent, eHealth startups are maintaining post-COVID popularity, focusing on healthcare financing and access to medical care. Examples include SUSU, which received USD 2.16 million in pre-seed funding in 2022, and mPharma, raising over USD 35 million in series D funding last year. Innovation in this sector will continue to build upon the infrastructure built between 2019 – 2021, developing an eHealth economy that will bolster access to healthcare throughout the continent.
A solution to Africa's medical waste problem
The COVID-19 pandemic cast the spotlight on public health supply chain management and, in the process, exposed Africa’s struggle to manage its medical waste. At the same time, the pandemic exacerbated the continent’s waste problem. The mandated wearing of masks during the pandemic contributed to the fivefold increase in medical waste produced in many African countries between 2020 and 2021. At the height of the pandemic, a staggering 353 million disposable masks were discarded daily in Africa alone, amounting to 10.5 billion discarded masks per month. Unfortunately, more than 90% of waste ends up in illegal dumpsites, which are eventually burned. This practice poses a severe safety risk to waste workers and wildlife. In fact, as many as one million people worldwide die every year due to mismanaged waste.
One solution to the problem is to turn medical waste into energy. Waste-to-energy plants use various approaches – most frequently incineration, gasification, and distillation – to produce energy. This solution is most appropriate for disposing hazardous, infectious waste that cannot be reused or recycled. The conversion of medical waste into energy also has the potential to solve Africa’s growing demand for electricity, where 43% of people still lack access to electricity. In recent years, South Africa and Ethiopia opened waste-to-energy plants, with various other countries like Kenya in the planning phase of constructing such plants. While these developments signal a great potential for innovative, alternative approaches to managing waste in Africa, the over-burdened and under-funded public health sector is struggling to manage medical waste effectively. In many African countries, including South Africa, the safe disposal of medical waste falls squarely on the shoulders of the private sector. With a population growth rate of about 2.3% (more than double the global rate), and the world’s largest incidence of disease, Africa’s dire need for effective medical waste management is not expected to subside soon.
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Sustaining Africa's Private Capital Boost
In the face of crippling global macroeconomic factors in the first half of 2022, the African investment landscape saw several shifts. Like the other markets, the region experienced a contraction of real GDP, with forecasts expecting it to decelerate to 4.1% in 2022 from nearly 7% in 2021. However, the African market flared strongly for new Private Capital Investment deals, setting a record high in H1 of 2022. A $4.6 billion cumulative deal value was recorded for 338 deals signed across the region. The highest share of deals was in the early stage, indicating increasing market confidence. Leading markets for the recorded deals include West Africa (Nigeria, Ghana, Senegal), accounting for 34% of the share in 2022 (nearly doubly 2020 figures), while several East African markets also came out strong, particularly Kenya. The Kenyan market recorded an impressive 43 deals resulting in a 153% increase compared to 2021 H1. By sector, the recent boost is divided between the financials and consumer discretionary, industries, Information Technology, and healthcare. The landscape undeniably validates claims that Africa is the last growth frontier, with more expectations set for 2023, it will require targeted efforts to address existing challenges.
To find out more about opportunities in Africa, please get in touch with Lynne Martin.
