Seeds of Opportunity: The African Growth Series

April 2023 | Issue 3

In this week's issue, you will learn more about:

AFRICA TREND: Infrastructure Financing
AFRICA OPPORTUNITY: The Future of Banking is Digital
AFRICA TREND: Mining Exploration Budgets in Africa
AFRICA OPPORTUNITY: Artificial Intelligence in Africa’s Healthcare Industry
AFRICA OPPORTUNITY: The Growth of the Construction Industry in Africa

AFRICA TREND: Infrastructure Financing

Securing new sources of finance outside of traditional lenders is critical for progressing Africa's infrastructure landscape. The region's infrastructure needs are about 39% higher than the forecasted investment, with a financing gap estimated at around $100 billion. Yet, the last three years were characterized by a slowdown in investments due to several macroeconomic factors including the pandemic. With reduced support from traditional and international lenders due to increased risk large commercial banks are unlikely to step in. Financing needs in the last decade (2008 to 2020) were largely met by the China Exim Bank, African Development Bank Group, and China Bank. This has opened a critical gap between local and regional banks alongside development finance institutions, with the latter playing a pivotal role due to the long tenor of deals. The rising private capital deals point to new financers trends comprising specialist infrastructure funds, private equity, debt financers, etc., In 2022, the rise of private capital deals was evident. Still, the extent to which the boom can be sustained remains to be seen, with key markets like South Africa primarily affected by unresolved energy crises and other unique challenges.

AFRICA OPPORTUNITY: The Future of Banking is Digital

The African banking sector is ripe for disruption. With a young and growing population, increasing access to mobile technology, and a growing middle class, Africa is the perfect breeding ground for innovative financial services.

One example of a company leading the charge in the digital transformation of banking in Africa is Bank Zero. Started by tech entrepreneur Michael Jordaan and banking innovator Yatin Narsai, Bank Zero is a digital-only bank offering various innovative products and services, including card subscription control and special card patents.

Other companies are also following suit. For example, Monzo, a UK-based challenger bank, has announced plans to expand into Africa. And TymeBank, a South African digital bank, has grown to over 6 million customers.

The market for solely digital banks, also called neobanks, in Africa is expected to grow at a compound annual growth rate (CAGR) of 29% from 2022 to 2027. The increasing adoption of mobile technology drives this growth, the growing middle class, and the need for more convenient and affordable financial services.

The future of banking in Africa is digital. And the opportunities for both businesses and consumers are endless.

AFRICA TREND: Mining Exploration Budgets in Africa

Africa is an attractive destination for mining companies and investors, albeit several key risks are hindering the growth of the mining sector, including currency volatility, policy revisions, agreement cancellation and deteriorating infrastructures. Australian and Canadian companies are responsible for half the exploration budget, followed by South African-based companies. Africa is home to more than 60% of the global manganese and PGMs and more than 50% of the global cobalt reserves. Gold-focused exploration budgets led with a total of $733 million and are likely to continue leading in 2023, driven by the region's high potential, specifically in West Africa with Burkina Faso, Ghana, Ivory Coast, and Mali all reflecting gold exploration budget increases of above 30%, all hosting high-grade gold (avg. 2.28 g/t). Africa is expected to become more involved in the global metals and minerals markets as the world shifts to a green economy, demanding metals primarily found on the continent. African governments must ensure conducive policies and honour agreements across political changes to attract investment and benefit from the downstream benefits of increased mining activity, such as improved infrastructure (roads, ports, etc.), refining capabilities, and associated economic and financial benefits.

AFRICA OPPORTUNITY: Artificial Intelligence in Africa’s Healthcare Industry

Artificial Intelligence (AI) and other emerging technologies have been transforming African societies by creating new opportunities, transforming lives, and including previously removed societies into the digital realm. AI significantly impacts Africa’s healthcare industry, where the continent’s healthcare infrastructure is limited, and resources are scarce. A clear example is Rwanda, where general GPs are relatively common, but specialised doctors such as radiologists are scarce (less than 20 in the country). By making use of AI, Doctors Kevin Muragijimana and David Ndayishimiye founded DoctorAI, which is designed to address healthcare challenges in Africa, mainly where physicians and specialists are few. DoctorAI provides user-friendly and mobile-based AI models to help reduce diagnostic errors and promote standard management. Some of the application’s features include an AI-powered breast X-ray, which interprets breast images at an accuracy of 98% and an AI-powered chest X-ray analyser, which can detect normal and many abnormal features on chest X-Ray images, including lung cancer, at an accuracy of 95.4%.

With the goal of taking this platform globally, DoctorAI can help fill the gap by providing real-time diagnostic and treatment support, reducing medical errors.

AFRICA OPPORTUNITY: The Growth of the Construction Industry in Africa

The prevalence of multi-sector developments in Africa, particularly within the energy sector, is growing the construction market in the continent. Developing oil and gas pipelines across Africa significantly maximises intra-country trade and export markets. Key examples include the Central African Pipeline System (USD 26 million), the Nigeria/Morocco Pipeline (USD 26 billion), and the East African Crude Oil Pipeline (USD 3 billion) which are expected to drive growth within the continent. Moreover, natural gas pipelines are in strong development in both South Africa and Nigeria. It is expected that projects of this calibre will continue to progress along with the climate created by the African Continental Free Trade Area Agreement. Currently valued at USD 328 billion, the construction industry is forecasted to grow at a compound annual growth rate of 7.5% and surpass pre-COVID value.