Seeds of Opportunity: The African Growth Series
October 2023 | Issue 1
In this week's issue, you will learn more about:
- Price, People and Power in Africa's Technology Market
- AFRICA OPPORTUNITY: Africa's Green Hydrogen Opportunity
- AFRICA TREND: M&A in the Technology Market
- AFRICA TREND: Customer Relationship Software Boom
- UPCOMING EVENT: Critical Minerals Africa 2023
- UPCOMING EVENT: Africa Energy Week (AEW) 2023
Price, People and Power in Africa's Technology Market
Africa's technology market, burgeoning with potential and innovation, is deeply influenced by three pivotal factors: Price, People and Power.
Price plays a crucial role in determining the accessibility and adoption of technology across the continent. With a diverse economic landscape, where many countries grapple with issues of poverty and income inequality, affordability is paramount. Technologies that are priced lower or offer cost-effective solutions tend to gain rapid traction. For instance, mobile money solutions like M-Pesa have seen widespread adoption because they cater to the financial needs of the unbanked population at an affordable rate. Similarly, affordable smartphones have driven digital penetration, enabling millions to access the internet for the first time.
People, the second influential factor, refers to both the consumers who drive demand and the skilled workforce that propels the tech industry forward. Africa boasts a young and rapidly growing population, eager to embrace digital solutions that enhance their daily lives. This demographic dividend has led to a surge in demand for tech-driven solutions in education, healthcare, finance and entertainment. On the flip side, there's a burgeoning community of African tech entrepreneurs, developers and innovators who are tailoring solutions to local challenges. Their intimate understanding of local cultures, languages and needs ensures that technological innovations are relevant and impactful.
Lastly, Power — both in terms of electrical energy and political influence — shapes the tech landscape. Reliable electricity is fundamental for tech infrastructure and in regions where this is inconsistent, the growth of tech hubs and data centers can be stymied. Political power, on the other hand, can either foster or hinder tech growth. Governments that recognise the potential of the tech sector and create conducive regulatory environments, invest in digital infrastructure and promote digital literacy can significantly accelerate tech adoption and innovation.
In conclusion, the interplay of Price, People and Power profoundly impacts the trajectory of Africa's technology market. Understanding these dynamics is essential for stakeholders aiming to tap into the continent's vast tech potential.
AFRICA OPPORTUNITY: Africa's Green Hydrogen Opportunity
The African continent is making significant strides in the hydrogen industry. The African Green Hydrogen Alliance members, including Namibia, South Africa, Egypt, Kenya, Mauritania, Morocco, and recently admitted Ethiopia and Angola, are spearheading the development of hydrogen projects all over the continent. Other countries are also joining in as the hydrogen economy evolves. Djibouti is the latest country to participate in the green hydrogen race. These projects are not just experimental; they are expected to generate large amounts of green hydrogen and its derivatives, such as Ammonia, and significantly create a competitive hydrogen market in Africa and globally. Thanks to its vast expanses of renewable energy land, Africa is an excellent opportunity for renewable energy. Unlike densely populated regions, Africa’s size makes it an ideal location for large-scale renewable projects. While grey hydrogen is relatively cheap, low-carbon hydrogen projects are still relatively expensive. Green hydrogen is expected to match grey hydrogen’s cost by 2040 and become cost-competitive with blue hydrogen by 2030. As the production of green hydrogen increases, the costs of various electrolyser technologies drop, leading to economies of scale. In the hydrogen race, Africa competes with other regions, such as Australia and Latin America, particularly Chile. Africa must enter the competition at full speed as the opportunity is fleeting.
AFRICA TREND: M&A in the Technology Market
In recent years, Africa's startup ecosystem has seen a surge in mergers and acquisitions (M&A) since it helps reduce the cost of tech solutions for end-users. The rising demand for affordable tech solutions more than doubled the M&A deals to 44 in 2021, compared to only 20 in 2021. M&A deals tracked in Q1 2023 were about seven acquisitions and were worth about US$710 million. South Africa, Egypt and Nigeria drive this activity whilst fintech, e-commerce, renewable energies and telecom sectors have seen a rise in consolidation activity since the beginning of 2022.
This trend is exemplified by Stripe's acquisition of Paystack, which contrasts with the fewer startups opting for initial public offerings, such as Jumia on the NYSE. The driving forces behind this M&A trend include rapid market expansion, competition neutralisation and fast-tracking product development. The African business environment, characterised by collaboration and a shared mission for continental improvement, further fuels this M&A climate. As the continent pushes for more unicorns, M&As offer startups revenue assurance, especially in challenging funding conditions. Foreign investors also view M&As as a strategic entry into the vast African market. As the African startup ecosystem evolves, M&As are becoming the norm, offering both growth opportunities and challenges that require informed decision-making by founders.
AFRICA TREND: Customer Relationship Software Boom
Customer Relationship Management (CRM) software is dominating the enterprise software market in Africa, accounting for 29% of revenue in 2022. This is because CRM software is essential for businesses of all sizes that want to improve their customer relationships. It helps businesses to track customer interactions, manage leads, and provide customer support.
The adoption of cloud-based CRM solutions is driving the growth of the CRM market in Africa, which is expected to increase at a CAGR of 12.6% from 2022 to 2028, surpassing the overall enterprise market growth of 8.9% over the same period. This growth is being driven by rising awareness of CRM benefits among African businesses. In 2023, the market revenue is projected to be US$1 billion, and by 2028, it is expected to reach US$1.7 billion. The projected average spend per employee on CRM software in Africa is estimated to reach US$2.0 in 2023 and increase to US$3.2 in 2028.
Although the African CRM market faces a few challenges, such as the lack of skilled CRM professionals, high software costs, and low awareness of CRM benefits among smaller businesses, several factors are driving its continued growth. These include the increasing adoption of cloud-based CRM solutions, recent small business CRM adoption, and expanding features from the software offerings. These factors are leading to more African businesses investing in CRM offerings to improve their operational efficiency and profitability.
Despite the challenges, the CRM market in Africa is expected to keep growing in the coming years. Continued CRM adoption will allow African businesses to streamline their business development while encouraging greater collaboration between different departments with more automation.
UPCOMING EVENT: Critical Minerals Africa 2023
I am excited to announce that Frost & Sullivan Africa is a Strategy Partner for the Critical Minerals Africa 2023 conference happening from 17-19 October in Cape Town, South Africa, at the CTICC (Auditorium 2).
On 18 October at 16h00, come and join the conversation on ‘’ESG and Building More Value in Africa’s Critical Minerals Production’’ which will be moderated by Christopher Vandome, Senior Research Fellow: Africa Programme, Chatham House.
Panelists will include:
● Anja Berretta, Head of the Energy Security and Climate Change in Sub-Saharan Africa programme, Konrad Adenauer Foundation
● Cathie Lewis, Head of ESG, GCX
●Patrick Prestele, Consultant, Frost & Sullivan Africa
● Selleen Sewpershad, Project Manager: Competence Centre for Mining & Mineral Resources, Southern African German Chamber of Commerce and Industry
There is still time to get your ticket today - https://lnkd.in/dDEY8k4z.
UPCOMING EVENT: Africa Energy Week (AEW) 2023
AEC African Energy Week 2023 is fast approaching! 🌍
Join us from 16-20 October at the CTICC, Cape Town, South Africa, and experience Africa's booming energy markets.
➡ Click here to register: https://lnkd.in/d2HhRcNS
Secure your spot now and be part of 'The African Energy Renaissance: Prioritizing Energy Poverty, People, the Planet, Industrialization, and Free Markets.' Enquire more at https://aecweek.com/.
To find out more about opportunities in Africa, please get in touch with Lynne Martin.
