Seeds of Opportunity: The African Growth Series
February 2023 | Issue 4
In this week's issue, you will learn more about:
- African Artificial Intelligence’s new frontier
- Green Hydrogen for Africa Panel - Africa Energy Indaba
- Private Equity and VCs - the Lifeblood of Project Success
- Rwanda: East Africa's Sillicon Valley
- Private Equity in Africa - the emerging destination
- Africa's Active Investors
- Improving Maternal Mortality Through mHealth
African Artificial Intelligence’s new frontier
With the rise of artificial intelligence (AI) and machine learning technologies, the opportunities for innovative African tech companies are growing at an unprecedented rate. In the wake of ChatGPT's launch at the end of 2022, many African countries have been restricted from accessing the service. This has provided an opportunity for a ground-breaking new competitor to ChatGPT developed in Cameroon, called KapyGPT.
Founded by Donald Steve Kapyouo Tchuisseu, KapyGPT is an AI chatbot tailored explicitly to African languages. This is a vital development, as African languages have historically been underrepresented in the development of language processing technology. The mistranslations can be this of African languages on Google Translate. The platform is built on understanding and interpreting the nuances of African languages, and it has the potential to revolutionise communication and information access across the continent.
South Africa and Nigeria are among the leading countries in Africa regarding AI development, with a high concentration of companies specialising in this field. A key example is Botlhale AI, a South African research and innovation start-up specialising in conversational AI. Botlhale AI provides a multilingual, voice-enabled, no-code, conversational AI platform that can be used to build, test, and deploy conversational AI onto platforms like WhatsApp without a single line of code.
The opportunity for companies in this sector in Africa is vast, with statistics indicating that the African AI market is expected to grow at a CAGR of over 36% by 2026. This is a clear indication of a significant demand for this type of technology on the continent, and there is great potential for African AI startups to meet that demand.
Green Hydrogen for Africa Panel - Africa Energy Indaba
I am fortunate to be part of the Hydrogen for Africa Panel during next month's Africa Energy Indaba Africa Energy Indaba conference at the CTICC in Cape Town. We will be discussing the crucial role hydrogen, primarily green hydrogen, can play in Africa's sustainable industrialisation and the impact it could have on several African economies. Hydrogen in its various forms (brown, grey, blue, green) can not only help industrialise the continent. Still, it will also help the continent overcome its most vital challenges, such as the atrociously low electrification rate, high unemployment rate and negative trade balances. Additional discussion topics will be the role governments must play in facilitating the process by creating conducive policies and legislations to attract and secure global investors' confidence in the sector.
I look forward to the panel discussion, and the insights will generate some much-needed traction to help Africa grow!
Private Equity and VCs - the Lifeblood of Project Success
In the last few years, the African investment landscape has welcomed a boom in private capital as it rises as a critical destination for fund managers seeking portfolios in emerging markets. Top investment platforms, particularly in 2021 and 2022 have been the private equity and venture capital space. For the region, what does this mean? "Private equity can be considered as the lifeblood of project success in Africa", explained speaker Craig Parker at the recent Frost & Sullivan Think Tank, hosted as an instrument to facilitate the conversation around Africa's investment trends. According to Parker, PE's contribution will result in strong due diligence, project feasibility, and commitment, going beyond just government funding. The latter still dominates (~41%) the infrastructure investment space, which is one of the attributes of the overall low project closure rates (~10%) evident in the region. Increasing private sector participation is critical, with an infrastructure financing gap estimated at US$170Bn. Beyond the growing contributions of PE, the African venture capital market is a space to watch. As Hurbet explained, the venture capital market is the feeder as most businesses on the continent are informal and small and medium enterprises. Thus by focusing on these there is a pipeline to tap. However, to sustain the boom innovative partnerships need to be considered, including increasing long-term institutional funding such as those emanating in Australian and Canadian markets versus traditional debt-based models.
To follow the whole conversation on how these trends will likely play out in Africa, request the recording on https://lnkd.in/ddCFDtdK
Rwanda: East Africa's Sillicon Valley
In 2022, the Global Innovation Index (GII) ranked Rwanda as the most innovative economy amongst low-income countries. According to the GII, which tracks innovation trends worldwide, Rwanda’s economic policies and technical articles are the country’s core strengths. The introduction of progressive policies have lead to the development of two satellite constellations (Cinnamon -217 and Cinnamon -937), which are in progress. These systems are forecasted to enable permanent connectivity within Rwanda and surrounding East African countries. Creating a robust communication system indicates the country’s commitment to the innovation ecosystem, and the innovation economy – with the gross domestic product (GDP) forecasted to reach over USD 17 billion by 2027. As a result of the continued investment in the growth of the digital landscape, Rwanda has been hailed as East Africa’s Silicon Valley, due to the Kigali Innovation City (KIC) and the Norrsken Kigali House. These hubs are transforming the landscape of Rwanda, with startups thriving – such as Zipline, an instant logistics company, which recently secured USD 250 million for operation expansions. This growth opportunity is further bolstered by the country’s startup business ecosystem index of 0.22, with 250 startups founded in Rwanda in 2022.
Private Equity in Africa - the emerging destination
In Several macroeconomic challenges in 2022, left a dent in the global investment landscape, particularly private equity (PE), but what does this mean for Africa? Global PE fundraising in 2022 saw a 53% YoY decline and a 37% decline in the value of exits. Yet for Africa, the maturation of the sector continues. Between 2019-2022 Africa's PE landscape has seen positive shifts, with improving exits seen in 2022, 29% higher than in 2021, in the first half of the year. Key pockets of growth have been in industries such as manufacturing, fintech, and infrastructure. Regionally, Southern Africa has taken lead, accounting for 34% of deals recorded in the last three years. For Africa, the success of the private equity landscape trickles down to the success of other investment platforms, i.e, infrastructure. Increased private capital funding for infrastructure can play a critical role in improving the much need project success rate, allowing projects to reach financial close sooner. Key players that have helped pave the way to the maturation of Africa's PE include Development Partners International (DPI), Helios Investment Partners, Convergence Partners, BluePeak Private Capital, AIIM, etc.
To explore the direct link between infrastructure success and PE and more, review the Frost & Sullivan Think Tank hosted recently, using the link below https://lnkd.in/ddCFDtdK.
Africa's Active Investors
Africa's economy has been facing disruptions and shrinking in recent years. But, over the past two years, Africa's top 14 investors consistently funded startups across the continent by conducting at least one deal worth over US$100 thousand per month on average. Excluding angels, almost 1,500 investors contributed to the growth of Africa's startup ecosystem.
Launch Africa was the most active investor in terms of deal count in 2021 and 2022, signing more than one deal per week on average. The company got involved in 12% of all equity deals between US$100 thousand and US$10 million and the sectors include fintech (Julaya), insurtech (Kuda) and e-commerce (Gozem). Flat6Labs focused on Northern Africa, with 2/3 of its investments in Egypt and 1/3 in Tunisia. This company's portfolio in both countries includes agriculture and fintech amongst other sectors.
Overall, the consistent investment from all top funders confirms the opportunity they value in Africa's startup potential as a hub for innovation and entrepreneurship.
Improving Maternal Mortality Through mHealth
The risk of dying from pregnancy-related complications is one in 5,400 in high-income, developed countries. In contrast, one in every 45 women are at risk of dying from pregnancy-related complications in low-income, developing countries. However, two-thirds of these deaths are preventable if women receive appropriate and adequate antenatal and postnatal care.
Mobile health platforms address the prevalence of preventable pregnancy-related deaths through providing information and care to expectant mothers over digital platforms. In Zambia, DawaMom monitors crucial health markers such as gestational blood pressure and haemoglobin levels remotely and provides in-person care to rural women through mobile clinics. Its artificial intelligence-powered platform also gives patients a digital summary of their clinic visit using data visualisation tools to empower women to understand their health. Although the African market for mobile health applications aimed at pregnant women is still nascent, the market is growing. DawaMom has secured USD120 thousand in pre-seed funding and expanded its services to include Zimbabwe, Malawi and Tanzania. HelpMum, a similar mobile health startup in Nigeria, received USD500 thousand in funding as of 2022.
To find out more about opportunities in Africa, please get in touch with Lynne Martin.
