Seeds of Opportunity: The African Growth Series
February 2024 | Issue 4
In this week's issue, you will learn more about:
- AFRICA TREND: Global Energy Growth Opportunities and Trends
- AFRICA TREND: Startup Funding Surge
- AFRICA OPPORTUNITY: Eurobonds are Boosting African Markets in 2024
- BUSINESS DAY TV INTERVIEW: The Transformative Power of Digital Technology Across the Continent
- EXPERT INSIGHT: Unlocking Africa's AI Potential
AFRICA TREND: Global Energy Growth Opportunities and Trends
The mounting pressure to achieve global decarbonisation and increased geopolitical conflict (Ukraine Crisis, Middle East) will continue to disrupt the power and energy sector. 2023 was a record-breaking year for power generation investment, with $840 billion in global projects, up from $611 billion in 2022. Climate commitments and supportive regulations are the mainstays of global energy and power sector growth.
Solar photovoltaic (PV) technology will continue to hold a leading position in power generation investment, with $367.8 billion invested in 2023 across the residential, commercial, industrial, and utility sectors. Innovative business models will increase market penetration, such as prepaid electric usage (pay-as-you-go) and energy-as-a-service (EaaS). This will be important in markets with huge potential but low finances, such as Africa.
The next boom cycle for offshore wind will likely happen in 2024. Global decarbonisation efforts, declining project costs, faster regulatory approvals, larger turbines, ever-higher efficiencies, and the need for dedicated hydrogen production will accelerate annual additions. Onshore wind has significant growth potential, but reducing costs will be a priority for the industry.
A virtual power plant (VPP) platform aggregates, manages, and optimises connected decentralised renewable energy systems, energy storage systems (ESSs), and controllable loads, all of which are connected and controlled via a central system (VPP software). VPP platforms will leverage AI and ML algorithms to manage power generation assets, understand customer behaviour, and adjust output levels depending on demand and forecast consumption to manage the increasing share of RES in the global energy mix.
The steep infrastructure investment is a significant challenge for realising the hydrogen economy, specifically in countries with high renewable potential but low access to capital (e.g., Africa). The creation of hydrogen clusters will require numerous stakeholders in the hydrogen economy to act in harmony, including regulatory and financing bodies and intercontinental agreements.
Data centres are some of the most energy-intensive technologies, having consumed an estimated 4% of the global energy production in 2023 and is expected to reach 10% by 2030, creating a need for more sustainable operations. Data centre operators are moving toward 100% renewable energy to reduce their carbon footprint and grid dependence, specifically in developing African regions, through AI, ML, predictive analytics and big data.
These global energy drivers will also be evident in the African energy landscape, as the continent has the unique opportunity to leapfrog legacy investments and utilise emerging technologies to their fullest potential.
AFRICA TREND: Startup Funding Surge
In 2023, Kenya, Egypt, South Africa, and Nigeria received the most startup funding in Africa, with 87% of all investments, the highest since 2019. These countries accounted for 71% of startups that raised $100k or more, highlighting their significant influence on the continent's entrepreneurial ecosystem. Kenya led the way, securing 28% of Africa's total funding despite a 25% year-on-year decrease, showcasing its dominant position in Eastern Africa. Despite having the lowest number of ventures raising over $100k among the Big Four, Egypt saw a substantial increase in its share of North African funding, thanks to significant deals and the slow performance of neighbouring countries. South Africa stood out for maintaining the highest regional funding share at 97% and witnessing an 8% increase in total funding year-on-year. Nigeria experienced the most dramatic shift, with a 67% decline in funding compared to the previous year, signalling a challenging period for its startup scene. Despite the concentration of the financing within the Big Four, there's a vibrant ecosystem of startups across the continent, with 29% of those raising significant funds located outside these dominant markets, indicating a diverse and burgeoning landscape ripe for exploration and investment.
AFRICA OPPORTUNITY: Eurobonds are Boosting African Markets in 2024
A total of $4.8 billion has been raised by the trio Benin, Cote d’Ivoire, and Kenya, through the revival of the Eurobond market in early 2024. A Eurobond is a debt instrument that is denominated in a currency that is different from the country’s currency in which it is issued. A lull in the market was broken by Cote d’Ivoire, which issued nine- and thirteen-year bonds at an interest rate of 8.5%, raising a total of $2.6 billion. This has been widely oversubscribed, attracting over $8 billion in orders. Following this, Benin issued a 14-year bond worth $750 million at an interest rate of 8.375% - the country’s first-ever dollar-denominated bond. Kenya joined the revival by issuing a $1.5 billion bond, a seven-year note with the highest interest rate of 10.375%.
The in-flow of foreign currency from the oversubscribed bonds has positively impacted the countries’ currencies, causing a sharp dollar appreciation. Additionally, the success of the above Eurobonds indicates improving channels for Africa into the global debt market. More African countries are expected to follow suit, taking advantage of the favourable market conditions and increasing confidence in African markets.
BUSINESS DAY TV INTERVIEW: The Transformative Power of Digital Technology Across the Continent
According to the African Union report, digital transformation is a driving force for Innovation, inclusivity and sustainable growth for the African continent. It is estimated that investment in Advanced Technologies could result in a net gain of about 1.2 million jobs in South Africa Alone by 2030 however, the lack of addressing infrastructure education and inequality is the continent's downfall. Learn more as Consulting Analyst at Frost & Sullivan Africa, Sisonke Mgwebi unpacks this further on BusinessDay TV.
EXPERT INSIGHT: Unlocking Africa's AI Potential
Africa's AI revolution is underway, and the potential for transformative growth is immense. Are you ready to unlock it for your business? Hannro Steenekamp's recent article published on TechSmart explores the opportunities and challenges of Africa's burgeoning AI market. Get the insights you need to make informed decisions for your company's future.
Learn more: https://lnkd.in/dMcR43nW
To find out more about opportunities in Africa, please get in touch with Lynne Martin.
