Seeds of Opportunity: The African Growth Series

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

Innovation in Smart Diamond Mining

Africa is a major producer of numerous key minerals, including gold, diamonds, bauxite, iron ore, coal, and copper. The Democratic Republic of Congo (DRC), South Africa, Namibia, and Zimbabwe are some of the major mining countries on the continent. As a result of the rapid adoption of the industrial internet of things (IIoT), the mining sector is transitioning to smart mining, which is expected to result in a sustainable and more productive mining sector.

Smart mining comprises different processes of digitising a mine’s key assets through sensors that relay data to a central system via a wireless network. The global smart mining market, a highly fragmented market, is expected to grow at a compound annual growth rate (CAGR) of 20.62% from 2023 to 2028. In the market for smart mining, diamonds are one of the materials with the greatest potential. An estimated USD 13 billion worth of rough diamonds are produced annually, of which approximately USD 8.5 billion are from Africa (approximately 65%).

Diamond prospectors, who explore these valuable mineral deposits, generally search for kimberlite (the host rock for diamonds) by testing the ground for changes in magnetic fields. Once diamonds have been detected, different mining operations are used to extract the diamonds, depending on their environment. Following extraction, diamond ore is crushed and processed many times before it is sorted and classified.

In South Africa, a patented new MinPET was developed at the University of Johannesburg that detects diamonds in rocks. More specifically, the technology enables online, high throughput, quantitative, 3D imaging of local carbon concentration distributions in kimberlite. Diamonds contain much more carbon than other sources, and thus 3D images of these diamonds can be detected in rocks. This process would eliminate the need to process 99% of incoming material, promising massive cost, environmental, and land savings. South Africa, which produces 10 million carats of diamonds annually and is the fifth largest diamond producer in the world, could benefit greatly from the large-scale adoption of this technology.

Low-Carbon Hydrogen and Its Application Industries

Africa is ideally situated to produce low-carbon hydrogen and hydrogen-based fuels such as ammonia using its abundant renewable energy resources (solar PV + CSP, wind, hydropower), which offers a significant economic opportunity to the entire continent. The three primary application industries applicable to low-carbon hydrogen include Energy & Environment, Industrial, and Mobility. Many power and energy companies are investing in manufacturing green hydrogen to offer it as a commodity. For example, ReNew Power has collaborated with the Egyptian government to invest $8 billion toward green hydrogen plants in Africa. The industrial chemical sector can benefit by offering advanced electrolyser technology to facilitate the production of green hydrogen, helping to decarbonise industrial processes by utilising green hydrogen. OEMs seek to outsource green hydrogen production for application in FCVs, accelerating the path of net-zero emissions by decarbonising heavy-duty transportation. Africa must develop the transportation and storage infrastructure to provide better products and avail benefits taking advantage of the low-carbon hydrogen opportunity fully. Countries with existing natural gas infrastructure can repurpose natural gas pipelines and power plants for transporting hydrogen and generating electricity, which will be affordable and safe. Due to Africa’s abundant renewable energy resources, the continent is ideally positioned to offer low-carbon hydrogen at competitive costs. This must happen sooner rather than later, as several new entrants will enter the market once the technology matures.
​Moreover, the country must facilitate, support, and retain the development of a skilled workforce to avoid using them in other emerging low-carbon hydrogen markets. The opportunity of producing, using, and exporting low-carbon hydrogen in Africa is there for the taking. Still, policies and regulations must be developed to drive the sector’s development across the continent and industries. ​

Africa to Benefit from Europe's Energy Switch

In the wake of the Kremlin’s invasion of Ukraine, Europe decided to reduce energy purchases from Russia, reducing their dependence on Russian fossil fuels. Last year, the European Union and several European states increased the number of signed energy deals with developing nations, prioritising diversification. Russia’s war on Ukraine forced Brussels to revise its zealous climate policies, with direct and positive implications for African producers. This shift was met with optimism resulting in several African nations increasing their oil and gas exports to Europe. Now, Africa accounts for nearly 20% of Europe’s gas imports, a share that is likely to increase. African countries with operational gas export facilities will likely benefit from this demand. Countries such as Nigeria, Algeria, Egypt, Cameroon, Angola, Equatorial Guinea, or the DRC with proven oil and gas resources have the largest potential. Nigeria, Africa’s largest proven natural gas reserves (the 10th largest in the world) and vast renewable potential, is well-positioned to benefit from European exports.

This change in global trade may evolve into a win-win situation whereby European countries diversify their gas suppliers. In contrast, African countries attract the much-needed investment to increase production and meet domestic and international demand.

Kiana Steyn

Author, Frost & Sullivan Africa

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Startups: East Africa

In 2022, East Africa ranked as the second-most attractive region for startup funding on the continent as it raised US$1.2 billion with a year-on-year (YoY) increase of 115%. The region also saw a significant increase in the number of deals valued at US$100 thousand or more, almost placing it on a par with North Africa. Kenya stands out as the powerhouse of this region, representing 22% of startup funds raised but accounting for 4% of the continent’s GDP and population. Beyond Nigeria, Kenya punches above its weight as the only other market in Africa to have attracted over US$1 billion in funding for 2022, with notable deals including Sun King’s US$260 million Series D, Wasoko’s US$125 million Series B and M-Kopa’s US$75 million in its growth equity funding round. Overall, East Africa presents an interesting opportunity for further investment in the start-up ecosystem. In particular, Kenya’s strong economic growth, favourable business environment, and growing consumer market make it an attractive destination for foreign direct investment.

Financing Healthcare in Africa

Health insurance coverage in Africa is notoriously low, with an aggregate insurance penetration rate of about 3% across the continent. Therefore, out-of-pocket healthcare spending is high and poses a serious financial threat to vulnerable, low-income communities. To address this problem, countries such as Ghana and Rwanda aim to implement universal health coverage. But in a climate of poor economic growth and rising public debt levels in many African countries, publicly funded universal health coverage seems like a pipe dream. More international aid is also unlikely to be the solution to Africa’s healthcare financing problem. In the years leading up to the COVID-19 pandemic, aid to the least-developed countries in Africa declined by 4% in real terms, and against a tightening fiscal landscape in the wake of the global pandemic, donor countries are tightening the budget. There is a gap between the demand for and supply of affordable healthcare coverage.

It is this gap that companies such as BIMA, a microinsurance and health services startup, are filling. While private health insurance in Africa is often reserved for the wealthy, the typical BIMA customer lives on less than USD10 per day and is accessing insurance for the first time through BIMA’s services. The trailblazing company serves clients in Ghana, Tanzania, and Senegal and countries across Southeast Asia. It is disrupting the traditional health insurance industry by providing affordable health insurance to vulnerable communities in developing countries. Although healthcare spending in Africa only makes up about 2% of global healthcare spending, it is estimated that the African healthcare market will be worth USD259 billion by 2030. Additionally, 14% of global investment opportunities in the healthcare industry are expected to be in Africa by 2030.

Africa's Infrastructure Investment Networks

The maturing of investment networks on the continent, particularly the infrastructure-focused ones is a step forward for Africa. Among these growing platforms is the Africa50 Infrastructure Investment Platform. The need for infrastructure improvement in the region is critical and apparent, with the African Development Bank estimating, a $68-108 billion infrastructure financing gap. Yet, the region faces several challenges in financing, which was additionally slowed down by the Covid-19 pandemic. Pre-Covid 19 (2018), the region peaked with $100 billion in commitment, with the government being the leading financier (37.%). However, with the impact of increased government debt has opened the window of involvement for DFIs and more private-sector participation. Africa50's contribution to this agenda has successfully achieved 17 investments, valued at $5 billion, including the 120MW Malicounda power plant in Senegal. The investment platform which comprises 33 shareholder countries (most recently Botswana) and 3 banks (African Development Bank Group, West African Development Bank, and Bank Al-Maghrib) is focused on developing, accelerating, and mobilising financing for medium-to-large scale bankable projects. It boosts over $881 million from shareholders alone in committed capital, which will be distributed across 8 core sectors. En route to growing its influence ahead of 2030, it recently launched its private equity infrastructure fund. Despite challenges in 2022, the African investment market has several seeds of opportunity that can allow it to rebound on several fronts.

Upcoming Webinar: Dispelling Myths about Enterprise Resource Planning Systems

Increasing geopolitical tensions and supply chain shocks push executives to adopt and implement digital solutions such as Enterprise Resource Planning (ERP) technology to minimise disruptions and continue running the business. However, adopting and implementing such systems can have various outcomes, leading to misconceptions (truths and myths) about this business software.

To truly maximise the benefits of any ERP system, it is crucial to have the right expectations, which is why SYSPRO and Frost & Sullivan Africa have developed the ERP Myths & Truths Dispelling Misconceptions About Enterprise Resource Planning Systems.

Join the webinar on Wednesday 22 February at 10h00 SAST as Frost & Sullivan Africa's CEO Hendrik Malan, and Sisonke Mgwebi address and discuss the myths surrounding ERP systems and uncover the truth about this software.

Register for free today: https://lnkd.in/d3XEupRX

Upcoming Event: Africa's Green Economy Summit 2023

Frost & Sullivan Africa is excited to announce that its CEO Hendrik Malan will be speaking on "Infrastructure Opportunities in Africa" at the first Africa's Green Economy Summit taking place in Cape Town from 22 – 24 February 2023. 

The summit will focus on connecting global capital and green economy projects across the continent and is an official event of E-FEST Cape Town. Join industry stakeholders for this important and pioneering event that will shape the future of our province and the African continent.

Book your ticket today: http://bit.ly/3tYCnMJ

Upcoming Event: Africa Energy Indaba 2023

Frost & Sullivan Africa's ​ Energy Expert, Patrick Prestele will participate in a panel discussion on “Hydrogen for Africa” on 8 March at the CTICC in Cape Town.

Join the Africa Energy Indaba from 7 – 8 March 2023 as it hosts a stellar line-up of speakers discussing and shaping solutions to Africa’s energy challenges.

Get your ticket today: https://lnkd.in/dRtVe_Mk

To find out more about opportunities in Africa, please get in touch with Lynne Martin.

Lynne Martin

Sales Contact, Frost & Sullivan Africa

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lynne.martin@frost.com+27 21 680 3260