Seeds of Opportunity: The African Growth Series
July 2022 | Issue 2
In this week's issue, you will learn more about:
- Africa’s Path to Universal Energy Access
- African Fintech Funding Forecast to Double in Just 3 Years
- Internet Development in Namibia
- Boosting Kenya's Automotive Industry
Africa’s Path to Universal Energy Access
Africa is facing a considerable challenge in terms of meeting its energy demand. Rapid population growth and economic development are significant drivers of energy demand. Africa is home to about 1/5th of the global population and continues to grow at an annual rate of 2.5%, faster than any other region in the world and double the global rate. It is estimated that by 2030, the African population will grow to 1.7 billion people with an average age of 20. The continent is continuing to struggle with energy access, with 600 million people to date lacking access to electricity, the most significant proportion of which is mainly located in remote rural areas far from national grids, while increased demand in urban areas due to rapid urbanisation and higher standard of living places increased pressure of governments to meet the electricity demand. For every African to gain access to electricity by 2030, 90 million people, of which 70 million people are located in rural areas, would need to gain access on an annual basis from 2022. The fastest and most cost-effective solution to electrification varies from country to country. New grid connections are the most cost-effective in areas closer to the national grids. However, because the most significant proportion of the African population lacking access to electricity resides in remote rural areas, decentralised, modular systems, particularly solar home systems (SHS), have proven effective in Africa. Annual sales of SHS reached more than 1.3 million units in 2021. There is a positive trend in the electrification ambitions among African countries. A high share of mini-grids and stand-alone systems (SHS) combined with national grid extensions accelerates the electrification rate. Most households that initially gain access through decentralised systems will eventually be connected to the grid system, with mini-grids becoming integrated into the national grids to improve the overall reliability of the electricity transmission and distribution network. Africa has the opportunity, unlike never before, to prosper into a new age of economic development and growth for its people despite financial hardship caused by the covid-19 pandemic and the current Russia-Ukraine conflict.
African Fintech Funding Forecast to Double in Just 3 Years
A recent survey conducted by PureProfile, indicated that African business leaders are forecasting a surge in tech start-up spending as foreign direct investment and improved internet connectivity help establish the continent as a tech superpower. The survey included 100 senior executives from Angola, Botswana, Cameroon, Ethiopia, Ghana, Nigeria, South Africa, and Tanzania. 54% of these executives expect spending on tech start-ups to more than double to USD 10 billion or more, by 2025 as the West and China continue to be major sources of investment in the continent. Nearly half of these executives believe that Africa will become a tech superpower in the next ten years as development in the African tech ecosystem is forecasted to double in size. This will further expand the continent’s role in supplying technology to the rest of the world.
The potential for investment growth is large as Africa only accounts for 0.2% of global money invested in technology start-ups. As interest from the West and China increases, so will the capacity for growth.
Internet Development in Namibia
While Namibia currently has 11.5% higher internet connection levels than other sub-Saharan countries, it has previously relied on the West African Cable system for internet stability. However, the infrastructure for a cable landing station (CLS), required for the Equiano Subsea Internet Cable, has successfully been developed by Paratus Group and Telecom Namibia. Equiano is expected to be fully operational in Q4 of 2022 and will deliver 20 times more capacity than currently experienced in Namibia and will adjust the internet penetration rates by 7.5%. This will serve as a major catalyst for growth in the IoT and SaaS markets and is fundamental to the digital transformation of the country and the innovation economy of the continent. The importance of this project has been recognised by Nitin Gajria, MD of Google (Sub-Saharan Africa), who worked to ensure that the Equiano has the most beneficial effect in Namibia where, as of 2020, the country is ranked 104 in the Global Innovation Index. The potency of the impact of Equiano and the effect it will have on the country and how it will assist in the country’s commitment to Vision 2030, which places ICT at the forefront of Namibia’s economy, is of vital importance. The Namibia Vision 2030 Project, launched in 2004, is mandated to address the unemployment rate, decrease the Gini – coefficient, increase the per capita income - and integrate the rural economy into the modern economy. As such, the CLS will serve to meet these goals and allow for the inspiration of innovation. The improved internet is a major space for growth and development in Namibia in edtech and e-commerce start-ups, but will also allow for growth opportunities in AI innovation due to communication diversity, flexibility, and increased connectivity speeds throughout the country.
Boosting Kenya's Automotive Industry
The Kenyan government is set on regaining its position as a regional automotive manufacturing hub. Having already attracted leading manufacturers Mitsubishi Corporation, Simba Corporation Limited, and the Associated Vehicle Assemblers, the national government aims to encourage even more companies by ensuring an enabling environment. In this regard, progress has been made through the launch of the National Automotive Policy in 2020. The policy is geared towards boosting the local assembling of motor vehicles and job creation linked to that. Speaking at the recent launch of the Euro 4 Mitsubishi L200 pickup, the local government has further iterated this commitment. Plans to fast-track the policy implementation include establishing the National Automotive Council in the foreseeable future. As it stands, Kenya's automotive industry is performing at only 25% of its production capacity (30,000 vehicle units a year). However, the mobility industry's potential remains strong, even as the country's economy continues to improve. Furthermore, Kenya is also taking up space in the growing electric vehicle space in Sub-Saharan Africa, after South Africa, proving its determination to achieve the Kenya Vision 2030.
To find out more about opportunities in Africa, please contact Lynne Martin.
