Seeds of Opportunity: The African Growth Series
September 2022 | Issue 2
In this week's issue, you will learn more about:
- Africa’s Emerging Start-Up Economy
- Fintech Market Reaching new heights in sub-Saharan Africa
- Africa's Twin Cities
Africa’s Emerging Start-Up Economy
Africa has established itself as a recognisable and definable start-up investment landscape. The continent has displayed continuous growth since 2017 (CAGR of 45%), reaching new heights during the 2020 COVID-19 pandemic. This growth was further exceeded in the following year. The continent saw a 128% YoY increase in the number of deals from 2019 to 2020 and 104% YoY growth from 2020 to 2021, reflecting a maturing of Africa’s start-up ecosystem. The number of start-up deals recorded in 2021 alone corresponds to 70% of the total volume of deals recorded on the continent between 2014 and 2020. The cumulative value of start-up deals in Africa reached US$5.2 billion in 2021, reflecting a 373% YoY growth. African start-ups raised more in 2021 alone than combined in the preceding seven years. The increase in volume and value of deals in Africa paints an optimistic picture for the start-up ecosystem's future and growth opportunities in the entrepreneurial space. Africa remains one of the fastest-growing start-up ecosystems globally, a trend that shows no sign of future abatement. The sector has successfully transitioned from recovery to results. FinTech is the leading start-up sector across Africa by value and volume. The industry received a total of US$3.25billion, driven by its attractiveness and maturity. Its 219 deals (32% of all deals) made up not only the vast majority of late-stage deals but also of Seed+ and Series A deals. The remaining verticals are closer to start-up funding deals and value received. LogisticTech received nearly US$400million, while EdTech came in just below US$300million. Following the same trend as FinTech, leading companies in these two sectors focus on building underlying infrastructure and enabling access or distribution. And there appears to be no slowing down, as the continent is currently on track to outperform the previous records in 2022. Undoubtedly, the start-up ecosystem will form a significant source of income for the African continent and create new employment opportunities for Africa’s tech-savvy youth. African governments need to understand the critical role start-ups will play in the economy in the coming decades and ensure incentivised policies and regulations are in place to support the ecosystem's growth further.
Fintech Market Reaching new heights in sub-Saharan Africa
The African fintech market has remained resilient compared to other markets and industries worldwide. Increased access to mobile devices, Internet connectivity, and backbone network infrastructure has accelerated Africa into the second fastest market for global banking and payments businesses. Companies such as PalmPay, a Lagos – based fintech, have continued to grow, increasing financial inclusivity in one of Africa’s most populous countries, Nigeria. Palmpay operates under a Mobile Money Operator license from the Central Bank of Nigeria and has gained significant traction with its payment app and nationwide agency banking network. PalmPay recently announced that it had reached 10 million users in Nigeria, representing a doubling in its user base in just six months and only three years after its launch in the market. PalmPay is said to process millions of transactions daily, with 20% of its customer base reporting that the PalmPay app was their first financial account. This remains a benefit for financial inclusivity in Nigeria, as 36% of the population remains unbanked.
The pandemic accelerated the shift from cash to digital payments, enabling fintech companies like PalmPay to innovate to meet the financial needs of its consumers. As PalmPay continues to grow in Nigeria, the fintech has looked to replicate its success in various African markets.
Africa's Twin Cities
Climate change will have a devastating impact on African cities. However, technology can help weather the storm. The continent only contributes 3% to global CO2 emissions, but it is home to 79 of the world’s 100 rapidly growing cities at 'extreme risk' from the negative impacts of global warming. This list holds 15 capital cities and a variety of commercial hubs, with Lagos Nigeria’s economic risk valued at US$ 128.5 billion and Ethiopia's Addis Ababa valued at US$ 69 billion. The total amount of GDP exposed to ‘extreme risk’ is predicted to be worth US$ 1.4 trillion by 2023, which is nearly half of Africa’s GDP. Digital twin models can help these cities mitigate against the negative impacts of climate change as the technology can simulate scenarios and generate insights to help officials make data-driven decisions. Digital twins replicate everything within a city, from transport networks, buildings, energy, water, and telecommunications infrastructure. The University of Pretoria/Universiteit van Pretoria (UP) began its Hatfield Digital Twin City initiative by modelling a 10-square-kilometre model of the university’s main campus to develop a smart grid and optimise managing energy consumption in the area. Second, the City of Johannesburg announced plans to build a digital twin model of its inner-city late last year. This model could help government officials, city planners, construction stakeholders and other users improve public safety, disaster risk management, waste management, and infrastructure management for the inner city.
To find out more about opportunities in Africa, please contact Lynne Martin.
