A new report from Endeavor Nigeria, a community of high-impact entrepreneurs in Nigeria, has stated that Africa’s technology ecosystem is set for a period of exponential growth, accelerated by strong market fundamentals and the impact of the COVID-19 pandemic.
The report, titled “The Inflection Point: Africa’s Digital Economy Is Poised To Take Off”, reviewed key events in Africa’s technology ecosystem from the last few years, identified patterns (especially in the context of other technology ecosystems across the world), and offers a roadmap to successfully navigate the opportunities that are emerging.
According to the report, which drew on multiple sources, including analysis from McKinsey & Company, Africa’s digital economy is approaching its S-curve, a period of rapid, significant growth that will positively impact the continent’s GDP, and job creation, and overall economic outlook.
Africa’s digital economy is large and growing, with an estimated market size of $115 billion – expected to reach $712 billion by 2050. By 2050, Africa will be home to a third of the world’s young people and the continent is urbanizing faster than other regions. Additionally, 1 in 6 of the world’s internet users will be in Africa in 2025.
The COVID-19 pandemic has also accelerated digitization across Africa, encouraging more Africans into digital activity. This is why more investors are starting to pay attention to African technology’s potential. Between January 2020 and 2021, African digital startups saw funding grow 2x faster than global rates. Early investors can also expect to find exit routes with the growth in mega-rounds as well as liquidity events and unicorns.
The combination of these events has primed Africa’s technology landscape for success. However, there remains a ‘white space’ for investors to consider. The market is likely to be flooded with deals in the 1-5mn dollar range over the past year (600), compared to the 5-50mn range (150). As more companies move to higher ticket sizes, companies in the 1-5mn range will have less supply. If the financial support is available, this excess innovation can be used to further develop the continent and drive more prosperity.
Commenting on the report, Tosin Faniro-Dada, CEO and Managing Director of Endeavor Nigeria, said, “The data gathered in this report is clear – Africa is the next digital growth frontier. Our young and tech-savvy population combined with an emerging ecosystem of technology and the effects of the COVID-19 epidemic on human behaviours are set to create a turning point in our digitization process. We have been excited by the increased levels of funding that our entrepreneurs are attracting but we want to make it even easier for more investors to bring out their checkbooks to catalyse the growth that we believe is pending”.
Topsy Kola-Oyeneyin, Partner at McKinsey and Company, said, “We’ve seen a few eye-catching funding rounds and acquisitions in Africa’s technology ecosystem in recent years but the findings of this report suggest that we barely scratched the surface. Many sectors on the continent are still influenced by informality and fragmentation which limits the availability and affordability for products and services. These opportunities for disruption abound across the continent and this report will make it easier for interested investors to adjust their business models effectively to capitalize on these opportunities”.