Tech, Africa's New Oil

The shift from black gold to bits and bytes

African tech ecosystems have exponentially grown over the past 5 years and it’s now clear that Africa's most valuable resource is no longer its oil, gold or diamonds. It’s now the genius, ambition and talent of its founders and investors.

It’s harder to appropriate these resources for the benefit of a few, hence I’m much more optimistic about the prospect of African economic prosperity and to see more businesses that are profitable while also doing good and being forces for good across the continent.

Let’s delve deeper and understand what’s causing this shift from black gold to bits and bytes.

1- Human capital

Recently at a talk with four prominent investors in Africa, one of them was asked what was the biggest challenge that she faced as an investor in African tech startups, she said:

"For a startup to grow it needs human and financial capital and this is one of the biggest challenges that African startups face."

She added:

“How do you find local talent to help you grow your business?

At the moment the marketplace is messy and opaque.”

As someone with hiring experience in the UK and Senegal, I can testify that it’s challenging. This challenge is clearly even more accentuated in Africa where universities produce fewer engineers, computer scientists and software developers than in other regions.

However when it comes to talent, quality over quantity is definitely better and African talent is living proof of this. For instance African founders are the main innovators on mobile money with Kenya’s M-Pesa being the standard bearer.

Founders and investors are proactively working to train and upskill more people with initiatives such as Nigeria based Ingressive for Good and DevCareer, and Senegal based Alida School.

Now for the first time ever, there’s also a significant number of second and third time African founders building new startups.

2 - Financial capital

There’s a massive amount of capital flowing into African tech startups - billions of dollars are pouring hard and fast with an almost 2x yearly growth rate - Africa Growing Venture Capital Sector - and African startups are for the first time raising six figures pre-seed and seed rounds.

In March of 2021, we achieved a historic milestone: Flutterwave became the first African unicorn when it closed a funding round of $170M and it was valued at more than $1B.

Until then investors used to wonder if Africa could create $1B startups, now the question is what will be the first $10B African startup?

3 - Knowledge transfer

There’s a significant number of Africans born, raised, educated or with work experience in Western countries repatriating back home.

These returnees bring with them not just their talents, ambitions and geniuses but also their work experience and know-how from more mature startup ecosystems.

They are building new startups, angel investing and mentoring the new generation of African founders.

4 - The Internet

The Internet really made this blue planet of ours a global village and its access is far more reaching. Recently I travelled to Senegal and even in the more remote villages of Casamance or in the outskirts of Dakar, I still had Internet access on my laptop and phone. One of my cousins a student at a university located in Southern Senegal spent a big portion of his time streaming his computer science classes on his laptop or on his tablet.

We can say with certainty, the Internet now is global, more people are online, and even with a cheap laptop and slow Internet, any entrepreneurial mind can make an honest living from it.

5 - Easy, Cheap and Quick Dev Tools

Over the past 20 years developer tool companies such as Microsoft, Red Hat and Atlassian, have built and developed tools that allow developers to build products easily, cheaply and quickly.

While advances in cloud computing decreased significantly the costs associated with storing or managing big amounts of data.

6 - Merger and Acquisitions

As more investors began investing in African startups, the conversation shifted from:

“Is it safe or viable to invest in African tech startups?“

to

“How quickly could investors get profitable returns on their investments?“

Despite a global health pandemic and the subsequent economic downturn, 2020 saw significant M&A deals for African tech startups being one of the most talked about Stripe’s acquisition of Paystack for $200M in October of 2020.

The table below lists other important M&A deals:

With a population projected to reach 2.4 billion by 2050, and with more investments in education and training with initiatives such as Alida School, DevCareer, Ingressive for Good and Ashesi University, and edtech startups such as uLesson and Kidato gaining global prominence we can confidently say that Africa has turned a new page when it comes to its most valuable resources.

May you achieve what you’re striving for.

Dauda Barry