Growth in Africa; Reimagining the Future

By Charmaine Niewerth // 9 July 2020

In a recent #FFLive session, co-hosted with 2020 Knowledge Partner McKinsey & Company, panellists discussed  “Growth in Africa and Reimagining the Future on the Continent”, including the impact of COVID-19 on African tech, the future of education on the continent and potential growth areas for various African startup hubs.

Moderated by Acha Leke, Chairman, McKinsey & Co, Africa, the panel included Runa Alam, CEO, Development Partners International, Fred Swaniker, Co-founder & CEO, African Leadership Group, and Mitchell Elegbe, CEO, Interswitch Group.

A brief summary of some takeaways from the session as follows:

1. Diversification is key for resilience in African business

  • The Covid-19 crisis has highlighted how those businesses that have diversified across the value chain have been the most resistant to shocks
  • African businesses that utilised local manufacturing, owned supply chains, and served customers across numerous touchpoints saw reduced negative impact from global shutdown, compared with those reliant on lengthy international contracts or those stuck in one mode of production

2. Africa needs camels, not unicorns

  • Africa doesn’t need the Silicon Valley “unicorn” model, where small teams generate outsized returns for restricted investor pools, and instead needs a large pool of minor successes to drive employment and stable growth
  • The average age across the African continent is ~19.5, and currently there are not enough jobs to support this rapidly growing workforce
  • Therefore, there is considerably more value in building a massive pool of “camel” SMEs to drive job creation as opposed to looking for massive exits from companies with 8 employees

3. African business needs a tech-injection to grow

  • Two major opportunity areas for investors across Africa are improving the levels of technology in existing businesses and investing in tech focused businesses themselves
  • However, fundraising itself also needs innovation – Africa needs more types of funds: debt, equity mezzanines, venture capital, infrastructure funds, etc. 
  • There is incredible opportunity across the continent but still limited variety in asset classes and fund sizes

4. There is still a need for external investment to create success stories

  • Despite rapid increases in locally available capital, many African investors are still reluctant to take risky bets
  • Much of this is down to insecurity over wealth; the rich, in many cases, are first generation and fear riskier bets due to recent memory of the realities of poverty
  • To get more Africans investing, there needs to be more success stories and more time for people to realise the opportunities out there. External, less risk averse capital is a key route to creating these success stories

5. Africa needs large-scale, targeted education to capitalise on potential talent

  • In the West, there is plenty of capital but a scarcity of new ideas, as many of the game-changing tech-driven ideas have already been developed
  • In Africa, the mix is different: there are plenty of available ideas, many of which are simple, and there is capital available, but the real issue is finding teams to execute
  • There is no shortage of talent across Africa, or indeed entrepreneurs, but the structures and organisations required to support them are lacking – this is a huge opportunity for growth

Thank you to our guest speakers and all attendees for engaging in this discussion.

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