Africa is the next frontier for innovations and business opportunities. The continent has a rising population and a growing rate of both mobile and smartphone adoption, which are indicative of opportunities for economic growth driven by innovation, especially comparative to Europe, America, and some parts of Asia where growth has plateaued. This also creates the opportunity to move beyond exploitation and exportation of natural resources, which have driven conflict in various parts of the continent, to innovations to catalyze significant growth across various economic sectors.
Innovation is critical for African nations to keep up with international trade, create jobs for the growing youth population, and expand their GDP. For example, Kenya experienced a decade of steady growth from 2010 to 2019, with GDP expanding year on year by an average of five percent, and a broadly stable macroeconomic environment reflected in low inflation, which is highly connected to the churn of innovative startup ventures catalyzed by increased mobile access (from one percent in 2002 to 39 percent in 2014). The Kenyan economy, according to the World Bank analysis, showed resilience to the COVID-19 shock, with 2021 output rising above the pre-pandemic levels.
The following factors are driving innovation in Africa, and policymakers, entrepreneurs and investors will do well to capitalize on them.
Key Innovation Drivers in Africa
- Green Economy: The extractive industries, which include mining and oil and gas production, are the main sources of investment and revenue in many African countries. There is a global move for a switch to cleaner energy, and demand is growing for cleaner energy technologies. Traditional oil and gas companies are rebranding as energy companies to accommodate. African countries are sources of a critical proportion of critical minerals for renewable energy technologies, for example, the Democratic Republic of the Congo (DRC) produces more than half of the world’s supply of cobalt, which is a component of lithium-ion batteries that power electric vehicles and store energy from renewable sources. Copper, one of the highest thermal and electrical conductors, is used five times more in renewable energy systems than in traditional power generation on the average. Solar photovoltaics (PV) rely on copper for cabling, wiring and heat exchange. The DRC is the top producer of copper in Africa, and the fourth largest copper producer globally; Zambia is Africa’s second biggest copper producer, and the world’s seventh largest. The global concerns about environmental degradation, health and safety hazards, and poverty and inequality caused by mineral extractions, and these make the case for African countries to move beyond extraction to value addition, especially in the renewable energy sector, for example, the manufacture of batteries for local, regional, and global markets. This is a way to embrace sustainable development, while expanding economic growth.
- Urbanization: According to the UN, by 2050, nearly seven of ten people in the world will live in cities, and Africa is projected to have the fastest urbanization rate and be home to additional 950 million people. Urbanization is a catalyst for productivity and innovation because of the demands for housing, transport systems and other infrastructure.
According to the Center for Strategic and International Studies, it is rare to transition from a low-income country to a middle-income country without first having to go through a process of urbanization. Hence, urbanization is critical for economic growth. Yet, urbanization without improved infrastructure and services causes negative repercussions. They overburden existing infrastructure, create more slums, increase poverty rate, and even when the unemployed or underemployed population turn to illicit or informal jobs, countries cannot achieve significant economic growth from them, since they are unable to collect taxes and reinvest them for further development. This is driving countries to make policy decisions supportive of innovation to stimulate job creation and infrastructure development for the expanding urban population.
- Internet Penetration: Over the past decade, internet penetration on the continent has increased to ten times what it was in the early 2000s. Internet penetration solves access-to-information problems, makes transactions faster, cheaper, and more convenient, which increases productivity. Internet penetration has also increased inclusion, with more women and people with disabilities entering the formal workforce because they can now engage in remote work. It has expanded the talent market too, as skilled workers in African countries can trade their services in global markets. Overall, this has increased entrepreneurship in areas like mobile banking, e-commerce, and other technology solutions. The convergence of workforces has also removed limitations of collaboration and allows for experimentation of ideas. One example is in the area of education. Edtech is a rising star in Africa’s tech ecosystem because of the rise of the internet, and the solution to issues of access, quality, and affordability of education on the continent. Some examples of edtech innovations are Tuteria, which receives over 500 tutor applications monthly from students who need help in various subjects; uLesson, which provides online lessons in various subjects and has had over two million downloads of its app; and Edves, a cloud-based school management software platform, among others.
The most promising ideas have come out of markets and businesses, often driven by the necessity to solve a problem. The next decade will likely see a continued wave generated by better education and better access to information as people seek to increase their capabilities, while at the same time realizing the economic opportunities that exist through delivering innovation to others. Universities are beginning to change their curriculum to include entrepreneurship and industries are actively seeking people with knowledge of how business models work to be successful in the highly competitive markets that exist in Africa today.