Business Opportunities in Africa That Will Make More Millionaires
After nearly a decade of galloping economic growth, the continent experienced a very sharp decline last year.
The hardest hit were the major commodity exporters, especially
Nigeria, Angola and South Africa. Nigeria, Africa’s largest economy,
went through a recession and its currency took a severe beating, losing
more than 60 percent of its value in less than 12 months.
In South Africa, pull-backs in mining operations and volatile
commodity prices (especially for gold, platinum, and coal) led to
increased unemployment and slow economic growth.
Given the continent’s enormous economic challenges, it’s tempting to think:
“Are there still any viable business opportunities in Africa?”
“Is Africa still rising?”
You see, for decades, the biggest business opportunities in Africa
were created through “traditional” sources, especially from the trade
and export of raw and non-value-added commodities such as crude oil,
timber, gold, coal, cocoa, tea, coffee, leather and several others.
Today, the wealth that is breeding a new generation of millionaires
in Africa is being created through new and unconventional business
opportunities.
These business opportunities are simmering beneath Africa’s endless
stream of unsolved problems, underserved needs and everyday
frustrations. New wealth on the continent is emerging from solving
problems and creating value, and not from “old school” resource
extraction.
Below are the 11 giant business opportunities that will make influx pocket millionaires in Africa.
FinTech:
As the name implies, FinTech involves the use of technology
to support and enable banking and financial services, making it easier,
faster and cheaper to meet Africa’s underserved demand for financial
services.
In many countries on the continent, access to financial services is
very poor. In most cases, just about one in five adults has a bank
account, and most transactions are still done in cash.
But since the wild success of M-Pesa, the revolutionary mobile money
solution that has transformed financial services in East Africa, several
innovative fintech products and services have erupted across the
continent.
Just a few months ago, Paystack, a Nigeria-based fintech business raised $1.3 million
from local and international investors. Paystack provides an online
payments platform that allows local merchants to accept payments from
around the world, via credit card, debit card, and direct bank transfer
on web and mobile.
Another fintech solution, TopCheck, helps users to compare prices of
financial products such as various types of insurance and bank loans. It
has attracted over €1 million in investments and was recently acquired by South Africa’s Silvertree Internet Holdings.
SnapScan,
the South Africa-based fintech service, allows consumers to make
payments with their mobile phones by simply taking a photo of a QR code
and punching in the amount they want to pay.
These are only but a few examples. There are hundreds of
entrepreneurs on the continent behind fast-growing fintech companies
such as Paga, Zoona, Interswitch, Wealth Migrate, Riovic, BitPesa and
several others.
Fintech is hot in Africa right now because financial services is a
severely underserved market, and a multi-billion dollar opportunity for
the continent.
In 2017, the business opportunities in Africa’s fast emerging fintech
scene will be interesting to watch as more investors and entrepreneurs
take their positions.
Film & Movies
Over the last three years, three different blockbuster movies from Nollywood, Africa’s leading film industry, have broken local box office records back to back.
Despite major economic difficulties and a tough recession, “The Wedding Party”,
a romantic comedy drama, has become one of the highest grossing African
movies of all time, raking in over 400 million Nigerian Naira (just
over $1 million) in less than 60 days after release.
One million dollars in box office pickings may be pocket change by
Hollywood standards, but it’s the scale and growth of business
opportunities in Africa’s film industry that’s truly breathtaking.
With a population of over 1 billion people, of which about 60 percent
are young people below the age of 25, Africa presents a very fertile
ground for its local film industry.
The four biggest business opportunities in this industry are in film financing, production, distribution and exhibition.
With less than one cinema per million people, Africa is the most
underserved cinema market in the world. That’s why entrepreneurs like Kene Mkparu,
who worked for many years with Odeon cinemas in the UK, have returned
to the continent to explore lucrative opportunities in the African
cinema market.
Since launching his business, Filmhouse has opened Nigeria’s first IMAX movie theater and about10 cinemas across the country in just a few years.
In the film distribution space, homegrown companies such as Iroko
are consolidating their positions on the African market. With nearly
$40 million in funding, and a strategic partnership with Canal +, Iroko
is widely regarded as “The Netflix of Africa”, serving films in over 35 countries on the continent.
I’m really excited by the prospects of Africa’s film and movie
market, and there’s no doubt in my mind that 2017 will be another year
of blockbusters from the continent’s creative and entrepreneurial minds.
Sports Betting
Often regarded as a complicated and controversial industry, sports betting is making a windfall in Africa.
Africa’s young and fanatical sports fan base makes it a very promising market for the global sports betting industry.
Lax laws on betting, a widespread use of mobile phones and increasing
access to the internet have reduced the barriers to enter a 350-million
strong African market, where nearly 50 percent of male adults in Nigeria, South Africa and several other countries are involved in active sports betting.
In July 2016, SportPesa, the biggest sports betting business in East
Africa, became the first organisation in Kenya to sponsor an English
Premier League football club after it signed a three-year deal with Hull City FC.
Why would a sports betting company in Kenya spend over a million
British Pounds on a sponsorship deal in the most-watched football league
in Africa? Your guess is as good as mine: “expected high returns on
investment.”
Across the continent, in Ghana, Nigeria, South Africa and several
other countries, hundreds of sports betting businesses are jostling for a
greater share of this lucrative market as they spend handsomely on
marketing, promotion and customer acquisition.
It would be interesting to watch how this fast emerging industry evolves in 2017.
Digital healthcare:
With less than one doctor per 20,000 persons in countries like
Ethiopia and Tanzania, the healthcare industry in Africa is in a
perilous state.
But entrepreneurs across Africa are taking on these challenges by creating innovative digital healthcare solutions.
These innovations, which include telemedicine, e-prescriptions and m-Health
applications, are helping to free up congested health facilities from
dealing with non-life-threatening conditions so they can provide better
care to patients who require more critical care.
In Uganda, Brian Turyabagye – a young entrepreneur – and his team have developed a biomedical kit
for early diagnosis and continuous monitoring of pneumonia, a disease
that kills half a million children in Sub-Saharan Africa every year,
according to UNICEF.
This kit, named “Mamaope” eliminates most human error, and diagnoses pneumonia at a rate three to four times faster than a doctor.
In Nigeria, Redbank
is a new service that helps hospitals and patients quickly and easily
search and find safe blood supplies in real time via SMS. This could
potentially save thousands of lives especially in emergency situations
and for patients in need of critical blood transfusions.
Across Africa, there is a growing trend of pharma firms looking to
discover, support and partner with digital health startups. Last year,
Merck – the global pharma giant – expanded its digital health accelerator program for the first time outside Germany to Nairobi, in East Africa.
5)Renewable Energy:
With a growing global bias for climate-friendly energy solutions,
Africa has become an international test bed for innovative renewable
energy solutions.
According to a recent World Bank,
only one in three people in Sub-Saharan Africa has access to
electricity. And up to 80 percent of households on the continent use
firewood and charcoal as a primary energy source for cooking,
endangering the continent’s fast-depleting forest resources.
In Ghana, one company is harnessing the force of crashing ocean waves from the Accra coastline to generate electricity. Yam Pro Energy
has secured a power purchase agreement (PPA) that allows it to sell the
electricity it generates, and the project could provide up to 10,000
households with electricity.
Across the continent, the solar energy revolution is in full swing. In East Africa, businesses such as M-Kopa Solar, Off Grid Electric, StemiCo and several others are lighting up Africa by using the power of the sun to provide low-cost electricity to unconnected households.
6) Urban Transportation
The effects of rural-urban migration and natural population growth
have overwhelmed transport systems and infrastructure in major cities
and towns across Africa.
According to the AfDB, Africa has experienced the highest urban
growth in the developing world. During the last two decades, Africa’s
urban population grew by 3.5 percent per year and this rate of growth is
expected to hold into 2050, with some African cities accounting for up
to 85 percent of the national population.
While government authorities and urban dwellers are frustrated by the
congestion, inefficiency and disorganized nature of urban transport
systems on the continent, a growing number of businesses are exploring
the business opportunities behind this underserved market.
Uber,
a highly successful multinational ride hailing business, is one of the
big players harvesting the opportunities in Africa’s urban transport
market.
Now present in 12 cities across the continent, including
Johannesburg, Lagos, Kampala, Nairobi, Rabat and Cairo, Uber has created
a powerful platform for entrepreneurs and investors to reap the
lucrative rewards of serving urban transport needs in Africa.
Hundreds of entrepreneurs now earn recurring monthly revenues by
putting cars on the Uber network, whose value proposition of
convenience, affordability and comfort has created a loyal and
fast-growing customer base of urban commuters.
7) Pay TV
There are over 100 million TV households in Sub-Saharan Africa.
However, at the moment, just about 15 million of these households are
pay-TV subscribers, and this number is expected to reach 30 million by
2021.
According to a study by Dataxis,
the five biggest pay-TV markets account for 65.4 percent of total
African pay-TV subscriptions. These are: South Africa (35.8%), Nigeria
(14.5%), Angola (6.5%), Tanzania (4.4%), and Kenya (4.2%).
Currently, the biggest players in these markets are South Africa’s MultiChoice, China’s StarTimes, East Africa’s AzamTV, Safaricom and Zuku TV. In Francophone Africa, Canal Plus Overseas remains the dominant operator.
Africa’s large population and its youthful demographic makes the
continent a very attractive market for the pay-TV industry. With annual
revenues estimated at over $4 billion, there is still a lot of room for
new players in this market.
Just a few weeks ago, Econet Media, owned by Strive Masiyiwa – one of Africa’s most successful entrepreneurs – entered the pay-TV market with the launch of Kwesé TV. The service has gone live in Ghana, Rwanda and Zambia, and plans to roll out to more countries by April 2017.
Africa’s growing internet penetration, rising smartphone adoption,
and digital migration will be the key growth drivers of the pay-TV
market in Africa as niche offerings such as video-on-demand (VOD) and
Internet Protocol TV (IPTV) evolve.
8) Food Processing
It’s widely believed that Africa does not produce enough food to meet its own needs. The continent actually produces far less food per hectare than the world average.
Due to inadequate processing options, a significant proportion of
harvests from farms in Africa never make it to the final consumer.
Right now, Africa’s biggest food problem isn’t production; it’s processing, and then, marketing.
If Africa could process more of the food it produces, food waste will
reduce, food supplies would be more stable and less seasonal, and food
prices would be less prone to wild swings.
Take the case of tomato in Nigeria. Despite being a leading producer
of tomato in Africa, Nigeria has spent millions of dollars on processed
tomato paste imports from China.
The same situation applies to several other imported processed food
products whose raw materials are abundantly produced in Africa: fruit
juice concentrates (processed from raw fruits), industrial-grade starch
(from cassava), edible oils (from soybean and cotton seed) and several
others.
Young African entrepreneurs like Affiong Williams, founder of Reelfruit,
are taking on the food processing challenge in Africa. Reelfruit
processes a range of seasonal fruits including mango, pineapple and
coconut into dry fruit snacks that can be consumed throughout the year.
As more entrepreneurs and investors pursue agribusiness opportunities
in 2017.
9) Real Estate
According to the United Nations,
more than half of global population growth between now and 2050 is
expected to occur in Africa. Of the 2.4 billion people who are expected
to join the world over the next 30 years, 1.3 billion of them will be
Africans.
Where will all these people live, work, shop and play?
Currently, countries across the continent suffer a significant real
estate deficit. In Nigeria, for example, the World Bank estimates the
affordable housing deficit at over 17 million homes. In Lagos, one of
Africa’s largest cities with a population of over 15 million people,
there are less than 7 major shopping centres.
It’s the severity of the real estate deficit across Africa that makes
it such an amazing multi-billion dollar business opportunity.
Across the major segments of the market – residential, office spaces,
retail, industrial and hospitality – investors and developers are
positioning themselves to benefit from underserved needs.
The Landmark Group
is one example among several others that have been pursuing real estate
opportunities in Africa, and maintains a multi-million dollar portfolio
of properties on the continent.
The Group has developed and managed over 130,000 square meters of
prime real estate across the continent, and is building a Landmark
Village, which will be an iconic “Live, Work, Play” mixed-use
development with breathtaking sea views in the exclusive area of
Victoria Island in Lagos.
10)African Fashion
Africa is in the heat of a fashion revolution.
The explosive combination of creative genius and entrepreneurial
talent is increasing the visibility of African fashion on the world
stage, as a new breed of designers are leveraging the continent’s rich
cultures, history, and fabrics to make bold fashion statements.
Young African designers such as Maki Oh and Aisha Obuobi have
featured fashion pieces worn by international celebrities, including
Beyoncé and Michelle Obama.
The African Development Bank estimates Africa’s fashion industry could be worth $15.5billion over the next five years. While this is huge, it’s only a small share of the global fashion industry’s value of $1.3 trillion.
Despite its current challenges, Africa’s fashion industry has the
potential to create millions of jobs and significantly boost economic
growth on the continent. This is already happening in countries like
Mauritius, Ethiopia and Lesotho where apparel exports are a major
foreign exchange earner.
African entrepreneurs like 26-year old Kelechi Anyadiegwu are already reaping benefits from the fashion value chain.
She started her online African clothing store, Zuvaa,
with just $500 two years ago. Her idea was to share African-inspired
fashion designs with consumers around the world. Zuvaa is estimated to
make nearly $2 million in sales in 2016.
11) Startup Funding
Mark Zukerberg’s surprise first visit to Sub-Saharan Africa last year
was a strong external validation of Africa’s fast emerging startup
landscape. During the trip, the Facebook CEO who is one of the world’s
richest men, visited startup innovation hubs in Lagos and Nairobi.
In June 2016, Zuckerberg invested $24 million in Andela, a startup that trains African engineers and programmers, and outsources them to top tech companies in the USA and Europe.
According to the latest Disrupt Africa Funding Report
on African tech startups, the continent attracted $129 million in 2016,
with a 16.8 percent increase in the number of successfully funded
startups. South Africa and Nigeria raised the highest amount of funding,
followed by Kenya, Egypt, Ghana and Morocco.
Africa’s fast-emerging startup scene is a hotbed of innovation and disruptive possibilities. It’s no surprise there’s been a galloping growth in the number of innovation hubs, incubation and accelerator programs on the continent.
Africa is one of very few places in the world today that can deliver
the massive growth and scale necessary to yield very high returns on
investment capital.
As venture capitalists and angel funds continue their search for
promising investment opportunities, the exciting potential of Africa’s
burgeoning startup ecosystem will be hard to ignore in 2017.
11 business opportunities continue the reign of new wealth in Africa
Given the scale of business opportunities on the continent, there’s
no doubt that 2017 will create its fair share of winners and
millionaires in Africa.
These winners will include individual entrepreneurs, private and
institutional investors and the ecosystem of specialists and advisors
who support them.
These visionaries and believers deserve the rewards. Afterall, while
the rest of the world perceives Africa as a cesspool of intractable
problems, these winners are discovering new and uncontested wealth
opportunities by solving serious problems and creating value on the
continent.
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