The Next Frontier
Hey <<First Name>>,
For the last fifteen years, when it came to emerging economies, first China and most recently India, have received much of the spotlight. But last week, two important movements occurred that increase the possibility that the modernization of Africa’s infrastructure will result in the world’s fastest-growing consumer market expected to spend $2 trillion annually by 2020.
It’s been well documented that over the years Africa, as a continent, has been ravaged by civil and border wars. Such conflicts have resulted in governments that have used scarce resources to build armies, not healthy societies, and resulted in some leaders growing wealthy at the expense of economic development. Political strife, low literacy rates, and corruption have scared off most foreign investors.
All of this is changing quickly...
First, Facebook recently announced, along with Indian telecom giant Bharti Airtel, that they have laid nearly 500 miles of fiber-optic cable across isolated northwest East Africa, with plans to expand throughout the continent, providing faster internet access to an area with 1.29B people. The move comes as Facebook’s user growth slows in developed markets like the U.S. and Europe.
The fact that Facebook has taken on the initiative of enhancing the networks in Africa has massive repercussions as a lack of connectivity on the continent is the central impediment to increasing economic growth. Removing barriers to connect will accelerate education, communication, and foreign investment. This initiative will also stimulate the proliferation of mobile phone networks which have allowed Africans to skip the landline stage of development and jump right into the digital age.
In what has otherwise been a bleak economic time globally, Africa has experienced near 6% economic expansion. And that growth has come even though 600M people on the continent lack access to electricity, which fuels any commercial development.
And last week, Africa’s first “unicorn,” the continents largest e-commerce company, Jumia listed on the New York Stock Exchange. The listing was a watershed moment for Africa’s tech ecosystems as Jumia, became the first Africa-focused tech company to launch on the NYSE or any major global exchange. Shares of the Company soared by 75% on their first day of trading, leading many to speculate that this could be the beginning of the floodgates opening up for Africa’s tech startups.
Funding for African startups hit record levels last year, reaching $725.6M, led by legendary investor Jim Breyer. Increasingly, startups are being viewed as an integral part of Africa’s future and economic development.
Competition to capture Africa’s digitizing consumer markets — expected to spend $2B online by 2025, according to McKinsey — could get fierce, with more global entries, acquisitions, and competition on fulfillment services all part of the mix. Amazon had offered limited e-commerce sales on the continent but recently started offering AWS services in Africa.
As smartphone and internet penetration across the continent expand, global streaming companies will continue to make a deeper play for audiences. Netflix has its eyes set on Nigeria’s film industry, popularly known as Nollywood, which is arguably the second largest movie industry in the world in terms of film output.
Culturally, the explosion and influence of African music called “Afrobeats” on American pop, has woken up the music industry to recognize Africa's potential as a music mecca and profit center. In January, global investment firm TPG Growth acquired a majority stake in TRACE, a leading Afro-urban music and entertainment brand in sub-Saharan Africa that owns and operates 30 digital and mobile services and seven FM radio stations.
And not to be outdone, The NBA and FIBA with the help of Former US President Barack Obama, plan to launch a professional basketball league in Africa called the Basketball Africa League featuring 12 teams from the continent, set to tip off in January 2020.
All that being said, obstacles still remain as political strife is ongoing in certain countries. Internet costs are higher than anywhere else, and speeds remain below global standards. But, it wasn’t cool being African when I was growing up, thankfully it sure as hell is now!