Mobile phone access, digital innovation, maturing consumer appetites and more reliable infrastructures have converged to encourage record overseas in Africa’s start-ups in 2018. With economic growth forecast to hit 4% at least in the coming years, the potential for more rewards from the growing consumer appetite for services and products, await investors into the region, too.
Figures from the African Development Bank show the African economy grew some 3.6% in 2018 and it anticipated it to expand by closer to 4% in 2019 and 2020. Against that backdrop it’s not too surprising that a trio of reports highlighted a surge in investment in African start-ups last year too.
Reports on start-up investment within in Africa from Disrupt Africa, Weetracker and Digest Africa, puts the level of investment over 2018 into star-up across S-Saharan African countries at between $334.5 million-to-$1.19 billion. The difference lies in the methodology of what business is classed as a start-up and whether only those where disclosure was public, were counted.
However, whichever report you prefer, the end-message is the same: Interest, investment and belief in the region is growing. Not only that, demand for the services and products on offer from those start-ups deemed investment worthy, is also on the up.
Another detail the three reports agreed on, was that latter stage funding rounds were successful among for the many start-ups who gained investment. In addition, while fintech was the main winner, there was investment interest for new businesses across most industries.
Why Africa, why now?
Sub-Saharan Africa has, in the past been a region of mixed fortunes. South Africa, Kenya and Nigeria are broadly recognised as the region’s most developed countries, a detail borne out in the reports, with those three countries taking the lions-share of investment. Indeed, South Africa and Nigeria performed strongly on the start-up investment front, despite less than impressive, individual GDP data performances.
For the past few years, the region as a whole has drawn interest from overseas investment. In 2018 and likely beyond, it appears that interest, combined with a vibrant start-up industry and increased demand for a wider range of products and services, has led to more confident entrepreneurial pitches and more confident investment decisions, too.
In addition to the supply, demand and investment confidence, is a maturity in the supporting infrastructure. The commitment to later stage funding also supports this; even if the start-up idea is flawless, investment wouldn’t be forthcoming if investors were concerned the process, rules and regulations.
With the convergence of start-up maturity, investor confidence, the right infrastructure and good demand levels, investors looking for the next potential above average return on investment couldn’t fail to notice Africa and the opportunities it continues to present.
Fintech set to remain the big winner in Africa
As we said, fintech investments proved the biggest draw in 2018. And, like much of the rest of the world, looks set to remain so for the next few years. The reasons for this are numerous. But for Africa, much is tied to the growth of mobile phone ownership.
Traditional banking models have left the region with poor access to traditional banking services. World Bank data states that, on average, each 100,000 adults have access to just 6 ATMs and only 5 commercial bank branches.
However, the same data shows that 73% of the Sub-Saharan population owns a mobile phone. This means that where financial services are made available via reliable mobile apps and accounts, more of the population has access to their funds in a digital format. That’s a key focus for many fintech start-ups based in the region. Its also good news for all other industries who are working to start or grow their business, including with an online presence.
With so much potential remaining untapped across the region, the SeedsLife Caban Impact Investment Fund, or SLCI Fund is perfectly placed to help its investors benefit from a region that could grow at a faster pace than much of the developed western world, for some years to come.
The SLCI Fund was created with that in mind; tapping the growth potential of Africa through investment in exciting start-ups that have produced innovative solutions to the regions’ requirements. While it’s clear that 2018 was a positive year for African-based start-ups and investors in them, we know the regions’ entrepreneurs have more serious and potentially successful business ideas to share. With the SLCI Fund, you can share in that success too.
CEO Dave Romero said:
Just as having the right idea as a start-up is one of the most important elements of success, timing is also an essential detail. That’s true for both entrepreneurs and investors. The SLCI Fund has been operating for a couple of years now and the activity in start-ups and fintech across Africa in 2018 highlights that our decision to create the fund was the right one, as was the timing.
As the countries that make up the Sub-Sahara African region continue to mature, both as places where consumers have more access to everything they need and want and an area investors are confident doing business, more growth and success is highly likely, today and for years to come.