In various African nations, a number of demographic and economic shifts have occurred in recent years, resulting in a burgeoning business landscape. Startups have and will continue to play a prominent role in this process, according to market analysts.
VC4Africa published a report showing that the majority of startups have had success in generating revenue, and another large percentage have secured external investments in their products and services. More specifically, those businesses that have gained the most ground are in the technology field.
The young population in Africa—almost three-quarters of which are younger than 30—has influenced this trend, at least in part. Entrepreneurs have demonstrated an increasing ability to identify and fill gaps in the market based on consumer demand. Business owners in South Africa, Nigeria, and Kenya raised a combined $150 million in investment funding in 2015 alone.
Entrepreneurs in South Africa led the way in securing $54 million in investments by building investor confidence. Nigeria and Kenya, which raised $49 million and $47 million, respectively, stand out for their advancements as leading nations for technology. In fact, South Africa, Nigeria, and Kenya have been compared to some of the most thriving markets in the world. Following is an overview of each city.
Cape Town, South Africa – The Silicon Cape
Securing venture capital support and angel funding has proven difficult for many nations on the African continent. Thus, the track record for obtaining funding is one of the greatest strengths of entrepreneurs and startup owners in Cape Town. Local business executives point out that funding numbers could increase even further with the introduction of strategic tax breaks.
Alongside the funding prowess of startups in South Africa, the availability of resources—particularly with regard to IT infrastructure—has greatly contributed to the high standing of Cape Town. In 2011, the city boosted its bandwidth by roughly 1,000 times. Combined with other cost-saving innovations, this move encouraged exponential business growth in the area.
The local university system also attracts its share of investors to the area. For example, Samsung backs a tech laboratory at the University of Cape Town, where staff, students, and researchers develop mobile applications. Another example is Naspers funding a full-scale media service development lab at Stellenbosch University.
Finally, one of the biggest elements in the success of Cape Town, and the push for referring to it as the “Silicon Cape,” stems from community support. Local nonprofits, such as the Silicon Cape Initiative, have formed to promote the economic growth of the city by developing an international business network and attracting new talent to the region.
Lagos, Nigeria – The Silicon Lagoon
Lagos, which is situated right on the coast of the Gulf of Guinea, is a large urban city that has grown significantly in the last few decades. Estimates place the population at somewhere around 21 million, up from 1.4 million in 1970. Some believe that Lagos is contending with Cairo for the honor of the most populous city in Africa.
The size of Lagos and the opportunity that it represents for scaling a business model is one of the most appealing factors for entrepreneurs in Nigeria and internationally. In addition, the size of Lagos’ GDP—which is larger than the entire economy of Ghana—has attracted some of the best minds in business.
Close proximity to two local universities has also generated interest in launching new business ventures in Lagos. Yaba College of Technology, the University of Lagos, and The Federal Science and Technical College each produce a lot of talent, and the local environment encourages many of these individuals to remain and start their careers.
Within the growing business scene, the Yaba district has evolved into what some have referred to as “Yabacon Valley,” and Lagos has more broadly received the title “Silicon Lagoon.” Such comparisons with Silicon Valley have drawn a lot of attention from venture capitalists to the Nigerian coast.
Nairobi, Kenya – The Silicon Savannah
Much of the tech development that has surfaced in Africa over the course of the last 10 years has come out of Kenya. The introduction of mobile money and a model for tech incubation, coupled with global crowdsourcing and government support, have strengthened the industry in Kenya. A growing population and consistently improving GDP have also been contributing factors.
Information and communication technology (ICT) is projected to constitute as much as 8 percent of Kenya’s GDP by 2017. Within that economy, Nairobi, the nation’s capital, is a leading player, attracting startups and international tech giants (such as Google, Microsoft, and IBM) alike.
Part of what is driving this exploding market is the prospect of improving the nation’s economy. Some entrepreneurs are currently focused on developing technology that is capable of reducing cyber security concerns, while others hope to develop a new mobile voting platform to help with future elections. In addition, the highly anticipated 5G technology is expected to revolutionize communication and business in Kenya and throughout Africa.