Investors in Africa’s tech sector will win by solving real world problems, not just the digital ones


Technology investments are usually viewed through the lens of disruption where new ways of using data or delivering services are introduced and create new markets and/or displace existing businesses.
But what if there was no real existing service and that which existed was both inefficient and poorly deployed? In this regard technology can also act as a catalyst or enabler to improve asset utilization, getting the most out of existing infrastructure and catalyzing investment to grow capacity and address market gaps. This is particularly the case across Africa.

Why is this important? ‘Technology-only’/pure-play digital businesses in Africa, for example, local social networks, have had limited success. This is because the poor enabling environment (low penetration of smartphones and broadband, unreliable electricity, and poor levels of education) hindered scalability and rapid distribution—though this is slowly changing. The level of disposable income and market dynamics in Africa can also produce an equilibrium price that is lower than expected.

In contrast, businesses that put a digital overlay on traditional brick and mortar businesses that exhibit the characteristics of being under-capacity and poorly deployed today, appear to have much more traction. An example of this is Uber in Lagos. Uber has recently delivered a million rides and its growth on the continent is further fueled by the lack of public transportation options and unavailability of vehicle financing. This ‘asset optimization/ monetization’ play is arguably of more value in African cities with limited public transportation infrastructure and historically low private investment to expand capacity. Read More

Posted in