Innovation in Africa: Challenges and Opportunities

While for centuries, Africa has been seen as the “dark continent,” it is quickly becoming a hotbed of innovation, and smart investors are taking notice. Many challenges remain, but it’s safe to say that the seed of innovation in Africa has been planted.

“The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese proverb.

New Land of Opportunity

Africa has a lot of things going for it that make it prime innovative territory. In terms of population age, the continent of Africa is the youngest in the world. According to TechCabal, “In 2050, 40% of the global youth will be African yet today, 60% of Africa’s unemployed are between 15 and 24 years old.” This means that if that young talent is invested in, mentored, developed and coached, there is huge potential return—and huge potential loss if they’re left behind.

African entrepreneurs are taking things into their own hands, however. According to research by the African Institution of Technology, African innovation is picking up speed and entrepreneurs are finding improved ways of resolving local problems, even as the continent draws top global technology brands:

Young Africans are unleashing entrepreneurial energies as governments continue to enact reforms that improve business environments. An increasing number of start-ups are providing solutions to different business problems in the region…The presence of IBM in Kenya will seed future start-ups in [the engineering/science] sector.

One of the most important factors in Africa’s widespread innovative advances is widespread use of technology: The Economist notes that “mobile phones are common today in even the most remote African villages.” Some smartphones are available in Africa for as little as $25, and their increasing use “is likely to push internet penetration to 50% within a decade.” That’s a huge leap from as little as five years ago, and it is allowing entrepreneurs to become more agile through improved solutions for payment collection, shipping logistics, and communication.

Some of the most interesting innovations in Africa respond to very local needs with remarkable ingenuity. Forbes spotlighted a number of inventions, from an open-air pedicab made from 100% recycled materials to a touch-screen ECG machine that can be used by health workers in remote areas and transmit test results back to specialists for interpretation.

Youthful energy and increasingly widespread access to technology are fueling a boom in African inventions and investment.

Youthful energy and increasingly widespread access to technology are fueling a boom in African inventions, which is cause for celebration—and investment.But there are still enormous hurdles to overcome before that inventiveness can truly translate into a larger-scale economy of innovation in Africa.

Challenges and Priorities to Keep Africa Rising

One of the weakest links in the African economies is their reliance on single commodities such as minerals and hydrocarbon, which results in cyclical economic stresses as the prices of those commodities fluctuate. Even when prices rise and economic statistics rebound, strikes, riots, and protests indicate that the lives of many Africans, especially the young, have not improved. Too often, wealth from these commodities flows to the established political and economic upper classes, rather than being invested in infrastructure, services, and education that would allow for the development of a robust middle class.

Innovation in Africa remains tested by issues that restrict access to capital, and is further bound by poor technical manpower and inadequate infrastructure. Here are four priorities that African governments should focus on to ensure the continent’s continued growth as an innovation economy.

1. Access to capital. A Ghanaian investor notes that one of the most pressing issues facing entrepreneurs in Africa is lack of access to the capital that would allow them to grow their businesses beyond very local, informal markets.

In developed countries like the United States, investment capital is a critical component for the growth of small business enterprises. In African nations, however, many entrepreneurs operate in the informal economy without government licenses or bank accounts. This makes it difficult to assess a business' worth or provide the collateral that makes banks comfortable lending money to new enterprises without sky-high interest rates. African governments should work with private investors and institutions to create an ecosystem where small-time entrepreneurs can thrive in the wider formal economy.

2. Physical infrastructure. While rapid advances in internet penetration are improving the innovation atmosphere, basic components of infrastructure like power, roads, post offices, and airports are still severely lacking, according to Ndubuisi Ekekwe, founder of the African Institute of Technology. Investments in these basic building blocks will allow businesses to expand more rapidly and make their operations more efficient.

3. Legal systems. Ekekwe also points out that many potential foreign investors are scared away by corrupt public institutions and the seeming inability or unwillingness of African legal systems to enforce property rights and IP protection. He suggests the formation of a pan-African anti-corruption institution with the power to prosecute leaders who betray the public’s trust.

4. Education and human capital. According to the Africa-America Institute, “returns to investments in higher education in Africa are 21 percent—the highest in the world.” However, only around 5 or 6 percent of Africans are enrolled in higher education. African governments should do all they can to increase that number. As it stands, many jobs in important growth sectors in Africa have to be done by foreigners with the necessary educational backgrounds. Giving those jobs to Africans will require much more investment in Africa’s most important resource: its people.

Despite enormous hurdles, it now seems inevitable that Africa's growing crop of young entrepreneurs will transform the continent and rewrite its future. Local problems are being solved while creating job opportunities in innovative technologies and businesses. A Forbes article states:

…there is a rising number of young Africans who are building fast-growing companies in food manufacturing, engineering, technology, hospitality, and any other industry you can think of. They are creating jobs, paying taxes, igniting the entrepreneurial spark amongst their contemporaries, and ultimately, playing pivotal roles in the continent’s renaissance. You can’t ignore them anymore.

So yes, the best time to be a part of Africa's rise may have been 20 years ago, but the second best time is now.

Contact me for more information on Africa’s innovation scene and investment opportunities.