The Brilliant Rise of Startups in Africa

In the early 2010s, Africa was still waiting on the horizon as an undiscovered, distant and difficult geography for everyone, especially investors. But with resources in the ‘new world’ starting to run out and access to information about the continent becoming more accessible, the African continent has already begun to be presented as a brand new world.

However, this brand new world is starting to take important steps, not only in the fields of production and industry but also in the fields of technology, fintech and software. Considering the economic fluctuations of previous years, the African continent may be the last place to look for investment and the first place from which to pull back, but the ice on this issue is slowly starting to break.

The recent surge in startup funding is a testament to the dynamic nature of Africa’s tech ecosystem. The lion’s share of funding goes to West Africa and East Africa, with North African startups catching up in recent years and South Africa showing some moderate growth. What’s interesting is that only one country accounted for more funding in each region: Egypt in North Africa, Kenya in East Africa, South Africa in Southern Africa, and Nigeria in West Africa.

In today’s article, I will share information that is relevant not only to financially strong corporate groups but also to investors who are considering establishing a company with a small amount of capital and turning it into a startup. As you can see from the table, the cost of entrepreneurship in Africa varies from country to country. While establishing a company is free in Rwanda, this figure goes up to $2300 in Equatorial Guinea. Rwanda, one of the youngest and most innovative nations in Africa, has established a company free of charge to support and encourage young entrepreneurs, which has activated many new graduates and fresh minds in the country.

Although the valuations of startups in Africa are far from their values in America and Europe, they give very positive signals for the future, thanks to the rapid transformations they have undergone. To give an example, we know that startups in Rwanda have received a valuation of approximately $48.9 million from 2020 to-date. They are traded at an average price of $1.3 million per valuation round. A total of 39 valuation tours have been conducted in the last three years, which is quite a large number for a country with a small population like Rwanda.

At this point, we see once again the importance of making the process of establishing a company in Rwanda easier and cheaper for the country. When incentives are accessible and easy, many innovative ideas can become reality.

Of course, there is another important explanation for this increase in investment in Africa, and that is the huge population growth projection in the region. More population means higher consumption and demand. To meet those demands, it means turning domestic and foreign capital in the countries into investments and creating jobs for people.

Africa’s potential to shape the global economic view by 2050 cannot be ignored. Here is a numerical look at the future :

• By 2050, Africa’s total gross domestic product (GDP) is expected to amount to $29 trillion, which is an increase of $2.6 billion compared to 2020.
• As the world’s population continues to grow, it is projected that by 2050, the continent’s population will have doubled to 2,5 billion people, making it a major consumer market worldwide.
• The African working-age population is projected to reach 1.6 billion people between the ages of 15 and 64 by 2050, making it the largest in the world.
• Internet penetration in Africa is projected to increase to 1 billion people by 2050, compared to 526 million people in 2020.
• $2.02 billion was invested in African startups in 2019, and the number is expected to reach more than $10 billion per year by 2050.
• The African Continental Free Trade Area (AfCFTA) will connect 1.3 billion people across 55 countries, creating a $3.4 trillion economic bloc.
• By 2050, renewable energy in Africa is projected to grow by 800 percent. Solar power is expected to be at the forefront of this growth.
• The rate of urbanisation is projected to rise from 40 percent in 2050 to 60 percent by 2060, which will have a positive impact on infrastructure and economic growth.
• By 2050, Africa is expected to be the world’s largest source of energy and raw materials.
• An estimated 134 million tourists are expected to visit Africa each year by 2030, providing a significant boost to the tourism industry.

In light of all this data, it is not difficult to foresee that Africa is a medium-term paradise for startups. For this reason, I advise many investors from all walks of life to discover the vast potential of the African continent and press the on button.