The Ticking Time Bomb in Africa’s Startup Ecosystem
It is important to note that Africa’s burgeoning startup ecosystem benefits from the positive economic outlook from the West. These benefits are underpinned from the benefits it receives from the unclassical tech startup funding and growth. Transformation has been driven by technological innovation, economies of scale, globalization and financial development.
As expected, structural transformation in economic processes has necessitated the push into high salaried employment tech sector by a large percentage of Africa’s workforce. Tech startups, demographic opportunities and the pursuit for a green economy are some of the basic conditions that has driven Africans into acquiring tech skills. Not neglecting Africa’s vulnerable position in the global investment market means we must consider that because Africa greatly depends on the West for startup funding, the region is exposed to structural, sociopolitical and technological changes that occur in the West.
Continuous technical advancements present fresh opportunities for increased productivity and economic expansion. It is crucial to remember that historically speaking, technological advancements have enhanced productivity, led to consistent increases in living standards, and produced more job creation than job destruction. Therefore, it is evident that the use of digital technology and the spread of digital skills may significantly improve and increase the employment options for young people. However, the success of Africa’s startups cannot depend solely on the actions of international investors.
The Economist regarded Africa as a hopeless continent in 2000, yet it has already seen its two best cumulative subsequent decades. Over the past ten years, trade between and within Africa has increased by 300 percent, exceeding global rates (196%). Many of the fastest-growing economies in the world now according to Brookings, call it home, providing exceptional prospects for U.S. trade and investment. At the moment, Africa is considered the next hot spot for technology advancement, but what happens when that’s no longer the case?
Technological advancement has its way of offering new prospects for higher productivity and returns. With new tech trends like Web3 and the Metaverse promising immense benefits, Africa might be left to fend for itself in the near future. The future of investment will certainly depend on ROI and if emerging techs present better fortunes, interest will shift. Per McKinsey analysis, the Metaverse will be worth $5 Trillion by 2030. By 2030, Africa is expected to have a $2.5 trillion consumer expenditure value.
Jisos!!! Be scared Africa.
We must understand that potential investment targets live on the digital maturity spectrum. The expectation and level of importance matter to investors even as existing portfolio companies strive to stay competitiveness related to technology capabilities. Because investment decisions rely heavily on data, investors are now leveraging the vast democratized data available to make investment decisions.
Deep techs are coming. Their digital proficiency is focused on using artificial intelligence, machine learning, and advanced computation to explore frontiers in physics, chemistry, and biology. The amount of capital investment in deep tech has grown fourfold, from $15 billion in 2016 to more than $60 billion globally in 2020.
To stay competitive, Africa’s startup ecosystem must learn to scale inclusively. We won’t remain the Prom Queen of the West forever.