It is no secret, by now, that Covid-19 has accelerated digitalisation across many industries. But while much attention has been given to the boost the pandemic has given to ecommerce in developed markets, hardly any has been given to the even more profound impact coronavirus has had in frontier markets. In Africa, that most frontier of continents in terms of economic power, the effect has been quietly revolutionary. Below the Mediterranean, Africa’s 1.3bn people are transacting digitally at an unprecedented rate, forever reshaping the continent’s technology sector.
This mirrors the first quiet revolution in mobile technology over a decade ago, when many countries on the continent managed to leapfrog much more developed ones — because nearly non-existent fixed connectivity meant there were no legacy systems to have to bring up to date — and shifted entirely to mobile. This happened to the point where the world’s best developed consumer mobile market is now Kenya.
Today Covid has driven similar, but much less visible, shifts in logistics, agriculture, and mobile-based B2B financing that in many ways have much deeper implications. Across the continent, these shifts are being driven by growth companies, while governments simply watch on. And it is happening at an amazing pace. Because of the fact that 80 per cent of African spend is still on essential goods and services, the sectors seeing the most tech “disruption” are those serving consumers’ basic requirements for food, energy, and health.
In Nigeria, Africa’s biggest economy, logistics tech provider Kobo, which provides a tech platform to match shippers and truck operators to confirm, finance and complete long haul trips, has doubled the value of trips on its platform to close to $200m annually since lockdown.
In Kenya, a smaller tech vendor called Copia is delivering essential products to rural households for as low as $1 per delivery using its sourcing and delivery system together with rural distribution points, providing a service that larger delivery firms simply cannot fulfil at that price. Phone financing operator M-KOPA, meanwhile, has increased revenue 50 per cent through Covid to an annualised $100m run-rate, by financing business phones for vendors now having to transact everything via mobile.
Also in Kenya, Africa’s largest agricultural marketplace Twiga Foods aggregates overnight demand via mobile from thousands of roadside stallholders who line east Africa’s main roads, and delivers them higher quality produce each day directly, while taking advantage of lockdowns to expand to serve consumers directly.
From its base in Ghana and now operating its own pharmacies across Africa, mPharma is solving the endemic problem of counterfeit and overpriced medication by sourcing and distributing reliable medicine through its own digital supply chain, allowing cost-effective treatment for chronic diseases for the first time in the continent’s history. A fast-growing group of companies including M-KOPA, Kobo, Green Light Planet, d light and Twiga are already generating $100m+ of volume, often after only a few years of operation.
Finally, in mobile payments, companies from South Africa’s DPO to Lagos-based Paystack have been acquired for $200-300m each in cash in recent months, off the back of sharp increases in volume and revenue in a continental market that remains wide open for technology penetration.
The reason for lack of coverage is that none of these companies is a $1B business yet — Aka, a unicorn. Yet the cumulative effect of so many tech-enabled commerce companies already operating at $100-200m+ of volume and growing in many cases by 50 to 100 per cent — or more — a year, is that an unprecedented amount of business activity is shifting to digital, quietly propelled by the demands of Covid restrictions on ‘normal’ business activity.
One sometimes-overlooked reason behind such rapid growth is that there are virtually no legacy tech-enabled players already on the continent. In logistics, agriculture, medicine and B2B financing there are no existing incumbents offering decent, first-generation technology platforms to compete with. Kobo ‘competes’ with agents often reached unreliably by phone only. Twiga ‘competes’ with stallholders having to make 4am trips to wholesalers to buy the day’s produce. And mPharma ‘competes’ with an archaic distribution network prone to selling fake medicine at sky-high prices. The same reason these companies can scale so quickly is the same reason they are so important.
The opportunity for further acceleration after COVID is also far greater than some people realise. Africa’s economy is still only a fraction the size of the US’s or Europe’s, but it is growing much, much faster than either. In terms of consumer spend it is already $4 trillion and has grown 5 per cent a year for the last two decades. The entire volume of all of Africa’s 100 or so tech-enabled commerce vendors still only totals a few billion dollars. Even five years of 100 per cent growth annually means all of these companies will only make up a small fraction of overall economic volume on the continent. And yet their proportion of economic growth is likely to be significant.
On current trends, it is very likely that nearly half of Africa’s $100bn annual economic growth will be driven by this still-unknown group of “start-ups” in the next ten to twenty years. Perhaps then, governments in Africa will begin to take notice. Whether or not that happens, the tech ecosystem will in its own way begin powering Africa’s growth, similar in impact to how America’s tech ecosystem has driven so much of America’s expansion in recent years. The effect will be nothing short of transformational.