It is predicted that Africa’s population will peak at a quarter of the world’s population by 2050. Despite a rapidly growing population, there are some socio-economic factors that may pose challenges to the continent’s development, such as the gap between infrastructure and population growth. Strong infrastructure is the lifeblood of economic development because it attracts investment, ensures job opportunities, and increases output; thus, poor infrastructural development impedes economic growth.
Despite these challenges, Africa has a rare bright spot that is believed to be a potential game-changer: the technology wave. Some have argued that with an upward slope of the technology curve in Africa, the continent need not worry about infrastructural issues. Technological advancement has the potential to lift Africa’s growth on its own Indeed, in some areas, technology in Africa is proven to work effectively beyond the impediments caused by a lack of proper infrastructure on the continent. But could it lead Africa’s next growth frontier?
Over the years, Africa has had challenges in FinTech, agriculture, health, smart city, education and energy. These challenges have slowed down the growth of Africa’s economy. Now, technology is changing the face of Africa’s economy tackling the challenges in those key sectors.
Agriculture has a significant role in Africa as it employs 65% of the work force and contributes 32% of GDP, according to the World Bank. Similarly, approximately 70% of Africa’s population depend directly on agriculture for their livelihood. However, the African agricultural industry is currently facing a number of problems with low productivity. This has been compounded by climate change, a lack of technical expertise and the migration of young people away from rural areas and into cities. Entrepreneurs in Africa are increasingly seeing opportunities in the agricultural sector and are developing solutions that enable farmers to increase their yields and access markets. Globally, agricultural tech start-ups raised $800 million in the last 5 years. Investors have also recognised the potential of Africa’s agricultural industry as there is potential to reach a large market. According to Disrupt, Africa’s recently released African Tech Start-ups Funding Report 2017, agro-tech start-ups received US$13.2 million in funding last year, the fourth largest of any sector. This was an increase of 203% from 2016. The rapid growth of agro-tech business in Africa is demonstrated by the increase of over 13 million in funding since just 2015, where funding was $50,000. The use of drone technology has also been introduced in the agricultural sector.
In FinTech, mobile money services have encouraged financial inclusion which was a long-term challenge for Africa. Africa’s unbanked population has been supported to get access to financial services, helping households to save and obtain loans or credit at lower costs. Despite poor infrastructure to support a proper banking system, financial services across Africa have flourished as a result of mobile technology. Tech start-ups mostly established by young Africans are capitalising on this technology while mimicking the Silicon Valley model to create solutions tailored to the African market. This is now creating employment opportunities, boosting demand, and increasing consumption.
Technology could be an alternative for most African countries to diversify their economies away from heavily relying on commodity exports. It was surprising that despite the current oil crisis the world is facing, much emphasis during Uganda’s presidential debates was about what the candidates would do to ensure that Uganda produces more oil. This shows how much the continent views commodities as the number one driver of economic growth regardless of the persisting risks caused by a lack of diversification. Evolving technology should therefore be used as a tool to boost capacity in other sectors, help countries diversify away from the heavy reliance on commodities and also strengthen cutting edge innovations that enable them to compete on a global level.
Watch out for Part 2 on Technology as a Game Changer in Africa.