Digital sectors are indisputably vital to Africa’s economic development. To meet an ever growing rise in demand, from both businesses and consumers, the industry is getting its ducks in a row, supported by government schemes and buttressed by ongoing innovation.
Shaken by the raw materials crisis in the first half of the 2010s, Africa’s economy has been getting back on track over the past several years. The digital sector has found fertile ground here, supporting the development of a host of traditional activities (agriculture, commerce) but also heretofore underdeveloped sectors, such as health and banking.
With an average 9% annual growth since 2014, Africa’s digital market grew to close to 92 billion EUR in 2019. It continues to be largely dominated by telecom services – which still account for three quarters of all ICT revenue today – but the real momentum is coming from the IT and Internet segments.
Telecom services dominate Africa's digital markets
Breakdown of digital tech markets in Africa by segment, in 2018 and 2023
A concentrated industry
Players are working to keep pace with this growth. Telcos in particular are on the front lines, with five of them together accounting for close to half of the segment’s revenue on the continent: three of them have a footprint that extends to some 20 countries (MTN, Vodafone and Orange) and two operate in at least 10 markets (Etisalat/Maroc Telecom, Airtel). The infrastructure market is also controlled by a few heavyweights, starting with Ericsson and Nokia (ex-Alcatel) and now Huawei more and more.
In the IT sector, several international and particularly European (Atos, GFI…) companies are forging a foothold in a great many markets. And, finally, despite a handful of local initiatives (e.g. Jumia in e-commerce), the Internet and media markets are mainly dominated by international Big Tech (Google, Facebook, Amazon), including several Chinese brands (WeChat, Alibaba, StarTimes).
Broad public sector support
Africa’s digital sectors enjoy broad government support, and administrations are among the main customers for tech solutions, and so play a vital role in financing infrastructures and helping develop applications (e-government, e-education, e-health). Public monies are also being mobilised to deploy national networks: over the past five years, on average, one out of every seven euros invested came from government programmes or aid, either directly or indirectly. Among the indirect sources of financing, a sizeable percentage is from development banks (World Bank, ADB, IDB, EIB…) but also from export support structures from countries that are currently very active in Africa – e.g. Exim Bank of China helps a number of Chinese companies to conquer local markets.
Government commitments to digital tech are still far below what is being invested in other utilities, starting with power companies, followed by transport and water. Even if we include private sector support (notably via PPP), the amounts invested in ICT totalled 7.1 billion USD in 2018, versus close to 44 billion USD in energy (source: ADB/ICA).
Goverment supplies 1 out of every 7 euros in network spending
Private sector's share of network financing in Africa in 2018
Another factor driving the momentum in Africa’s tech markets is a tremendous crucible of innovation, which has taken shape more and more every year. From some 10 business incubators at the start of the decade, the continent now houses more than 500. There has also been an impressive surge in funding for tech startups, which Partech Ventures evaluates at 1.16 billion USD in 2018 (for 164 operations), which is double the amount of the year before. If a small handful of countries are the prime beneficiaries – Kenya, Nigeria and South Africa together account for close to 70% of these investments – the momentum is gradually spreading to every part of the continent: Tanzania, Egypt, Senegal…
If, up until now, innovation has focused largely on traditional sectors, such as farming, or on compensating dire shortages in areas such as banking with e-money, energy and health, today it is looking beyond and into more futurist areas like smart cities.