“You can invest in Africa” and other common mistakes in how the world sees our continent

Africa, with some of the world’s fastest-growing economies and a rapidly expanding population, has the potential to become a global leader in telecommunications. But enabling this requires first overcoming certain shortfalls, first and foremost being the need to shift fundamental misconceptions about the continent, writes Bernard van der Walt, Audit Partner and TMT Sector Lead at BDO South Africa and Roy Nkandau, Director of Audit & Assurance in BDO Rwanda.

We must move away from the belief that Africa is a unified market. It is not. The sheer size of the continent is massive, with the ability to accommodate China, Europe, the Continental United States, and a significant portion of India within its borders. This expansiveness is not just geographical, but cultural too. It is home to more than 1.2 billion people — not far shy of China’s populace that speak upwards of 2,000 languages. By comparison, Europe houses a little over 200 argots and dialects.

The truth to be told here is simple: Africa is a region, not a market. It is crucial for us to understand that Africa is not a homogeneous entity but a diverse continent consisting of 54 markets, each with distinct political dynamics and economic climates; our Africa of today and the future is a region of diverse nations. As such, the argument stands firmly that we cannot logically “invest in Africa” because it is not one country with a single currency, government and regulatory framework, social system or business ecosystem.

From a business point of view, companies do not operate “across Africa” – they instead have the opportunity to win share in specific national markets. Without a doubt, over-generalisation cannot win in the region as operating in our context requires a tailored approach for each specific national market, and trying to extrapolate trends for consumer app adoption generically will only produce an inaccurate and dangerous conflation of no value.

There’s wisdom in the opportunity of complexity

The Technology, Media and Telecommunications (TMT) industry serves as a prime example of the intricate dynamics that make it challenging to adopt a one-size-fits-all approach to doing business in the region. As providers of connectivity and essential services, telcos play a significant role in building trust among consumers as they enable them to connect with others anywhere in the world, and make and receive payments. Looking at the sector, even from a basic perspective, we realise the depth of variations and nuances in market dynamics as there are extensive and innovative ecosystems.

In East Africa alone, consider some of the giants in digital payments and mobile money solutions: Safaricom's M-Pesa in Kenya, MTN Network's Mobile Money in Rwanda and Uganda, and Airtel Money in various countries. Within renewable energy and green technology spaces, there are companies such as M-KOPA Solar, BBOXX, and Powerhive which offer affordable and clean renewable energy solutions using solar power and battery storage, leveraging the Internet of Things (IoT) and cloud technology for monitoring and management. Artificial Intelligence (AI) is also leaping ahead with the likes of Twiga Foods, Shield, and Flare utilising AI and machine learning algorithms to optimise supply chain logistics, combat financial fraud, and optimise emergency response systems.

In terms of mobile technology, East Africa has witnessed remarkable mobile penetration, with this technology becoming the primary means of communication and internet access. Mobile money services and mobile applications are now widely adopted, with efforts being made to expand broadband coverage deploying 4G and 5G networks. Network infrastructure is also progressive with significant investments made in submarine and national fiber optic cables, improving international connectivity and broadband coverage – and this is just a glance at the full picture of the advances taking place.

There’s no x-factor in entrepreneurship

Another common misconception is the belief that all African start-ups can be categorised as "X for Africa." In reality, the start-up ecosystem of the region has evolved in three waves. Initially, these businesses emulated e-commerce models like Amazon, followed by drawing inspiration from Asian counterparts. A third wave emerged with them adapting to the realities and requirements of local environments. This showcases the distinct entrepreneurial spirit and solutions originating from within the African ecosystem.

Assuming that global values apply to start-ups on the continent is another fallacy. In reality, valuations in African countries differ significantly, challenging preconceived notions of Western investors. African deals are now valued at all-time highs, reflecting the growing confidence and willingness of investors to support these fast-growing businesses. Importantly, this discrepancy necessitates a more detailed method of appraisal, considering the factors at play in each market.

But first and foremost, we have to get a global grasp of the continent right. Africa cannot be treated uniformly, and acknowledging and understanding the complexities of this is crucial to enabling a powerhouse of inclusive impact – across the region.