Rethinking the African Market: No To Fancy Tech, Yes To Actual Everyday Needs

Last week, I wrote about the alarming rates at which startups are dropping dead everywhere in the middle of a funding winter and suggested M&A as a way VCs, especially investors working in platform or portfolio support roles, can play a significant role in the consolidation and strengthening of the ecosystem. One of the recurring themes across these startups is the duplicity of solutions in a tiny and poor market or the importation of business ideas from Silicon Valley into a less sophisticated market, resulting in little wins in the early stage that are sold to naive investors who would then fund the startup because, hey, it worked in SV or FOMO. These founders, pressured by the compulsion to justify the funding received, burned a lot of cash and then either shut down or found another story to tell. The vicious cycle was the norm until the global downturn when funding dried up and the death rate surged through the roof.

To break this vicious cycle, I believe it is time to rewrite the narrative on the African market. While glamorous fintech solutions and disruptive tech grab headlines, a quieter revolution is needed around something far more fundamental: addressing the essential needs of the average African. This isn't a call for charity; it's a roadmap for building sustainable, impactful businesses that generate significant returns alongside positive change. It is a call to founders, VCs and budding operators within the African market to look beyond just building the next FinTech. Even if anyone has an idea to build a new one, most subsectors have already chosen their category winners.

To tap into this "invisible" market, we must break free from the tired Silicon Valley playbook and rewrite the narrative. The key demands a deep understanding of the hierarchy of needs that underpins the African market and prioritizing solutions that seamlessly integrate into existing systems and enhance daily life, not just disrupt it.

The message is clear: the African market is not a SaaS market and even needs more than just "tech-enabled" solutions, the real gold lies in understanding the daily struggles and aspirations of everyday Africans. The core hierarchy of needs—food, shelter, health, and financial security—forms the bedrock of the market.

The foundation of successful tech ventures in Africa lies in the development of a robust value chain. Identifying areas where individuals are likely to spend money and creating comprehensive solutions around these aspects is crucial. This involves reimagining how technology can revolutionize daily life, with a focus on enhancing existing behaviours through innovative, affordable, and accessible business models.

Imagine a platform that not only facilitates mobile payments but also equips users with financial literacy tools and micro-investment options, empowering millions without formal bank accounts. Or a healthcare app leveraging AI to bridge the rural healthcare gap, providing basic diagnoses and medication access right where it's needed most.

But how do we tap into this "invisible" market? Look beyond the obvious. Analyze the in-betweens, the seemingly mundane interactions that define daily life. How can technology optimize daily routines? Think SMS-based agricultural advice boosting farm yields, voice-activated financial services reaching the unbanked, or offline educational apps powered by peer-to-peer learning, all addressing real, everyday needs.

Thanks for reading The Afroconomist! Subscribe for free to receive new posts and support my work.

One of the challenges in the African market is the presence of low disposable income. Entrepreneurs and investors need to devise strategies that take this into account, ensuring that their products and services are not only groundbreaking but also affordable. Exploring innovative pricing models, microtransactions, and strategic partnerships can pave the way for widespread adoption.

The potential is astounding. With over 1.3 billion people, Africa's market presents a unique opportunity to build billion-dollar businesses while making a tangible difference in people's lives. M-Pesa in Kenya and Esoko in Ghana are shining examples of this impact-driven approach, proving that understanding the "human angle" unlocks immense potential.

The success of fintech and payments in Africa provides valuable lessons for tech entrepreneurs and investors. By building along the pipeline of daily interactions, startups can emulate this success in sectors beyond finance. The key lies in understanding the local context, adapting to the diverse needs of the population, and creating solutions that resonate with the daily lives of Africans.

As tech entrepreneurs and venture capital investors set their sights on Africa, a paradigm shift is needed. The era of evaluating the African market with the same parameters as other emerging markets is over. Success in Africa requires a commitment to social impact, an understanding of the hierarchy of needs, and a dedication to lifestyle inclusion. By embracing these principles, tech innovators can not only make a significant difference in the lives of Africans but also unlock unprecedented opportunities for growth and success in this vibrant and rapidly evolving market. Africa is not just an investment; it's a journey towards transformative impact.