Why Africa?

“We must meet Lucy. You cannot claim to have visited Ethiopia if you didn’t meet Lucy,” the tour guide insisted.

So, the tour guide and I alongside my new friends headed to the National Museum of Ethiopia to meet Lucy.

“Hello, Lucy!” I gushed as we approached her. She smiled at us from her home, a transparent rectangular box housing her remains.

Lucy is part of an over 3 million years old skeleton found by archeologists Donald Johnson and Tom Gray in November 1974 at the site of Hadar in Ethiopia. Lucy was named after the Beatles song “Lucy in the Sky with Diamonds” which played repeatedly the night Donald Johnson and his friend made the discovery. Lucy is the most ancient early human ever found and is highly revered in Ethiopia.

I reflected on the import of Lucy to human evolution as I boarded a flight from Addis Ababa to Lagos. I had spent five days in Addis speaking to corporate and government officials on the value of a regional payment service. During the Ubuntu Africa talks, I listened to Mr. Tewolde Gebremariam, the CEO of Ethiopia Airline, make a speech on the success of the airline in spite of the economics of the industry. He stated that while other airlines are struggling or being closed, Ethiopian airlines have soared because of its local talent market.

“It’s a matter of survival as we depend on our own training for pilots, engineers, technicians, etc., as against the global market,” he emphasized.

Mr. Tewolde Gebremariam became the CEO in 2011 and has led the airline to become the biggest airline in Africa by the size of the fleet, revenue, and passengers.

I reclined my seat and was flipping through a magazine when he extended his hand with a smile, introducing himself.

“Hello, I am Rob.”

“Hi, I am Ifunanya, but please call me “Funa”, I smiled back.

We had exchanged nods as I settled in beside him. He was working and scribbling with fierce concentration on a notepad. He is a corporate executive, currently the Group CEO of a major African Telco. Before that, he was chief executive of an European Telco. So, out of curiosity, I asked him the impact of the continents on the role.

“Mostly the same,” he said. “But the markets are different. European and African markets are not the same. The European market is more profitable.”

“Really? In spite of Africa's huge population which translates to more users and revenue,” I said with a confused look.

“Yes, Africa has a huge population, but the spending power is not comparable to Europe.”

“I see,” I murmured.

Data points from GSMA show that as at 2017, there were 444 million (44 percent of the population) unique mobile subscribers in Africa and 465 million unique mobile subscribers in Europe (85 percent of the population). GSMA forecasts that there will be 634 million unique mobile subscribers across *Sub-Saharan Africa by 2025, equivalent to 52 per cent of the population; although this compares with a global average of 66 per cent.

Rob refocused on his work. I closed my computer and my invisible thought of Lucy and reflected on the prospects of today’s Africa.

“Why Africa?” I murmured to myself.

Africa is the second-largest continent in the world, with a total landmass greater than the United States, Europe, India, and China combined. Spending by Africa’s consumers and businesses totals $4 trillion annually and is growing rapidly. Household consumption is expected to grow at 3.8% a year to total $2.1 trillion by 2025 and its manufacturing output could grow from to $500 billion to $930 billion in 2025. Landry Signe and Ameenah Gurib-Fakim in their recent work, “High Growth of Integrated Africa” projected that by 2050, new African middle and upper class of 250 million people could stimulate a five-fold rise in demand for goods and services. With some progress with African Continental Free Trade Agreement (AfCFTA) and the prospect of free movement of people, goods and services across the continent, Africa’s sun is rising.

With a young, fast-growing and increasingly urbanized population, the rapid adoption of technology makes the African continent a fertile ground for innovation. US tech giants like Microsoft, Uber, AirBnB, Facebook, Google having experienced high growth in their local markets, are expanding internationally, and have their sights set on emerging markets. African continent presents a huge market for global businesses to expand and increase their market share.

In contrast, Zipline, a Silicon Valley startup headed straight to Africa when it was initially turned down while attempting to test fixed-wing drones in the US airspace. Rwanda welcomed Zipline. Zipline has been successful in making time-critical delivery of blood and medical supplies to Rwanda remote areas. Ghana has joined the league. According to Keller Rinaudo, the CEO of Zipline, “Healthcare logistics is a $70 billion global industry, and it’s still only serving a golden billion on the planet.”

The Zipline experience reechoes Ravi Naidoo assertion that Africa offers some unique opportunities due to its relatively relaxed regulatory environment and many issues that need to be solved. Hence, Africa presents a fertile ground for innovation.

Africa is a hotbed of entrepreneurial activities. It has six of the world’s ten fastest-growing economies. The World Bank recorded that a third of all business regulation reforms from 2017 to 2018 took place in sub-Saharan Africa. The continent boasted of five of the ten most-improved economies in the institution’s annual Doing Business Index. Over 400 African companies already take in at least $1 billion in annual revenue. The World Bank estimates that SMEs are responsible for 77 per cent of all jobs in Africa and as much as half of the GDP in some countries.

Africa can support a broad range of market participants. In the exact words of Mr. Tewolde regarding Ethiopian Airline, “We have to work with everybody. Collaboration is the name of the game - East, West, North, and South, with everybody. Everybody who is willing and ready to support us is welcomed and should be our partner”. This mindset is not peculiar to Mr. Tewolde. It’s common amongst African entrepreneurs. The influx of technology creates an openness to adopt practices and accept businesses either at an experimental or experienced level. These businesses, though with great product-market fit, sometimes come to Africa with the mindset of one Africa. Africa is a continent of considerable diversity. Unlike in Europe, it has different currencies and diverse payment methods. Scaling in the continent necessitates a payment solution that serves the local market yet cuts across other African countries. The gains for businesses would be access to a variety of payment methods, cost savings in terms of time and money as a single or fewer integrations suffice for their African expansion, reduced cross-border card network, interchange fees as well as increased conversion rate.

Remittance presents a huge opportunity in Africa. PricewaterhouseCoopers, leveraging International Monetary Fund (IMF) report, stated that remittances sent to Sub Saharan Africa through informal channels, at 45 to 65% of formal flows, are significantly higher than in other regions. They also projected expansion of remittance due to two factors: strong regional economic growth in 2019 and large intra-regional migration flows from the SSA region. Intra-regional migration trend would birth increased business for existing and new IMTOs seeking a robust platform to meet increased remittance demands as well as an expanded corridor. This necessitates a robust regional remittance platform capable of terminating funds in multiple African countries to the bank, mobile money or wallet account, as well as cash with as less difficulty as a single or fewer integrations.

World Bank recorded remittances to Sub-Saharan Africa at $46 billion in 2018 and found that remittance costs across many African corridors remain above 10 per cent. It noted that banks were the most expensive remittance channels, followed by post offices. To encourage informal remittance flow, FinTechs using more cost-effective models are providing cheaper funds termination options. The capital inflow of funds into the continent increases consumption power and makes the continent a good destination for businesses and investment. Analysts reported that 70 per cent of remittances are used for consumption purposes, while 30 percent of remittance funds go to investment-related uses.

In Africa, businesses that adapt to the realities of the domestic population tend to excel more than those that aspire to change the locals. China conquered the African mobile phone market. Huawei, Tecno and Oppo flooded the markets with cheaper alternatives to Apple, Samsung, and the likes, that are more suited to the needs and affordability of the domestic population. In 2000, trade between China and the entire African continent was $10 billion. In 2019 it's $200 billion, making China its largest trading partner.

Domino’s Pizza, by adapting to the realities of the Nigerian population, has excelled in Nigeria. Founded in 2012, Domino’s Pizza has opened over 100 stores in Nigeria and is profitable. Other premium pizza companies have been unable to scale at the same pace.

Yet, it is premature to say that Africa’s sun has risen. There are infrastructure gaps, political instability and geographic complexity. Hence the recommendation that businesses transcend beyond growth to combining growth with risk. Successful businesses build resilience that enable them manage the risks that are inherent in their country of operation.

“Ladies and gentlemen, welcome to Murtala Muhammed International Airport. Local time is 12: 25pm and the temperature is 33°Celcius” announced the flight attendant.

That woke me up. I could already feel the warmth of Lagos. I dozed off while thinking of the prospects of Africa. It was a good flight. Thank God for journey mercies, I muttered. I smiled and stretched out my hand to Rob, “It’s a pleasure to meet you. I hope you enjoy your stay in Lagos.

As I headed to the arrival area, I reflected on how Lucy, an ape-like creature had become a human-like cultural ambassador for African archaeological heritage in Ethiopia. Paleontologists use Lucy’s remains to make claims about shifts in time, referring to transformation in landscapes, living beings and techniques. Africa’s story is no different. African continent has transformed itself quite significantly and has recorded many achievements in the last two decades. It has better economics, better governance and better macroeconomic management.

*  What is Sub-Sahara Africa? The World Bank lists 47 of Africa’s 54 countries as “sub-Saharan,” excluding Algeria, Djibouti, Egypt, Libya, Morocco, Somalia and Tunisia.

***About: I am a strategy, business and product development professional. I'm highly passionate about Financial Technology and Digital Innovation in the African Payment Space. If you've enjoyed this piece, don't hesitate to like, leave a comment and share the article with others.