Over the years, the African tech market has emerged as a dynamic force, defying expectations and capturing the attention of global investors and tech enthusiasts alike.
From the vibrant streets of Lagos to the bustling tech hubs of Nairobi and Cape Town, a symphony of ideas, talents, and technologies is propelling Africa’s tech revolution forward. Jonathan Tullett, Associate Research Director IT Services, Sub-Saharan Africa, IDC, shared insights into the complexities and opportunities that make Africa’s tech scene a captivating force to behold.
What are the trends shaping the dynamic landscape of the African tech market?
Within the diverse African tech landscape, it is important to recognise that there is no singular “African tech market.” Instead, there are 54 distinct tech markets across the numerous African countries, each with its own unique characteristics, spanning East/West divisions and language preferences like Francophone countries.
Nevertheless, there are overarching tech trends that resonate throughout the continent. These include the expansion of connectivity encompassing mobile networks, terrestrial fibre infrastructure, and international fibre connectivity. This surge in connectivity fuels remarkable growth in mobile and internet technologies, catalysing transformative changes in various sectors such as e-commerce, remote work, education, digital financial services, social interaction, and entertainment.
Additionally, the adoption of cloud computing has accelerated due to improved and more reliable internet access, leading to widespread acceptance among businesses. Simultaneously, there is a notable expansion of data centres, with significant investments being made in local facilities by international groups. This development not only meets the demands of cloud providers targeting larger economies but also addresses the infrastructure modernisation needs of local enterprises. Consequently, colocation hosting is experiencing parallel growth alongside cloud revenues.
Moreover, regulatory transformations have been witnessed across most African nations, with swift implementation or extension of legislation governing privacy, online transactions, and related domains. Many of these regulations align with global standards such as the General Data Protection Regulation (GDPR), playing a pivotal role in stimulating the growth of cloud services.
Which sectors of the African tech market are currently experiencing the most growth, and what factors are driving this growth?
Telecom companies are typically high growth in terms of tech spend as they provide vital digital infrastructure while simultaneously upgrading networks and expanding coverage.
Financial services is also another strong vertical as organisations in this sector such as banks and other financial institutions accelerate digitalisation to keep up with fintech competition.
In centralised markets, significant investments are being made in the retail/wholesale segments, driven by large retail networks and a surge in e-commerce, which gained remarkable momentum during the Covid-19 lockdowns. However, it’s important to note that the prominence of these sectors varies from country to country, with unique country-dependent dynamics.
Meanwhile, in markets rich in natural resources, such as Nigeria with its vast oilfields, substantial tech investments are observed in resource and extraction industries.
From your perspective, what are the biggest hurdles facing the African tech market, and what strategies can companies and governments employ to surmount these challenges?
Challenges vary from country to country, but they share several common concerns.
One prominent obstacle is the scarcity of skilled professionals in advanced technology fields throughout Africa. The high demand and low supply of talents in areas like cloud engineering, cybersecurity, and data science contribute to elevated costs and talent retention challenges. Although efforts are underway to bridge this skills gap, the rapid growth in demand poses an ongoing challenge.
Another pressing issue arises from disruptions in ICT supply chains caused by the impact of the Covid-19 pandemic. The resulting strain on hardware supply into telecom and enterprise environments has highlighted vulnerabilities in existing digital strategies.
Additionally, political interventions have emerged as a concern, with instances of increased online censorship or internet blackouts, raising apprehensions for digital economies. Reliability of infrastructure, specifically in terms of electricity and communication, poses a significant hurdle. While the presence of more undersea cables and fibre backhaul has improved internet and cloud consumption, interruptions to connectivity persist. Power shortages plague certain countries, directly impacting economic costs and the budget allocation for digital investments. These shortages also escalate expenses related to data centre operations, digital or remote workforces, and ancillary sectors such as communications infrastructure and transportation.
What role do you see African startups playing in shaping the future of the continent’s the tech landscape, and how can they best position themselves for success?
In many African countries, there is currently a surge of tech startups, albeit with varying levels of local support. These startups face significant challenges in accessing funding, which has become a crucial area where technology-savvy governments are actively fostering partnerships and investing in support systems for their startup economies. This proactive approach not only generates new economic activity but also addresses the growing demand for education and skills development. Recognising the potential for increased market share, major vendors are also investing in these startups, viewing them as gateways to broader opportunities, with cloud providers playing a particularly significant role.
While the scope of opportunities is vast, key sectors attracting attention include fintech, entertainment, media, logistics, transport, e-commerce, and public services, although this only scratches the surface.
