Africa has for a long time been regarded as a frontier market, often bypassed by venture investors in favour of other continents, especially Asia. Yet early signs are emerging that the continent is becoming a more attractive emerging market destination for investors.
Last week, US-based chip maker Intel’s corporate venturing unit, Intel Capital, signed its second deal in the region – and its first in West Africa – backing Ghana-based software business Rancard Solutions. Technology company IBM is also exploring the continent and will launch its next SeedCamp in South Africa later this year (see this month’s innovative region analysis for more on the country), while phone operators’ and others’ corporate venturing units have also been looking at the continent, especially Kenya as a pioneer of mobile commerce.
Arguably the most positive economic trend of the past decade has been the growth of economies that have for a long time lagged the developed world – success counterpointed by Western economies that have been plagued by a debt crisis for the past five years. The latest beneficiary of the emerging market boom appears to be commodity-rich Africa, following on from Latin America and Asia – even though it has long suffered from high levels of corruption and poverty.
Subtle changes in the continent’s fortunes, mean some of the world’s most-far sighted investors, like Intel, are getting very excited about trends in Africa. Sam Mensah, Intel Capital director for sub-Saharan Africa, said:““It is really easy for Africans to leapfrog an entire generation of landline technology. This has fuelled and is fuelling the growth of mobile devices, and there is very strong growth. There has also been a strong transition to higher end devices. It is increasingly becoming the case that Africans interact with a cell phone before they interact with a PC. We are trying to bring some of the experience traditionally associated with the PC to the mobile phone.”
He added: “We want to make sure there is more local, relevant content for people to make the transition to the smartphone from feature phones. Rancard as a software company specialises in content management software and content delivery. It acts as an intermediary to allow content owners and publishers make material available on mobile networks to mobile users.
Financial firms are also deploying more resources towards the continent, with Brazil-based bank BTG Pactual looking to raise at least $1bn to invest in the continent, as reported by UK newspaper Financial Times in May.
Mensah said: “We are seeing a lot more private equity and venture capital firms springing up in Africa. There is more activity from corporate venturing groups, and it is worthwhile to note that whereas some corporate VCs are behind, we have been active with people in the region chasing deals since 2009.”
Time to prepare your Africa strategy, by the looks of things, if you haven’t done so already.