Investing and Africa: Exploring Africa’s Untapped Tech Potential

Maslow’s Hierarchy of Needs is the theory that human motivation stems from satisfying more and more complex needs, starting from hunger and thirst and ending with self-actualization.

This model would imply that humans in less-developed countries would be less motivated on complex tasks as they’re working on satisfying simpler concerns. But the model is dead wrong.

Not only is human motivation messier than a neat little pyramid, and it has been proven that the order is wrong, as other needs such as belongingness are more important than they may seem, but humans are often motivated by less rational things, such as pain and hardship.

How motivated do you think the person who has been given comfort will be compared to the person who persevered in spite of hardship? How many entrepreneurs can genuinely say they’ve had it easy?

So how does this relate to Africa’s tech potential? Well, when you think of outsourcing tech work, you probably think of countries like India and China, which is logical, considering that they’ve been outsourcing hubs for years, and you might think Africa hasn’t developed enough.

However, the main benefit of outsourcing, which is cheaper labor, is no longer India or China. While it is extremely easy to find thousands of developers in India or China looking for work within minutes of searching, wages aren’t what they used to be, and other countries are catching up in talent.

Elix-IRR published a paper on the outsourcing opportunities in Africa, and if you’re willing to take a risk, this is a great place to start. Working with developers in Kenya and Nigeria, they’re some of the most motivated people I’ve ever worked with.

Their paper reports on Africa’s four top outsourcing countries:

Egypt, Ghana, Kenya, and South Africa make the list, but there are many more talented developers in other African countries.

However, in spite of this talent throughout Africa, Africa isn’t getting even a crumb of global investment money. In 2017, African startups raised $167.7 million. That’s only one-half of what US startups are raising every single day ($117 billion last year, or $320m/day on average).

In other words: every 12 hours, American startups raise as much money as African startups raise in a year. Accounting for Africa’s population (4x greater than the US):

Every 189 minutes, American startups raise as much money as African startups raise in a year.

I knew that most investors wouldn’t touch Africa with a ten-foot pole, but looking at the numbers is still shocking, especially considering that Africa has three listed unicorns ($1 billion+ valuation) and a number of up-and-coming startups.

Further, more of Africa has global internet connections, with connection rates now up to 28%. Surprisingly, just 76% of Americans are Internet connected. This means that Africa has 367 million Internet users, while the US has just 250 million. In other words:

Africa has almost 50% more Internet users than the US.*

*Yes, I realize I’m comparing a continent to a country, but a lot of people don’t realize how far Africa has come (not to say that there isn’t a long road ahead — there is).

Also, don’t forget that not all of Africa is “developing countries.” There are 7 African countries with “high human development” according to the Human Development Index: Seychelles, Mauritius, Algeria, Tunisia, Botswana, Libya, and Gabon. Notice that South Africa and Egypt didn’t even make the list. 

Out of curiosity, I added up the populations of those 7 countries: 65 million, which is about the population of France or the UK. In other words:

As many people live in Africa’s developed countries as in France or the UK.

By the way, the United States’ inequality-adjusted HDI is 0.797, the exact same as Seychelles’ HDI.

To put it together, Africa has many motivated, Internet-connected developers, up-and-coming startups, several developed countries, and even a few unicorns, but it’s not getting any investor attention — and that should change, not only because of the deserving startups in Africa, but because it’s a great investment opportunity.

I hope that this will spark a conversation, at least among more open-minded entrepreneurs and investors, of the real and untapped tech potential within Africa.