Tech giants of Silicon Valley are undeterred by the economic slump afflicting much of Africa. Facebook, Google, Oracle and Uber Technologies are at the leading edge of turning the world’s frontier markets digital. As the commodity crash buffets the continent’s biggest economies, the interest and investments couldn’t come at a better time.
Almost half of foreign direct investment projects in Africa last year were in technology, telecommunications, financial services and consumer products. The amount dedicated to oil, gas and mining dropped to 6 percent – from almost a quarter in 2005 – according to EY, a consultancy firm.
“There’s been a big shift from an almost exclusive focus on extractive sectors to those such as consumers and renewable energy,” said Michael Lalor, the Johannesburg-based head of EY’s Africa Business Centre. “There’s a growing base of consumer demand as that happens.”
African growth has slowed since 2014 as waning demand from China hammered prices of raw materials from oil to copper and coal. Of the three biggest sub-Saharan economies, Nigeria’s is shrinking and South Africa and Angola are barely growing.
“Kenya is really benefiting in terms of long-term investment,” said Martina Bozadzhieva, an analyst at London-based Frontier Strategy Group, which advises firms looking at emerging markets. “A lot of companies see it as a much more reliable, less vulnerable destination than, say, Nigeria or Angola.”
To be sure, the gap between promise and reality has bruised earlier generations of foreign investors in Africa. Heineken Chief Executive Officer Jean-Francois van Boxmeer said he was “praying” for higher oil prices to boost beer sales, while retailer Truworths International pulled out of Nigeria in February, citing red tape and capital controls.
Still, Facebook CEO Mark Zuckerberg just travelled to Kenya and Nigeria on his first visit to sub-Saharan Africa. In Nigeria, where his personal fund in June invested $24 million in Andela, a Lagos-based start-up software developer, he said he was “blown away by talent and entrepreneurs in this country.” In Kenya, he said he wanted to learn how businesses were using mobile money.
Oracle said this month that Africa was a “priority market” in which “cloud technology will undoubtedly drive the next phase of growth for businesses.”
Since launching in South Africa in 2013, Uber has entered Nigeria, Ghana, Uganda, Tanzania, Kenya, Morocco and Egypt. Last year CEO Travis Kalanick named the continent as one of his priorities, along with China and India. Read more