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11 Business Opportunities in Africa That Will Make More Millionaires.

The term “millionaire” is taking on a new meaning in Africa.

It’s no longer just about the size of your bank account; any shady politician, corrupt bureaucrat, or unscrupulous businessman on the continent can easily claim to be a millionaire.

But Africa’s new and emerging generation of millionaires are not just excited about money. They’re also passionate about impact; they want to create value that touches and improves people’s lives.

It’s called impact entrepreneurship. It’s the new way of making money and doing good, at the same time.

It’s a model that is proving that profit and ambition do not always have to come at another’s expense.

Remember, the bulk of Africa’s “old school” millionaires made their money from resource extraction and sheer opportunism. Often, their wealth had to come at the expense of the common good and the natural environment.

But Africa’s new wave of entrepreneurs are showing no keen interest in the continent’s finite resources; its timber, gold, copper, oil and diamonds. Rather, they’re far more interested in a much more valuable resource: problems.

Africa is a continent overwhelmed by serious problems, from unemployment and illiteracy, to hunger and inadequate electricity.

Most of these problems are tough, widespread and decades old. But while they are scary and frustrating to most people, entrepreneurs see them for the breathtaking opportunities they really are.

1) Crowdfarming

Across the world, agriculture is big business and most farmers are financially well-off. But not yet in Africa.

According to the United Nations, Africa’s agribusiness industry is expected to be worth $1 trillion by 2030.

And it makes perfect sense. The continent has a huge domestic market, owns 60 percent of the world’s unused arable land, and has abundant labour resources, and a favourable climate in most parts.

Still, Africa spends over $30 billion on food imports annually.

A big part of the problem is, most of Africa’s food is still produced by smallholder farmers in rural areas. They are largely poor people who use crude farming methods, and have very limited access to capital.

But what if all of us in the cities pool funds together, invest in these rural farmers, and take a share of the profits at harvest time?

Wouldn’t that significantly boost food production, cut down the continent’s food import bill, and make more money for both the investors and the farmers?

This business model is called “crowdfarming”, and it’s a trend that could totally transform the face of agribusiness in Africa.

In Nigeria, two crowdfarming platforms — FarmCrowdy and ThriveAgric — enable working-class Nigerians to crowd-sponsor farming projects and earn a share in the returns at harvest time. Last year, FarmCrowdy raised $1 million from US investors to expand its operations.

In Somalia, Ari.Farm is an online marketplace and crowdfarming platform that enables investors from across the world to play in the Somali livestock market.

In South Africa, Livestock Wealth, helps investors to own pregnant cows, and track them through a mobile app. Once the calf reaches seven months, it is sold to a feedlot or slaughterhouse and the return for the beef goes to the investors.

As Africa’s population doubles over the next 30 years, the business opportunities in Africa ‘s agribusiness space are very likely to produce a league of millionaires who made their money while pulling thousands of farmers out of poverty.

2) Waste

For decades, waste has been a huge and nagging problem in Africa’s urban areas.

Currently, most of the waste generated in Africa is either burned, buried or thrown away. As a result, more than 80 percent of solid waste produced on the continent ends up in landfills or gets dumped in water bodies.

And as the continent’s population continues to rise, the waste problem will only get worse.

So, what do we do with all the growing heaps of filthy waste before we find ourselves in the middle of the worst environmental crisis the world has ever known?

In South Africa, the solution appears to be to convert waste into animal feed.

AgriProtein is a business that grows maggots from waste collected from markets, households and businesses. The maggots are processed into a highly nutritious protein supplement that substitutes fish meal in animal feed. The company has raised up to $30 million in funding, making it one of the best-funded insect farming businesses to date.

In Ethiopia, the solution is to convert waste into electricity.

The Repi waste recycling factory in Addis Ababa will produce 50 megawatts of electricity from waste collected from across the city. The facility is expected to supply 3 million homes with electricity, and avoid the release of millions of tons of CO2 to the atmosphere.

Across the continent, entrepreneurs are hard at work trying to squeeze out value from waste, and in the process, they’re creating an industry that could provide both low and high-level jobs for thousands of people. Waste is likely to return to the food chain, to the electricity grid, or in some other recycled form

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3) Drones

In Africa, it appears there’s much more to drones than chasing terrorists and taking breathtaking altitude photographs.

Drones are finding some of their most versatile and impactful roles in Africa and are helping with everything from logistics and farmland management, to humanitarian deliveries and conservation support.

In Rwanda, Zipline is a drone delivery startup that delivers blood and medical supplies to clinics in the country. After successful pilot operations, it is now expanding into neighbouring Tanzania.

Aerobotics is a South African business that uses its drones to provide bird’s eye surveillance for farmers that provides critical information that can boost crop yields by up to 10 percent. It now operates in 11 countries, including the US, Russia and the UK.

In other parts of the continent, drones are playing more roles in humanitarian efforts to deliver aid to remote and conflict-ridden areas. They are also being used to monitor deforestation and illegal mining activities as part of efforts to conserve the continent’s forests and wildlife.

4) Affordable housing

Africa is experiencing the world’s highest rate of rural-to-urban migration. And by 2030, it is projected that up to 50 percent of the continent’s population could be living in towns and cities.

Urbanisation is great, but where will all these people live? And even if the governments tried, they cannot build homes fast enough to meet the teeming demand for accommodation.

In Nigeria, Africa’s most populous country, the housing deficit is estimated at 20 million homes. In South Africa, the deficit stands at 2.3 million homes.

Africa’s housing crisis opens a lot of interesting opportunities for several industries; from cement production and furniture making, to building contractors and mortgages.

It’s no surprise Africa’s richest man, Aliko Dangote, has expanded his presence in cement production across several countries on the continent. His interests in cement now make up a significant portion of his net worth.

But beyond conventional housing, there is an interesting trend of homes being built from cheap and durable alternatives, like shipping containers.

In Cape Town (South Africa), building contractors like Berman-Kalil are offering sustainable and affordable housing options by converting decommissioned shipping containers into low-cost homes.

In Kenya, entrepreneurs like Denise Majani are also converting shipping containers into amazingly creative residential and office accommodation at half the price of contemporary housing.

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5) Automobiles

As more Africans migrate to the cities, the big urbanization wave has caused a surge in demand for transportation services.

Currently, there are just about 44 vehicles per 1,000 people in Africa. This is significantly below the global average of 180, and lower than the motorization rates of other developing regions like Latin America, Oceania and the Middle East.

Estimates suggest that vehicle sales on the continent could reach 10 million units per annum within the next 15 years.

It’s no surprise the big name automobile brands like Toyota, Volkswagen and Mercedes are already digging into the African market by setting up assembly plants on the continent.

But what is more interesting is the emergence of “Made in Africa” automobiles.

The Mobius II is a luxury SUV built in Kenya. It is being advertised as “an affordable, no thrills, but robust and classy SUV that’s built for African roads.”

In Nigeria, Innoson Motors — a homegrown car maker – has released a range of private cars.

And in Uganda, Kiira Motors is developing Africa’s first hybrid cars. It has already launched Africa’s first solar-powered bus.

There are also promising indigenous automobile makers in Ghana, Tunisia and Sudan.

6) Local products for export

Africa spends billions of dollars on imports every year. This includes both food and non-food items.

But beyond the traditional commodities – crude oil, minerals, cocoa, coffee, timber etc. — what else of value can Africa actually export?

It happens there are a lot of local products on the continent that have the potential to become global brands. The problem is, we often overlook or look down on them.

But a few interesting entrepreneurs are now turning local African products into global brands and best-sellers.

Take Nilotica for example, a rare type of Shea butter that is used in luxury beauty products sold around the world. The trees that produce this butter only grow at the source of the Nile River; in Northern Uganda, South Sudan and Ethiopia.

By working with local women in the region to process the butter, Leila Janah – an American entrepreneur — has built LXMI, a luxury beauty brand with a range of skincare products that sell in over 300 beauty stores across the world.

Another example is fonio, a forgotten cereal that has been grown in Africa for more than 5,000 years.

Largely regarded as a “miracle” grain, fonio is gluten-free and rich in several nutrients that are deficient in most other major grains, such as rice, wheat and barley.

By processing fonio into products like crackers, cereals and pasta, one Senegalese entrepreneur and ex-chef — Pierre Thiam – has put this ancient food on shelves in New York, with plans to roll out to other stores across the USA.

Nilotica and fonio are only just two examples of several local African products that have global potential.

7) Startup funding

The buzz of entrepreneurship activity on the African continent has caught the attention of a growing number of investors, both within and outside the continent.

The potential returns on investment in Africa is currently one of the highest in the world, and has become too obvious for investors to ignore.

Since 2012, the amount of seed funding and venture capital flowing to Africa has grown 1,400 percent.And the trend continues to look up.

In 2017 alone, African tech startups received $560 million in funding from local and international investors. This amount represents a 53 percent jump from the $366 million raised one year earlier, in 2016.

And the biggest deal of the year was a $69 million investment in TakeALot, a South African e-Commerce startup.

Also, Silicon Valley accelerators such as 500 Startups and Y Combinator have increased the number of African startups that are admitted into, and receive funding, through their programmes.

Currently, South Africa, Kenya and Nigeria are in the spotlight and take the lion share (about 75 percent) of the investment inflows.

It’s important to note that every year, the size of venture capital investments that take place around the world exceeds $100 billion. Currently, Africa gets less than 1 percent of this global deal flow.

8) Fintech

Africa’s underdeveloped financial services industry presents very tough, important and widespread problems that need to be solved.

After more than 50 years of banking on the continent, just about 34 percent of adults in sub-Saharan Africa have bank accounts or access to formal financial services.

It is clear the traditional model of banking is too slow, inflexible and incapable of spreading financial access at the pace the continent requires.

But with the spread of mobile phones and the Internet across Africa, the continent’s entrepreneurs are leveraging technology to deepen financial access in ways the banks never have.

Last year, Flutterwave, a Nigerian fintech startup, raised $10 million in funding from a group of investors led by Greyloft, a US-based venture capital firm.

To date, it’s one of the highest Series A round investment in an African startup.

And there are a wide range of opportunities that are opening up in Africa’s financial services space.

They include bill payments, bulk disbursement, international remittances, merchant payments, mobile airtime top up, mobile banking, person-to-person transfers, peer-to-peer lending, micro insurance, and several other interesting opportunities.

In the area of overseas remittances for example, Africa loses more than $1.4 billion annually in charges alone. Western Union and MoneyGram have been longtime monopolies in the remittances segment, and are clearly ripe for disruption.

Opening up, growing and disrupting Africa’s financial services market will certainly transform millions of lives on the continent and create a league of millionaires in the process.

9) Low-cost private schools

According to this report titled: “The Business of Education in Africa”, it is estimated that 1 in 4 African students – a total of 66 million – will be enrolled in private schools by the year 2021.

Rapid population growth, poor funding, corruption and neglect have caused a serious deterioration in the quality of education in public schools on the continent.

As a result, more African parents are looking to private schools to ensure their kids get a good education. And the demand for this alternative is skyrocketing.

In Nigeria, the number of low-cost private schools in Lagos, its commercial capital, is estimated to be as high as 18,000. By comparison, in 2010-11 the city had just 1,600 government schools.

And this trend of low-cost private education is leading entrepreneurs to come up with several interesting models.

In Tanzania, the Silverleaf Academy is a chain of low-cost private primary schools that charge a daily school fee of $1.50. The school uses a technology-based approach and offers a curriculum taught by internally-trained teachers.

In Nigeria, the Lekki Peninsula Affordable Schools is a stand-alone low-cost school that charges an average annual fee of $125. The school has received up to $75,000 in funding from Village Capital and Pearson Affordable Learning.

10) Urban logistics

Currently, about 60 African cities have a population of over 1 million people. At the top of the pack are cities like Lagos (21 million), Kinshasa (10 million), and Cairo (9.5 million).

And one of the biggest problems that appears to be worsening with the growth of Africa’s urban populations is congestion. Most cities on the continent do not yet have well-diversified transport systems, so getting around town can be a very frustrating endeavour.

In Kenya, Twiga Foods uses technology to pool the orders of several urban retailers, saving them a trip to the market by delivering to their doorstep. It is now the largest distributor of a number of basic food staples in Kenya, and the startup raised $10.3 million last year.

In Nigeria, MAX is a fast-growing startup that provides last-mile delivery services. Last year, it launched an on-demand motorcycle courier service for clients who have critical deliveries that need to beat the notorious congestion on Lagos roads.

11) Healthcare services

With poorly-funded public hospitals, and a significant brain drain of African doctors to countries outside the continent, waiting for the government to fix the continent’s healthcare sector will not work.

Also, waiting for international “donor” funds (which are channeled through governments) will not work too. We have been doing the same thing for decades and very little has changed.

With 25 percent of the global disease burden, a rapidly growing population, and a rising middle class, Africa’s healthcare market presents a huge opportunity.

According to the IFC, Africa’s $21 billion healthcare market could double in size in just 10 years.

Currently, a growing number of Africans are seeking medical help outside the continent, in places like India, the Middle East and Europe. This growth in outbound medical tourism costs Africans millions of dollars every year.

To arrest this ugly situation before it gets much worse, Africa needs a private-sector led transformation of its healthcare industry that requires both the innovation of local entrepreneurs and investment from local and international investors.

In Kenya, Dr. Maxwell Okoth, a young medical doctor and entrepreneur, started a chain of low-cost hospitals with only $3,000. He is now setting up a 100-bed multi-specialty hospital which will have a cancer center, radiology center, pediatric unit, and several other specialties.

In Nigeria, Lifebank – a startup that develops smart ways to deliver critical blood supplies to hospitals in busy cities – raised $0.2 million to support and expand its operations.

 

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FODION CONSULTANTS ltd (www.fodionconsultants.co.uk), is a UK based FDI Africa Consultant.

 

 

 

 

 

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