Shortly after Nelson Mandela’s election as the first black president of South Africa, author Claudia Bröll went to the Cape for the first time. The African continent has captivated her ever since. Particularly the success stories of young entrepreneurs keep fascinating her. For eleven years, she’s been living in South Africa and writes about the continent’s economy.
The young boy printed out 400 pages of a C++ programming guide on his uncle’s creaking printer and got started. Today, the Kenyan is 25 years old and co-founder of SafeMotos, a kind of Uber for motorcycle taxis in Rwanda. The startup is so successful that it’s been attracting international attention. Its current statistic reflects 600,000 trips – and SafeMotos keeps growing.
Kariuki is a perfect example of the young generation of entrepreneurs that’s surging ahead in many places of Africa. They’re well-educated, full of zest for action, with a contagious kind of optimism. Kariuki’s generation is no longer willing to accept Africa’s image of a backward continent: “The future is African,” he says.
make up Africa. Clearly higher is the number of languages spoken and ethnic groups, each exceeding 2,000 – from the Berbers in the north to the Khoisan in the south. During and after the colonial period little if any consideration was given to inter-societal compatibilities and incompatibilities when borders were drawn up, which has led to many conflicts on the heterogeneous continent that still exist today.
The power of youth
The forecasts of the global population development prove him right. Four in ten people in the world will be living in Africa by 2100, according to United Nations estimates. Even at this point, the continent has the world’s youngest population. In 2015, 226 million people in Africa were between 15 and 24 years old. By 2055, this number is likely to have doubled.
The future is AfricanPeter Kariuki,
Young mobility entrepreneur
The population growth goes hand in hand with increasing migration from rural to urban areas. New megacities are developing, which entails enormous socio-economic challenges to the continent, as well as business potential. Technological progress plays a key role in Africa’s future: The industrial revolutions of the past largely bypassed Africa. South of the Sahara, only South Africa has seen an appreciable industrial development.
Today, renewable energies, the internet, and mobile telecommunications offer opportunities also in the remainder of Africa that would have been inconceivable just 20 years ago. According to Dianna Games, CEO of business consultancy Africa@Work in Johannesburg, particularly the young population in Africa is pushing for modern technology and innovations.
Development leaps instead of steps
Leapfrogging is the keyword, skipping development levels: from chaotic share taxis to app-based local public transportation, from smoking kerosene lamps to households supplied with solar energy, from traditional farmers’ markets to online shops modeled on Amazon.
In some areas, Africans are even surging ahead of people in other parts of the world. The M-Pesa money transfer system enabling bank transfers via smartphones that was launched in Kenya in 2007 is a case in point. Millions of people use M-Pesa, not only in Kenya, but also in other African countries. In fact, 49 percent of Kenya’s economic output is transacted via this system. A large proportion of Africans has no access to conventional banking services, but almost everyone has a smartphone. Ironically, Africa’s backwardness provides the greatest boost in some areas, according to Dianna Games. United Nations statistics reflect twelve percent of adults in Africa using a mobile bank account, compared with a worldwide average of two percent.
Be it in Rwanda, Uganda, Kenya or Nigeria – tech centers are emerging all over the continent. They’re called Silicon Savannah or, in the case of South Africa, Silicon Cape. Thousands of young software developers are working on solutions of how to move even the remotest corners of the continent into the 21st century. The push for innovation attracts venture capital companies, international corporations, and non-government organizations. “It’s not a market that’s easy to develop, but for companies like ours, Africa offers incredible opportunities,” says Prof. Rainer Lindner, Schaeffler’s regional CEO (see interview below).
African contrasts: a young businessman in Cape Town’s Township and the business center of Rwanda’s capital, Kigali, towering above a deprived area of the city
A blessing and a curse: the Fourth Industrial Revolution (4IR)
But will the Silicon Savannahs and mobile app developers bring about the big upswing? Like in Europe, the digital age is moving forward in Africa. The Fourth Industrial Revolution is in full swing, for instance in South Africa’s automotive industry, and classic economic sectors such as mining and farming are experimenting with 4IR as well. However, as Dianna Games points out, most African countries are not prepared for 4IR, so the large number of jobs promised by Chinese infrastructural projects might in the end be lost to automation.
The educational system is one of the big hurdles since millions of children in Africa have no proper classrooms, no access to the power grid, and no computers, according to Games. Teachers impart factual knowledge to their students, but they’re not learning to develop ideas of their own. Governments in most of the countries are just beginning to address the challenges posed by a digital world, but far too little is happening outside the conference rooms. It’s not enough to view everyone in Africa as a potential startup entrepreneur. The continent needs a lot more innovations and economic activity in order to create jobs and policymakers have to establish the right conditions to support this evolution.
Facts and figures
people might be living in Africa by 2100. Nigeria alone, which is as large as Texas, may have a population of 1 billion by that time (Source: worldpopulationreview.com).
Rwanda is ranked in the top spot of list of Continental African countries on the Ease of Doing Business Index regularly published by the World Bank. This puts Rwanda ahead of Spain, France, Switzerland, Japan, and others. However, seven of the ten countries with the poorest ratings are located in Africa as well.
Rwanda as a role model
However, the first “champions” have emerged among policymakers as well: Rwanda, the scene of a brutal genocide only 25 years ago, is now regularly making headlines with new initiatives, from a telecommunications satellite of its own, the country-wide utilization of drones, expansion of internet capabilities, through to an innovation center in the country’s capital Kigali that’s intended to become a pan-African technology hub. Rwanda’s president, Paul Kagame, is chairman of the Smart Africa Initiative that aims to advance Africa’s digital economy.
Young mobility entrepreneur Peter Kariuki hopes that other countries will follow suit. In 2015, he and SafeMotos’ co-founder, Barrett Nash, deliberately chose Rwanda as their starting and learning base. However, they see larger potential elsewhere, planning to soon roll out the SafeMotos motorcycle app also in Kinshasa, the capital of the Democratic Republic of the Congo. In a city of 15 million where traffic is an absolute nightmare, a lot can be achieved, Kariuki feels. Even though transportation is just one of many issues on the continent, he’s convinced that they can be tackled: “Problems facing the developing world will be solved by those staring out of windows and seeing problems; then deciding to do something.”
"We want to take part and contribute our share"
Interview with Prof. Rainer Lindner, CEO, Subregion Central & Eastern Europe/Middle East & Africa of the Schaeffler Group.
What are Schaeffler’s plans for Africa?
We want to extend and strengthen our commitment on the continent. The reason is that our previous activities are not in line with the opportunities that present themselves in Africa. By the end of the century, about four billion people will be living on the continent. There will be numerous megacities such as Lagos or Cairo. This entails countless challenges in terms of food, mobility, infrastructure, and energy supply. We want to take part and contribute our share.
Schaeffler’s only production site for the automotive industry has so far been in South Africa. Is Schaeffler keeping an eye on the rest of Africa as well?
Absolutely. By 2030, the number of new cars sold in Africa can be expected to amount to ten million, which are twice as many as today. Also, in the long run, several manufacturing hubs will emerge: in the southern part of Africa, in East Africa, and in North Africa. Wherever our customers have production sites we need to be present as well. Besides direct shipments to car manufacturers, the automotive aftermarket is an important business sector. However, we not only see opportunities in the automotive market but also in other infrastructural areas: from rail technology, agriculture, energy supply, and oil production to road, bridge, and harbor construction.
The Chinese are expanding in many parts of Africa. Do German companies still have any chance at all?
We do not regard China as a direct competitor but as a project owner. For the “New Silk Road” project, China has launched a huge investment program in Africa: in ports, pipelines, rail networks, in digital networks. Hardly any area is omitted. This is where we see business opportunities.
So your increased interest in Africa is due to China surging ahead?
That’s not the only reason. In many countries, the governments are driving infrastructural initiatives and industrialization as well. A lot of things have been set in motion. IoT is another topic of interest in many places.
If you want to be successful in Africa as a company, you need to pursue a focused approach, concentrating on specific markets, and customersProf. Rainer Lindner
Africa has been regarded as the world’s last major growth market for a long time, but many national economies continue to be crisis-stricken. Even South Africa is unable to guarantee electric power supply by its own grid. When will the upswing come?
We shouldn’t forget that Africa consists of 54 countries. If you want to be successful in Africa as a company, you need to pursue a focused approach, concentrating on specific markets, products, and customers. Our focus countries include Nigeria, Algeria, Morocco, Kenya, Ghana, and Ethiopia. In spite of the current electricity crisis, South Africa as a heavyweight on the continent is included as well. In addition, it’s an important location with a long tradition for the German car industry.
You used to be CEO of the German Committee on Eastern European Economic Relations. Do you see any parallels between Eastern Europe in the past and Africa today?
In Africa, we’re facing a similar development as we did in Eastern Europe 20 or 30 years ago when these markets served as low-cost manufacturing sites. Similar to Eastern Europe back then, governments and government-owned companies play a major part in this. There are issues such as corruption and there’s a lot of internal migration activity. Similar to Eastern Europe, there’s great business potential as well. However, to tap into it, one has to understand the local context and be active locally.
What does your scenario for Africa look like, going forward?
We’re going to see strong population growth on the entire continent: By 2030, 17 cities will have more than five million inhabitants and some megacities will have populations of more than 20 million. However, the continent will not be developing evenly. There’ll be islands of modernization and losers. Diversity will continue to increase.
Is Africa a challenge?
It isn’t a market that’s easy to develop. But for companies like ours, there are incredible opportunities. That’s why in developing and implementing our strategy for Africa we’re in the right place at the right time in order to use and help shape these opportunities.