In the modern interconnected world, technology has a beneficial effect on business operations. Regardless of the size of the enterprise, technologies can have both tangible and intangible benefits that will help organizations gain profit and produce products and services that meet customers’ demands. Technological infrastructure influences business culture, its efficiency, as well as the relationships within entities. Besides, due to the need to exchange mass amounts of data, technologies are needed to strengthen personal information security and other trade advantages. The current business climate in Africa has been characterized by new growth markets and opportunities to build large and profitable companies. The region’s population is young, fast-growing and increasingly urbanized, with the rapid adoption of technologies making the continent a prominent arena for innovation (Leke, Chironga, & Desvaux, 2018). Therefore, it is essential to explore the role of technologies in making business in Africa due to the market’s rapid expansion and the emergence of new trends that many entrepreneurs can capture.
Modern Business Climate in Africa
The African business climate has faced significant challenges, which led to it being underestimated and misunderstood. There is a significant misconception that there are no companies in Africa that earn annual revenue of $1 billion or more (Leke & Signé, 2019). In reality, there are more than four hundred such companies exist and many of them, on average, are both more profitable and faster-growing in contrast to their global peers (Leke & Signé, 2019). With Africa’s fast-growing population, the business environment presents crucial opportunities for businesses in an environment of slowing global growth. Coincidentally, more significant investment and innovation from businesses is imperative for meeting Africa’s unfulfilled demand for products and services (Am et al., 2020). Besides, there is a significant need to close gaps in the region’s infrastructure, create more job opportunities and decrease the rates of poverty. Thus, there are several areas of business opportunities in key sectors that investors can consider.
The actual annual GDP in Africa grew at an average rate of 5.4% between 2000 and 2010, caused by such measures as labor force and productivity growth (Leke & Signé, 2019). The slowdown in the region was associated with the 2011 Arab Spring and the 2014 fall in oil prices (Leke & Signé, 2019). However, now, Africa’s growth has recovered and has the potential to expand and bring new business opportunities. This is illustrated by the World Bank indicators, such as eight out of ten fastest-growing economies in the world in 2018 being in Africa, with Ghana leading the pack (World Bank, 2018). In addition, based on World Bank’s 2019 Doing Business Index, five out of ten most improved countries were in Africa, with the third of all reforms that were recorded around the world being in sub-Saharan Africa (Leke & Signé, 2019). Overall, there is significant economic acceleration that allows improving the business environment in the region, underpinned by long-term trends that make it possible to unlock transformative growth in important sectors of the economy.
Business Opportunities
When it comes to business opportunities that are closely related to technologies, there are three distinct sectors that should be considered. First, it is important to mention that Africa is industrializing, with its local manufacturers increasing the production of a varied product range ranging from automobiles to processed foods (Leke & Signé, 2019). African industries have the opportunity to increase their production by two times to reach around $1 trillion within the decade (Leke & Signé, 2019). Three-quarters of the growth is expected to come from manufacturing replacing imports to meet the expanding local demand (Leke & Signé, 2019). Technologies are imperative to increase the capacity of the manufacturing processes. The ongoing revolution among industries without smokestacks, including tourism, agro-industry, as well as information and communication technology-based services, opens new opportunities. These can serve as escalators of development because the industries share the core characteristics of traditional production, such as exportability, increased productivity, and high labor intensity.
Second, innovations are put in place to unleash the agricultural industry’s wealth and resources. Technological advancement is essential in this case because poor infrastructural development is one of the main impediments to investment and growth in Africa. It has been challenging for the government and businesses to translate the resources available in the country into shared wealth and sustained economic developments. With the help of new innovations and investments, it is possible to facilitate change in that picture and create extensive growth opportunities for businesses (Kolaski, 2018). For example, in the energy (oil and gas) industry, Africa remains rich but poorly explored, with an abundance of high-potential regions and significant unmet demand for energy. It has been estimated that the domestic gas market in Africa will grow by 9% a year by 2025, by which time the region can use up to 70% of its own gas (Leke & Signé, 2019). Therefore, new and advanced technologies are detrimental to the expansion of the energy sector to make sourcing and production more efficient and cost-effective.
Third, there is significant potential for increasing mobile and digital access. Between 2008 and 2015, Sub-Saharan Africa experienced the fastest global rate of new broadband connections, with mobile data traffic expected to increase by seven times by 2022 (GSMA, 2021). The continent has more than 120 million active mobile money accounts, which is over 50% of the world’s total, which has jumped over many people over traditional banking accounts (Leke & Signé, 2019). Considering this trend is important for consider because of the opportunities for companies to improve their productivity through IT, speed up transactions, and access broader markets. There is potential for adding $300 billion to Africa’s GDP by 2025 (Leke & Signé, 2019). Therefore, despite the lack of misunderstanding of the African market, it offers abundant business opportunities.
Impact of Technologies
In the post-COVID-19 business environment, African mobile technologies and services saw a significant increase in their economic activity. This means that technologies have become the defining factor for guaranteeing resilience. The high demand within the mobile telecoms industry in sub-Saharan Africa, illustrated in the rising annual capital investment rise between $7.4 billion and $7.7 billion each year throughout 2020 and 2025, points to the need for businesses to meet it (Minney, 2021). However, despite the high demand, there are risks such as changing technologies, evolving customer needs, and regulatory uncertainties, which negatively affect the business.
Besides mobile technologies, Africa has seen a boost in the growth of Information Technologies. For instance, Facebook is working on introducing 2Africa, which is the largest subsea cable in the world at 45,000km, to connect Europe, Africa, and Asia (Minney, 2021). Besides, Google has mentioned $1bn of investment into Africa over five years, including a subsea cable named after Olaudah Equiano, a Nigerian-born 18th-century writer (Minney, 2021). The cables will ultimately provide increased connectivity to Africa’s fast-increasing population as well as make sure that tech giants including Facebook, Google and others can increase their capacity and connections to their data centers. At this time, onshore networks offer much lower capacity, which means that many countries in the content have shown Internet download speeds. Therefore, the expansion of Internet networks to Africa can result in the improved capacity of doing business there.
An expansion of the fintech industry is illustrative of Africa benefiting from technologies. Digital financial services, including fintechs, continue attracting the interests of investors in Africa, with the appearance of “unicorns,” tech start-ups that have a market value of more than one billion dollars. They include Wave, which is a fintech from Senegal, OPay from Nigeria, as well as Interswitch, and Fawry from Egypt (Minney, 2021). The mobile funds that the fintechs illustrate are especially exciting, with Sub-Saharan Africa being the leader user of mobile money in the world. As a result, the e-commerce industry has boomed during the COVID-19 crisis, continuing its expansion to this day.
Considering the vast business opportunities that characterize the business environment of the African continent, technological innovation represents the key to the long-term business development of the market. Because of this, more new tech start-ups open every year and need more investment to thrive. For example, the funding of start-ups in Africa reached $1.2 billion in 2020, which was a six-fold increase in five years, but is still less than the 1% value that American tech start-ups get (World Economic Forum, 2022). Besides, the continent’s investment in research and development is only a quarter of the international average. Because Africa is trailing behind the world in developing a knowledge-based and digital economy (World Economic Forum, 2022). In order to address this challenge, governments can provide more investment and other small businesses through various tech incentives and investments in the skills of the workforce.
Recommendations
To enhance the positive influence of technologies on business, African governments need to drive greater investment in the sector as well as the knowledge economy. In regard to this, policymakers have the potential to make a difference by means of reducing the regulatory burden, embedding incentives with legislation, and the science and technology skills of workers (Simpson & Conner, 2021). For example, it is recommended to pass legislation such as “Start-up Acts” intended to boost private sector innovation, reduce regulatory burden and promote entrepreneurship (Malinga, 2022). Such “Acts” have shown to be effective in such countries as Tunisia and Senegal that lead the way in African innovation (World Economic Forum, 2022). Within new legislation, it is recommended to embed incentives in the form of start-up grants, rebates on efficiency gains through technology implementation, co-investment of critical infrastructure, R&D incentives, operations done on a tax-free basis, and others. Finally, to address the challenges of technological innovation in Africa, it is necessary to invest in workforce education, competencies, and skills. At present, only 2% of Africa’s university-age population has a STEM degree, which should be fixed (World Economic Forum, 2022). Overall, it is necessary for African policymakers to create environments in which organizations will find it easier to use technologies to their advantage.
References
Am, J. B., Furstenthal, L., Jorge, F., & Roth, E. (2020). Innovation in a crisis: Why it is more criticalthan ever.
GSMA. (2021). The mobile economy Sub-Saharan Africa.
Kolaski, R. (2018, June 21). The role and importance of technology in business.Industry Today.
Leke, A., & Signé, L. (2019). Spotlighting opportunities for business in Africa and strategies to succeed in the world’s next big growth market. Brookings.
Leke, A., Chironga, M., & Desvaux, G. (2018). The definitive guide to doing business in Africa, packed with fresh insights from McKinsey and exclusive interviews with prominent CEOs.
Malinga, S. (2022). WEF advocates Start-up Acts to boost Africa’s digital economy.
Minney, T. (2021). Covid-19 boosts uptake of digital technologies in Africa.African Business.
Simpson, E., & Conner, A. (2021). How to regulate tech: A technology policy framework for online services. American Progress.
World Bank. (2018). The World Bank in Ghana.
World Economic Forum. (2022). Tech start-ups key to Africa’s digital transformation but urgently need investment.