Top five trends in African markets

GPs and LPs offer their perspectives on five of the most important current and future dynamics playing out across Africa

African markets present investors with a range of unique investment opportunities and challenges.

1. The digital story is only just beginning in African countries

Here, GPs and LPs offer their perspectives on five of the most important current and future dynamics playing out across the 54 countries in this vast continent.

Aubrey Hruby, Co-founder, Tofino Capital

“The average person on the African continent pays more for their data in relation to their monthly income than anywhere else in the world. When costs fall, as we saw in India, we will see a take-off of creative industries, streaming, edtech, fintech and healthtech.”

Wim van der Beek, Founder and Managing Partner, Goodwell Investments

“The risk perception among investors is very much that technology exposure is already a risk and that African markets themselves are risky, especially when compared with other emerging markets. Many believe the risks just stack up.

“That’s not what we see, especially in fintech. The business model shake-out taking place in many other markets isn’t happening as much in African markets. That’s because these are markets where technology companies are not disrupting the status quo; they are building something. Those business models are still there regardless of what is happening in Silicon Valley or in the capital markets.

“We see technology investing in African markets as less risky than many others because the technology has a connection to the physical world – you can’t build it in isolation. You have to build it so that it connects to where the need is and you’re not displacing something that’s already there. You are building the infrastructure and you need to invest in the entire technology stack, not just in one, isolated technology solution that will change a market. You are building an entire ecosystem in one go and that makes it a more solid proposition.”

Bringing you the best in
private capital

SuperReturn Content Hub

Connect with the people who

matter in private equity,

venture capital,

private credit and real assets

Head to the website now >>

2. The rise of local managers is creating new opportunities

Evelyne Dioh Simpa, Managing Director WIC Capital

“There is an emerging class of African fund managers adding to the European teams on the ground. They are using a local perspective to build real innovation that addresses the needs in their markets and are adapted to the continent. If emerging markets more generally have underperformed development markets, it could well be because so far, private equity has focused on larger companies. Only now are we seeing more investment in smaller businesses – and this is where the growth really is. It’s really important that the industry starts focusing on African firms that are innovating and finding solutions for small businesses. We are seeing a new generation emerge.”

Franziska Reh, CEO and Founder, Uncap – Unconventional Capital

“A couple of years ago, we saw capital flooding into expat-founded companies, especially in fintech. They weren’t embedded deeply enough into the ecosystem. They didn’t deliver and that hurt the industry’s reputation for a while. Now, there is more data available on how much capital goes to local founders and while we’re not there yet, the situation is improving. The key growth driver will be localisation – local founders, local investors and local strategies. I’m excited to see how that will change the environment.”

3. Diversity and inclusion needs unique approaches

Janade du Plessis, Fund Manager, Launch Africa Ventures

“We often celebrate the fact that the average age across African countries is 19. That makes for dynamic economies with some of the fastest growing consumer markets on the planet. However, there is a flip side that we should also address:

you see 54% youth unemployment in Nigeria, 60% in Kenya, 65% in South Africa and 30% in Egypt.

The future of Africa is largely dependent on how we treat and equip our young people to bring prosperity to the continent. Youth unemployment is the biggest threat the region faces and we have to do more to include our young people in formal employment.”

Phil Davis, Director of ESG, Helios

“Africa currently accounts for less than 4% of the world’s greenhouse gas emissions. Historically, economic growth and emissions are strongly correlated. We all need Africa to be the first continent to break that link.”

Tariye Gbadegesin, Chief Executive Officer, ARM Harith Infrastructure Managers

“Hydrogen is a very exciting opportunity in the medium to long term. However, it may not be as long-term as we think. There are some very interesting moves in green hydrogen and green ammonia in Egypt, for example. The truth is that we can’t address food security without fertiliser and green hydrogen is the foundation of innovation towards cleaner chemicals broadly.”

4. Africa could be the first region to develop sustainably

5. New private markets structures tailored to African markets may be on the horizon

Eghosa Omoigui, Founder and Managing General Partner, EchoVC Partners

“When we look at our sectors, it’s clear we don’t have the right fund vehicles. When we are doing healthcare, education, agriculture, foodtech and so on, they are very exciting because they are about meeting daily demand. But it takes a long time to build material outcomes. You need 15 to 20-year vehicles for this. These opportunities loom, but until we have alignment between GPs and LPs about creating the right vehicles to pursue these sectors, we’ll continue to have conversations about this.”

Franziska Reh, CEO and Founder, Uncap – Unconventional Capital

“The way we invest in African countries is still very conventional and driven by LPs. Yet we all recognise that the continent works very differently. We need to ask whether the typical structure where we aim for an exit within a certain timeframe is right for African markets. Many LPs take the view that they are not interested if structures are even slightly different from what they are used to. We need to build financial structures tailored to the market. I am starting to see some LPs question whether the way things have been done so far is the right approach. We talk a lot about investing in highly innovative companies, yet there has been no innovation around how to invest in them, how to provide capital to fund innovative structures and how to conduct due diligence in an innovative way. If we could achieve this, we could drive immensely more capital towards entrepreneurs in the region.”