Investors Turn To Tech Startups In Africa As Commodities Slump Bites

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Written by Kevin Mwanza

Investors have turned to tech startups across Africa in a shift from the traditional sectors such as mining due to ongoing economic slump in most African economies, occasioned by the global fall in commodity prices.

The startups have given investors a reprieve in the wake of a commodity prices slump that has hit currencies in large economies like Nigeria and South Africa and led to a significant reduction in production in the mining sector in Zambia.

African tech startups received $185 million in funding from investors last year, Forbes reported, while analysts predict a boom in the industry this year.

“There has been a big shift from an almost exclusive focus on extractive sectors to those such as consumers and renewable energy,” Bloomberg quoted Michael Lalor, the head of Ernst 7 Young’s Africa Business Centre.

Most of the continent’s economies are in crisis, and investments to oil, gas and mining industries fell to six percent while technology, consumer products, financial and telecommunication sectors took almost half of the total Foreign Direct Investment (FDI) last year.

The continent received $38 billion in FDI last year.

Microsoft, Cisco, Intel, IBM, Facebook Inc., Oracle Corp., Uber Technologies and Google are some of the global giants in the technology and communication industry that have set operations in Africa, Disrupt Africa reported.

Leading ecosystems in Nigeria, South Africa and Kenya have spurred innovation, attracting investors. The recent boom in internet penetration and mobile phone network in sub-Saharan Africa provides a potentially rich yet unexploited market for global information communication and technology firms.

Kenya, the biggest economy in East Africa, is the leading destination and has attracted more private investors than Angola and Nigeria which are considered more vulnerable due to their heavy reliance on oil exports, Bloomberg reported.

Private investors in the nation carried out 95 projects last year. This was an increase from 62 projects the previous year.

An investor boom has led to unprecedented growth in the continent’s tech startups. Technology hubs across Africa have doubled in the last one year. There are at least 314 tech hubs spread in 42 nations Quartz Africa reported.

More than half are located in Kenya, South Africa, Morocco, Egypt and Nigeria.

The tech hubs have provided alternative solutions in the health, energy, transport, financial and consumer goods sectors and increased job opportunities for Africa’s youth population.