Since 2000, Africa has been the second fastest growing economy in the world after China. As of 2010, Africa’s GDP was estimated at $1.8 trillion (comparable to that of Russia or Brazil) and Africa’s consumer spending was estimated at $900 million. This growth is expected to continue at an accelerated pace over the next 50 years. In 2020, Africa’s GDP is expected to reach $2.6 trillion Africa’s consumer spending is expected to reach $1.4 trillion.

Contrary to popular beliefs that natural resources are the main source of growth, natural resources only accounted for 26% of Africa’s growth, whilst 40% of that growth was generated by consumer goods and services as a result of the rise of the urban African consumer.

Today, 40% of Africans live in cities, a proportion that is close to China’s and continuing to expand. The continent already has 52 cities with populations greater than 1 million—equal to Western Europe—and is projected to add 32 more by 2030. As in other developing economies, urbanization in Africa is creating jobs, boosting productivity, and lifting incomes.

The number of households with discretionary income is projected to grow by 50% over the next 10 years, reaching 128 million. Africa’s workforce will become the world’s largest by 2040, with 1.1 billion workers, ahead of both China and India.

Digital technology (mobile banking, e-commerce, e-education, e-health, distributed energy…) will add USD300 billion to Africa’s GDP by 2025 according to McKinsey.

In 20 years in Africa, banking will no longer be done out of branches, education will no longer be provided at schools and universities, and energy will no longer be produced out of centralized power production facility.

While other regions in the world have to deal with legacy infrastructure that is costly to maintain and transform, Africa is nearly starting from scratch and can directly establish better and cheaper infrastructure.

Transformation

Mobile telecommunications transformed Africans’ access to telephones, increasing penetration from less than 1% to more than 50% over 30 years. Telecom firms have signed up more than 400 million new mobile-phone subscribers in Africa since 2000,more than the total US population.Mobile generated 6.7% of Africa’s GDP and 3.8 million jobs in 2015.

Unprecedented Growth

The ongoing rollout of 4G and LTE technology across Africa combined with the decreasing cost of smart phones has led to an unprecedented growth in the number of mobile broadband connections in Africa. The number of smartphone connections in Africa is now in excess of 300 million with an additional 250 million expected by 2020.

Many operators in the region recorded data traffic growth of more than 50% in 2015. As a result, data revenue as a share of total revenue is rising rapidly across the region, reaching 15% on average but considerably higher for mobile operators in the more advanced markets such as South Africa and Egypt.

This digital transformation for Africa has paved the way for African industries to leapfrog. For instance, M-Pesa a Kenyan company has become a global leader and innovator in mobile banking, which substantially improved financial inclusion in Africa. Today, Africa accounts for 52% of the 271 live mobile money services in 93 countries and 64% of all active mobile money accounts.

Similar effects of digital transformation are possible across many other industries in Africa, including electricity, distribution, education and healthcare, thanks to modern digital infrastructure and adoption rate by Africans that provides Africa with a comparative advantage to other regions in the world.

• Example of Companies such as Off-Grid Electric, supported by international investors are providing access to clean and affordable electricity across the continent, lighting the homes of over 50,000 people per month, and that number is only increasing.
• Example of Companies such as Get Smarter, supported by international investors, are providing affordable and high quality E-education by partnering with the world’s leading universities to offer the highest quality, career-focused online short courses to Africans.
• Example of Jumia, Nigeria’s no. 1 online retailer was established in May 2012, has more than 1,000,000 customers with Substantial Month to Month Growth, 1,000,000 plus Facebook followers, and 35,000 twitter followers.

This digital transformation has caught the eye of international investors. Across the region a Silicon Valley inspired network is developing. We have identified the existence of more than 200 African innovation hubs, 3,500 new tech related ventures, and $1 billion in venture capital to a pan-African movement of start-up entrepreneurs.

MFC’s digital transformation team, led by Hussein Abdel Karim, whose previous role was as a founder CEO for Rocket Internet ventures including Jumia, is at the forefront of mobilizing capital for African digital technology entrepreneurs. We are confident that the digital industry will generate several billion dollar companies in Africa over the next 5 years.