On the back of Cape Town being recognised as the tech capital of Africa, topping international rankings for foreign direct investment strategy, Ian Lessem, Managing Partner at HAVAÍC – investors in early-stage, high-growth technology businesses – said several other African cities are quickly emerging as leading start-up and investment hubs to watch.
“Start-ups in Nigeria, Kenya, Egypt and South Africa raised a total of US$625 million last year. Of those, Kenyan start-ups raised US$191 million, the most of any other African country, according to Disrupt Africa’s African Tech Start-up Funding Report for 2020. Distinct start-up geographies are emerging in Africa, each with the potential to become its own powerhouse,” he said.
In addition, the World Bank predicts that two thirds of the world’s GDP growth will occur in cities over the next 50 years. Lessem said Africa’s rapid urbanisation is a welcome development as cities foster greater economic potential, business collaboration and technological innovation needed to leapfrog traditional infrastructure, which can result in creating thriving tech ecosystems.
“HAVAÍC sees Southern Africa, dominated by South Africa; Anglophone West Africa, led by Nigeria; Francophone West Africa, dominated by Cote d’Ivore and Senegal; East Africa led by Kenya; and North Africa dominated by Egypt, as key African geographies to pay close attention to. Each are quite different, with some of them tackling more regional challenges and others offering globally scalable solutions,” said Lessem.
A diversity of businesses are emerging in critical sectors such as e-health, FinTech, security and education, as African start-up investment continues its upward trajectory, having increased year on year for the past five years. “West African hubs like Lagos have benefitted hugely from locals being skilled abroad and returning home where a young, bourgeoning middle class are open to new FinTech propositions as we have seen from the likes of Flutterwave. While in Nairobi, an influx of foreign direct investment and financing from national development finance institutions, coupled with international skills transfers, have contributed to creating a flourishing start-up environment,” said Lessem.
He added that Cairo’s access to favourable funding and product distribution from the Middle East is unique on the continent. “Egypt’s large local customer base and proximity to major international hubs in the UAE, Qatar, Oman and Saudi Arabia make it a strong B2B (business to business) and B2B2C (business to business to consumer) regional player. Of course, South Africa’s strong blue chip corporate base and financial and digital infrastructure have ensured the country’s start-ups have been able to enter developed markets with their seamless tech competing toe-to-toe in international markets.”
HAVAÍC’s own investment thesis is centred around investing in local African tech businesses that have the ability to scale and service both regional and global markets. “Our ability to invest locally, strategically nurture and help internationalise our portfolio is what sets us apart. More than ever before, investing and supporting local, growing innovation with the potential for global elevation is a smart investment decision at the heart of Africa’s future,” Lessem said.
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