The titans of Silicon Valley are undeterred by the economic slump afflicting much of Africa. Facebook, Google, Oracle and Uber Technologies are at the leading edge of turning the world’s frontier markets digital. As the commodity crash buffets the continent’s biggest economies, the interest and investments could not come at a better time
Almost half of foreign direct investment projects in Africa last year were in technology, telecommunications, financial services, and consumer products. The amount dedicated to oil, gas, and mining dropped to 6%, from almost a quarter in 2005 – according to EY, a consultancy firm.
Investors have adapted by focusing more on the continent’s young population and rising middle class as harbingers of opportunity. Countries less exposed to commodities are reaping the benefits. The number of foreign direct investment projects carried out by private-sector companies in Kenya rose to 95 in 2015 from 62 the previous year, the biggest increase among African nations, according to EY.
Investment in West Africa’s Ivory Coast, which the International Monetary Fund said will grow 8.5 percent this year, more than anywhere else on the continent, is also booming. Heineken NV announced a new brewery last year, French retailer Carrefour SA opened its first store in December, and Burger King launched its first sub-Saharan restaurant outside of South Africa there the same month.
Still, Facebook CEO Mark Zuckerberg just traveled to Kenya and Nigeria on his first visit to sub-Saharan Africa. In Nigeria, where his personal fund in June invested $24 million in Andela, a Lagos-based start-up software developer, he said he was “blown away by talent and entrepreneurs in this country”. In Kenya, he said he wanted to learn how businesses were using mobile money.
Oracle said this month that Africa was a “priority market” in which “cloud technology will undoubtedly drive the next phase of growth for businesses”. Uber has entered Nigeria, Ghana, Uganda, Tanzania, Kenya, Morocco, and Egypt, since launching in 2013 at South Africa. Last year CEO Travis Kalanick named the continent as one of his priorities, along with China and India.
While minerals, oil, and gas will continue to attract substantial money from abroad, internet-based industries will become more prominent over the next few years, according to Adeniyi Adedokun, an economics teacher at McPherson University in southern Nigeria.
“Investors need to diversify,” he said. “It’ll take time, but they are changing their strategies. They are focusing on manufacturing and construction. And telecommunications is attractive due to the growth of broadband and smartphone penetration.”