Why the EU should pay attention to Africa’s tech sector

As the EU defines its priorities for an EU-Africa partnership, Africa’s burgeoning tech sector is an obvious starting point for collaboration, argues Dan Dalton.

Dan Dalton is a former MEP and current Senior Advisor for Allied for Startups.

At the end of March, the European Parliament defined its new strategy for the EU-Africa partnership. The proposal emphasised improving EU collaboration with African governments around development issues, but also highlighted possible support for the continent’s digital transformation.  

As Brussels sharpens its focus on supporting Europe’s tech sector as an engine of growth, collaboration with Africa in tech is an obvious starting point for a new strategic partnership to develop. Indeed, for Europe’s tech sector, there may be much to learn. 

The African tech ecosystem is like no other. With half of the continent’s population under 19 years old, mobile technology booming, traditional infrastructure still patchy across much of the land, and population growth driving the development of mega cities, the digital economy has near limitless potential to make Africa the tech success story of the 21st Century.   

Tech hubs are growing across Africa, with an estimated 643 active in October 2019. Nigeria is the biggest tech market in terms of internet users and mobile subscriptions and also has the most hubs, with over 90.  Africa’s digital potential is most apparent in the Nigerian mega city of Lagos, which has become Africa’s biggest tech hub and has been described as Africa’s Silicon Valley. Lagos is poised to become one of the biggest cities in the world, with a predicted population of 80 million by the end of the century. As the digital economy tends to thrive in cities, the potential for explosive growth is obvious.  

Lagos isn’t wasting any time though, and its fintech sector is leading the way. Between 2014 to 2019, Nigeria’s fintech scene alone took in more than $600m in funding, and in 2019, Nigeria took in one-quarter of all funding raised by African start-ups, much of this centred on Lagos. 

The cultural sector is also booming, thanks in part to its proximity to Nollywood, the Nigerian film industry. IrokoTV, a Netflix type service is now the world’s largest online platform for African entertainment and is poised to list on the UK stock market. From online groceries to hotel bookings and recruitment, Lagos is well positioned to drive Africa’s emergence into the global digital economy.  

However, the African tech ecosystem has distinct challenges. A lack of funding limits its growth. The small footprint of the state, particularly in rural areas also means that non-profit or donor-funded organisations make up over half of the continent’s tech hubs.  

Tech startups are therefore filling the gaps in state provision, creating a start-up ecosystem unlike anything seen in Europe or America. While the pandemic caused significant disruption to the tech industry, the heightened demand for remote access to services, particularly digital banking, has seen the Africa tech industry play a greater role than ever in people’s lives. Government regulators, such as Nigeria’s CBN, have worked closely with banks and tech firms to promote digital payment tools, and combine cashless payments with financial inclusion programmes so that innovations by fintechs can address immediate issues raised by the pandemic. 

This has created a distinct environment where startups act as quasi-NGOs providing essential public services. They have a unique perspective and are unlike anything their counterparts are doing in Europe.  

Europe’s public services are well funded, but often fail to meet citizen’s expectations, which are changing in an increasingly digitalised economy. Africa’s experience could be hugely valuable in shaping 21st century European public service provision.

While there has been growing Western investment in this area, it is not yet enough to ensure the sector remains sustainable. Until there is a greater emphasis on the potential of the private tech sector in Africa to help meet development goals, the true potential of African startups to contribute to long term development goals will not be realised. 

The digital Revolution is already emerging in Africa. It is distinct and unique. It will create a new range of globally recognised African companies, and it has the potential to extend the range of state services, if done correctly. Through the help of predominantly American investors, hubs are developing throughout the continent. While the EU focuses on its own digital infrastructure, it should also look abroad for lessons and opportunities and ensure that a focus on tech should be at the heart of any EU-Africa partnership.