< Africa a leader in technology development />

Africa a leader in technology development

Why Africa is perfectly poised to take the lead in the development of technology

As economies in Africa start to recover and grow post the effects of the Covid-19 induced pandemic, parts of the continent are also becoming leaders in the development of technology that is starting to garner recognition from the global market. The investment trends in Africa are a mixed bag with different appetites for risk and reward. While the global rich are looking for opportunities in emerging markets, current investors on the continent are approaching opportunities with cautious optimism. In its bi-annual report, the African Development Bank stated that “Despite the confluence of multiple shocks, growth across all five African regions was positive in 2022—and the outlook for 2023–24 is projected to be stable”, with some areas like Central Africa displaying growth.

The installation of undersea cables that increase connectivity, the African Union that leads to an increased requirement for interoperability in the market, the expansion of what from January is called BRICS+ to include Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates all increase opportunity for Africa-based technology firms to service the increasing need. Not to mention South Africa’s additional links to the international community including strong links with the United Kingdom, partners on the continent and trade agreements across the globe. These points create tech opportunities, which include an increased demand for automation and AI-driven solutions, cloud computing, the internet of things, cybersecurity measures, blockchain technology, big data analytics, predictive analytics, and fintech solutions.

The increase in data regulation across the continent is gaining momentum, with more countries enacting these laws. Currently, 36 of the 54 countries in Africa have data protection laws. These data protection laws align with the General Data Protection Regulation (GDPR) regulations as set out by the European Union (EU). By upholding these internationally required standards it opens the opportunity for companies on the continent to supply services to the global economy. In addition to the data protection laws, developers in Africa are focused on the importance of Know your customer (KYC) and the importance of this in maintaining trust in the financial services industry. In South Africa, this is regulated by the Financial Intelligence Centre Act, 2001 (FICA), which requires businesses who enter business transactions to implement KYC with the duties to identify all clients for every transaction, keep records of these transactions and ensure that measures by accountable institutions are promoted.

The combination of talent on the continent, as well as a legal environment that is more conducive to industry, has led to not just a spurt of sustainable growth but an increase in mergers and acquisitions. South Africa is historically a leader of the pack. In 2018 the deal value on the continent was estimated at USD 504 million, with 24 of the 39 being in South Africa.

This is not just an example of the increase in funding but also attracts fresh investment. According to a published report, “Despite a global funding winter, there was a 28% increase in venture capital raised in sub-Saharan Africa (SSA) in the third quarter of 2023, compared to Q3 2022. Increased investment has been driven by technological innovation, changing consumer demands and an increased focus on environmental, social and governance (ESG) initiatives.”

It is not just the Africa-centric expertise and the continent being well-known for inventions that changed industries, such as M-Pesa, the CAT scan, the ATM and lithium batteries. The innovative nature, strong work ethic and strong expertise in technology, especially in South Africa, is increasingly making it a preferred destination for both in-continent and foreign markets.

South Africa is recognised as being a strong contender on the continent when it comes to technology development. According to a Fitch report, "South Africa has one of the largest information and communications technology (ICT) markets in Africa. It has established itself as a technological and innovation hub on the continent. South Africa’s IT sector includes software development, hardware manufacturing, telecommunications, cybersecurity, digital services, Fintech, and digital payment. As an increasingly important contributor to South Africa’s GDP, the country’s ICT and electronics sector is both sophisticated and developing.’

The same report also states that, “South Africa’s ICT products and services industry is penetrating the fast-growing African market. South African companies and locally based subsidiaries of international companies have supplied most of the new fixed and wireless telecoms networks established across the continent in recent years.”

The diversion of software development from countries that have traditionally been used to outsource projects to South Africa is a testament to these mentions as the country’s expertise becomes better known.