Africa's Internet Economy has the Potential to Reach $180bn by 2025


Wednesday, November 11, 2020 / 05:19 PM / By Google Africa and IFC  / Header Image Credit: Google Africa and IFC 

The African Internet economy is one of the largest overlooked investment opportunities of the past decade with potential for profound impact on development. The mobile Internet is transforming life across the continent with the support of growing local connectivity and mobility and a dynamic, young urban population. With a potential to add up to $180 billion to Africa's gross domestic product (GDP) by 2025, depending on the usage intensity of digital technologies by businesses, the Internet economy is improving productivity and efficiencies across large swaths of the economy, including agriculture, education, financial services, healthcare, and supply chains.


The Internet economy's potential to play a pivotal part in Africa's GDP growth has led to burgeoning investor interest. Buttressed by increasingly large liquidity events in African technology, even in the wake of the pandemic, venture capital funding in Africa reached an all-time high in 2019. There are signs that African venture capital funding is continuing its forward momentum, despite near-term disruption caused by COVID-19. The total amount of invested venture capital is still a fraction of total global venture capital funding, especially relative to the size of Africa's population, but this gap presents potential first-mover advantages for investors.


The COVID-19 pandemic has demonstrated that digital startups in Africa are able to provide innovative solutions when they are needed most. For example, public sector partnerships with private healthcare startups are increasing the availability of testing and have expanded the capacity for medical recordkeeping. The continued operation of the informal sector - a major portion of Africa's economic activity - is supported by e-Logistics and e-Commerce supply chain startups. New partnerships and business models like these will likely continue to influence startups across all industry sectors, even beyond the COVID-19 pandemic.


Africa has the world's youngest, fastest-growing, and increasingly urbanized workforce. These demographics, coupled with improved longevity and education levels, have led to a rise in the consumption of online services. Additionally, heavily concentrated populations in Africa's cities are supporting developer communities that attract new investors and talent pools. Rural populations also benefit from digital startups, and the Internet economy is critical to reaching and supporting the continent's 1.3 billion people.


The African Internet opportunity is driven by the talent of young digital entrepreneurs. Startups are solving some of Africa's most challenging issues, such as access to healthcare for remote populations, employment opportunities for women, and the ability to securely send and receive money. Advanced technologies-tailored to data-driven, scalable, and pan-African approaches-are providing new ways for Africans to conduct business and earn income. A robust collaboration between the private and public sectors is imperative to ensuring that African entrepreneurs succeed, not only in their home countries and regions, but in the global marketplace. Startups, and the entrepreneurs who create them, are the future of the continent.


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