Companies taking shape or looking for further growth on the African continent face unique sets of challenges and opportunities, here’s how improvement can be leveraged.
As African countries try to navigate a post-pandemic economic environment that’s riddled with rising interest rates and a looming recession for the American and European economies, it’s time to leverage decades-worth of knowledge and capability on the continent. A slowing global economy that’s still dealing with major disruption to the supply chain, coupled with a food and energy crisis derived from ongoing conflicts presents both chances and obstacles. But the upside is likely bigger for African companies.
Although countries on the African continent currently have a more limited industrial presence, growing opportunity for innovation and a move to more diversified funding models for up-and-coming ventures means that opportunity may increase.
As of 2021 manufacturing output figures, only two countries on the continent were present among the top 35—Nigeria and Egypt—while a third one, South Africa, waits in the wings to break the $50 billion figure. For that to happen, and for more countries to reach or overcome these milestones, a number of factors need to occur. Here’s a rundown of factors that may point to this being the African continent’s moment of opportunity.
Economic Uncertainty Provides Opportunity
As developed Western economies struggle with the fallout of inflationary practices, the moment presents itself with the possibility of newfound growth. Budding companies and startups can seize the moment and develop growth strategies that can increase their presence locally, to be able to challenge globally.
With startup accelerators now having a larger presence, opportunities arise for climate-focused ventures that can provide quick funding and boosts to entrepreneurs. Ventures in the space will also have the advantages of competitive labor costs, as well as a strong presence on a continent that directly deals with these issues and has an immediate interest in mitigating the impact of climate change while unlocking its economic development potential.
Funding Models Change
As the technology market develops, local companies can finally benefit from a more mature funding market, as venture capital (VC) becomes more ingrained. With a growing number of companies now having gone through several debt funding rounds, a rite of passage for the continent’s tech ecosystem. While equity funding has been around, fueling growth and providing potential for the development of new companies, debt funding has, until recently, largely eluded African startups, with volatility and risk the most often invoked reasons.
With the debt funding model now finally permeating the local startup landscape, that can mean more chances at a longer runway and less concern about burn rates and initial expenses. That also means that entrepreneurs need to have fewer concerns about giving up equity in the company to reach their goals and finance their projects. That directly translates into more control of innovation staying with the initial brain trust.
A Few Solid Principles for Growth
Both up-and-coming and established startups need to be mindful of the way they’re funding their operations, especially if they have a manufacturing component. A few basic ideas involve having a steady, predictable burn rate, making training staff a priority, proper inventory management, and having a clear roadmap to getting where you want across multiple phases.
To make it in competitive environments, companies on the African continent need to meet opportunities with clear plans, efficient spending, and a solid financing model. Recent successes, the rise of African industry, and fast-rising economies like Nigeria, all have to be capitalized upon so that new ventures from local entrepreneurs can flourish and challenge for resources.
Policymakers Need to Do Their Part
Innovation and growth are already happening at a strong rate, but to properly create an environment for growth, the policy must be directly involved. Fostering a culture of innovation and competition must be catalyzed by the right legislation and the people in charge need to react properly to the current environment.
Measures that need to be put in place for future development should include tax cuts, easing the transfer of wealth, preventing ongoing brain-drain to other continents, establishing proper relationships with the diaspora, and providing materials and access to resources.