Forget mobile-web: here are 5 sectors in Africa worth your money and innovation

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Africa

Mobile-web is all the rage in Africa lately, and not without reason. Mobile penetration and access to the internet is going to blow up in the coming years on the continent, connecting around one billion new and empowered consumers waiting to be tapped into.

But let’s not forget that there are other areas, sectors, that could use our attention – be it in innovation from entrepreneurs, or from funding. Let’s take a look at five.

Energy

The energy crisis on Africa is widespread. Countries such as Nigeria, Kenya and Tanzania have unreliable electrical infrastructure which results in frequent shortages. The result is that most households and, according to Omidyar Network’s “Accelerating Entrepreneurship in Africa” report, entrepreneurs too, purchase diesel generators to supplement grid electricity.

This increases the cost of running a business. South Africa doesn’t face as much of a supply problem, but its increasingly higher and higher electricity tariffs pose a problem to running a small business there too.

Nigeria’s solution has been to privatise, where six power generation companies in the country have been privatised, and some have even received foreign investment.

With privatisation, I say let’s invite competition. Sure foreign players might be getting involved, but as the demand for power grows on the continent so does a gap form that could be filled by some innovative technology: alternative power generators and sources, or more efficient means of running households and companies. Alternatively rival the foreign players, and try create electrical infrastructure to serve, in particular, small local businesses. This kind of infrastructure would require significant capital investments though, but could result in excellent returns if the right areas (those with strong economic activity) are targeted.

Health

Sub-Saharan African countries are still plagued by health challenges. From poor healthcare facilities with endless queues, to the quality and training of doctors and other healthcare professionals.

Most investment has focused on hospital systems (which are often still grossly understaffed) and not on the over-riding structures that are in place to empower the health sector to respond more readily and effectively to the continent’s growing demand for quality health care.

This presents entrepreneurs and investors an opportunity to devise innovative health solutions. One area to be focused on is perhaps modernising the structures of the systems in place. The admin-side of medicine is still largely facilitated by paper and by phone – from finding a medical practitioner, to booking appointments, to paying. Never mind in lower income areas where there aren’t enough facilities to serve the demand for healthcare, and patients have to travel far just to wait in a queue for hours. This is a problem of health services.

We need information systems that can save time and improve efficiency. We need to generate more effective data that can be used for policy and decision-making. This is a problem of technology. Most importantly, we need to find better ways to get those in need the healthcare that they deserve.

Infrastructure

In a recent interview with 88mph Nairobi director Nikolai Barnwell, he pipped infrastructure as a huge need for where Africa needs innovation. Not only do electrical structures need to be improved, but also roads (and railroads), communications, even the judicial system. All but the latter result in higher costs for running small businesses as they are all physical infrastructure.

Of the African entrepreneurs surveyed by the Omidayar Network for its report, only 38% agreed that infrastructure provided sufficient support for new and growing firms. However, the high costs of infrastructure was seen as an obstacle, with only 23% of entrepreneurs believing that new and growing firms could afford the costs of using infrastructure.

New technologies could be used to address communications, a gap for mobile to fill no doubt, but other innovations; such as enabling more efficient railroad systems, or battling corruption could further serve these needs. Lowering the cost of infrastructure needs on small to growing firms has to happen from the bottom up though, and needs capital investment to do this.

Education

Saying that Africa needs to improve its education system and services is nothing new. However, this could be approached from the angle of entrepreneurship and business training.

Malik Fal, managing director of Omidyar Network Africa, when speaking to Ventureburn about the challenges Africa faces, mentioned that African entrepreneurs operate in a complex environment, and often don’t have the business training to scale their businesses appropriately.

Another thing he noted is that there is a culture of innovation within the mindset of young entrepreneurs and Africans for that matter, however:

“people’s acceptance of entrepreneurship is more on the shallow and glamour side of things. What they don’t appreciate is the journey.”

There is not only a gap, but also a need to foster young entrepreneurs and this culture of innovation. We need to implement this on a grassroots level. Funding and innovation is needed to create new, and improve existing, business schools that teach of this journey, and empower entrepreneurs to better compete and innovate within their marketplace.

Funding

It seems quite funny to say that we need funding for funding, yet there is a huge need for development in the funding space in Africa.

Early stage sources of financing (Angel and VC) are small, both in supply and access to capital. Omidyar Network’s report states that 84% of SMEs in Africa are either un-served or underserved, representing a value gap in credit financing of US$140-170 billion.

Because of this, small and growing enterprises either take loans from family and friends, on their credit cards or from loan associations. Once these sources are exhausted, the challenge of tapping into other sources of capital is missing. This is where we need development: to expand funding networks, and to educate entrepreneurs about the various sources of funding out there. The system needs to be formalised.

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