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Investing in Africa just makes sense. By 2050, one of the biggest workforces in the world will be in Africa, because most of its population will be working age and able to drive significant economic benefits for the continent. Catherine Young, Founder of Thinkroom and Thinkubate, sheds light on the continent’s burgeoning startup landscape and its potential to fuel innovation and drive economic growth and global competitiveness.
Recently, The New York Times ran a story titled “How a Vast Demographic Shift Will Reshape the World.” Editor Lauren Leatherby discusses the changing global demographic landscape: “For decades, the world’s dominant powers have benefited from large working-age populations that help drive economic growth,” adding that the globe’s demographic “sweet spots” are changing fast. She suggests that in the near future, the most balanced workforces will come from regions like South and Southeast Asia, Africa, and the Middle East.
Experts predict that this shift could significantly impact economic growth and geopolitical power dynamics. Just imagine the potential for growth that could position Africa as a centre of global commerce in 2050. However, seizing this opportunity requires collaboration among major corporations, universities, investors, funders, and venture capitalists (VCs) to channel investments into Africa and, in particular, South Africa.
Africa has a population that is quickly approaching 1.5 billion people, and it is the continent with the highest entrepreneurial population in the world. According to the African Development Bank, 22% of Africa’s working-age population are starting new businesses.
But the biggest problem that could threaten everything is the need for more funding for entrepreneurs. Foreign venture capital investment into Africa fell 43% during the first half of 2023. VC investments in tech startups plunged by 48% in the same year.
Africa’s burgeoning population and entrepreneurial spirit hold promise for economic growth and innovation, but the critical funding gap must be addressed to harness this potential.
I was sitting with a group of funders, investors and government officials who had come together to solve this problem when Audrey Verhaeghe, CEO of Anza Capital, described the massive lost opportunity cost if entrepreneurs in Africa don’t get seed funding: “If you think about pre-seed to Series A, it’s really the beginning of industrialisation. It is where new ideas and the creative economy belong in Africa. If you do not invest in this early stage, you lose that capability in your economy.”
“If there is no investment, you’re just creating a big gap, which renders the region an import economy instead of an export economy. The lost opportunity cost is massive,” she says.
This isn’t a new problem. Underinvestment in African startups, more particularly in female founders, has plagued this continent for decades. But, if we change this, we can create real exponential growth — the kind that changes economic regions.
For change to happen, private companies in South Africa and Africa must stop hoarding their cash reserves and make some of these available for investing in Africa’s startups in balanced portfolios of gender and race.
An estimated R1.6 trillion is being held in reserve by the JSE’s top listed companies. As an asset class, VC needs only 2% of pension funds and corporate money to change Africa’s future forever.
Africa has enough potential for sustainable agriculture to feed the world. The continent is transforming free trade agreements, and its youthful population is driving technological development and startups at an unprecedented rate. Let’s start investing in Africa, because when we do, we’re building companies that become SMEs or even Unicorns.
By harnessing under-utilised capital, we’ll enable innovation, greater competition, new markets, and product diversity. And we’ll solve our intractable challenges, because no one sorts out problems on the continent better than African founders.
The time for investing in Africa is now.
If your business is looking to drive transformation through enterprise and supplier development and you’re looking for a partner to help, reach out and we’ll get back to you!
