As explored in part I of this series, the impressive level of investment in Africa and its private sector and venture capitalism is evidence that a Digital Wakanda could be on the horizon. If you’re frantically googling Wakanda, go back and read part I now. But, is the rate of investment enough to keep in line with Smart Africa’s 2030 goal?

Enablers to a Digital Wakanda

If we jump right in, it’s clear that there are some very strong enablers to Africa realising a Digital Wakanda.

  1. Private sector investment – ‘Soonicorns’ and Unicorns 

We can expect increased activity in the number of IPOs, acquisitions and scaled funding across the continent. There is appetite to invest in the African FinTech space, and it is already causing a ripple effect for foreign investors. In addition to this, the younger generation of African programmers and coders will see opportunity in this and in government led ‘Startup Acts’ that encourage entrepreneurship.

  1. Partnerships & Industry collaboration 

Large multi-nationals will need to actively partner with governments. Some African banks and Telecoms giants are currently co-creating in this way and have been able to realise the benefits of forming strategic partnerships. Namely, gaining insights from innovative start-ups in order to broaden their service offering, whilst in return sponsoring and incubating businesses to grow into economic contributors. The other side of this coin is where big players in an industry can work together (without formal agreements in place) to drive growth or to combat issues such as financial crime, sustainability, or digital identity as a collective.

  1. Co-ordinated regional bodies  

Organisations such as The World Bank Group, The African Union and The African Development Bank, in tandem with policies like the African Continental free trade Agreement, increase opportunities for foreign direct investment as well as entrepreneurial Africans to create new business.  

Is the rate of investment enough?

Yet, although these signs of record-breaking growth in Africa are encouraging, it’s important to consider how this compares on a global scale. Crucially, is this rate of accelerated investment enough to meet the ambitious 2030 target? Take Dubai’s digital emergence, for example. Situated in the UAE, it is often heralded for its impressive economic re-invention. Transformed from a humble fishing harbour to one of the world’s most bustling metropolitan cities, Dubai has consistently been cited as a top global city destination for FDI Capital. To put things into perspective, in 2015, the city of Dubai received $7.7bn. Whereas, the entire continent of Africa received $40bn in 2020 – a figure that equated to a miniscule 4% of global FDI. Aside from the obvious difference in economic factors that affect these two geographies, and the impact of COVID-19, the point remains that Africa’s piece of the FDI pie seems small. Particularly if they have aspirations of competing with the likes of Dubai and its special economic zones, tax breaks for businesses and myriad of digital programmes (Internet city, Silicon Oasis and Finance centre). Considering the ambitious projects and policies that keep Dubai relevant on the global stage, it is worth mentioning that ‘Smart Africa’ has recognised the UAE as not only a strong case study for what a digital economy could look like, but also as a potential investor into the continent. They have partnered to promote investment in Africa’s digital transformation by forming an ‘annual investment meeting’.

So, what are the potential blockers?

FDI aside, a number of existing challenges need to be addressed to increase ‘Smart Africa’s chance of success:

  1. Regulatory integration  

There is hesitancy for intra-country trading from African leaders. Why? Because there is a lack of co-ordination in accounting and financial standards, leaving Africa unable to embrace a continental currency that is easily exchanged. This means that the continental exports will remain low (19% of total exports) in comparison to other regions such as Europe and Asia, where continental exports are roughly 60% of total exports. To further highlight this point, one year on from the African Continental Free Trade Agreement (AfCFTA) and many nations are yet to ratify all the articles of the agreement, sceptical of any benefits that will be made to their economies. Surprisingly, firms are still unaware of the existence of the agreement and there is a severe lack in AfCFTA’s customs infrastructure and policy

  1. Human capital 

Experts fear that many Africans are not learning the skills they need for 21st century jobs. Sub-Saharan Africa has the lowest literacy rate of any world region – this is a potential issue as demand for digitally skilled workers is continuing to soar. Some popular theories on how to improve this are to have better digital education, improved infrastructure for the supply of electricity and by having higher levels of access to the internet for Africans.

  1. Broadband strategy 

Less than a quarter of Africans have access to the internet. Adopting a strategy that connects Africa will increase financial inclusion and open a plethora of opportunities to African businesses and entrepreneurs. However, reasons for slow adoption are a combination of affordability, digital skills literacy, and the lack of content in local languages. 

So what?

At Elixirr, we know the value of the VC community. Our global innovation ecosystem, made up of start-ups, VCs, entrepreneurs, and accelerators allows us to constantly use expertise and insights from world-leading start-ups to help clients disrupt. VCs drive innovation in economies and should be seen as a critical component in the realisation of a ‘Digital Wakanda’. But, having an emerging VC environment is only one piece of the puzzle. So, a variety of factors need to align to accelerate towards a digital economy. Low levels of FDI globally, hesitancy from African governments to adopt beneficial continental agreements, and the ability to supply a digitally empowered workforce to meet the future demands of the continent, to name a few. 

A complex set of challenges face ‘Smart Africa’, which will have to be met with agility, collaboration and entrepreneurialism in order to create a Digital Wakanda. Key to its success is a healthy private sector and attractive technology investment landscape for foreign investors – all underpinned by an innovative regulatory environment. Wakanda forever?