Four Nigerian firms among Africa’s top 11 with $1b valuation in six years

•Africa’s digital payment space expected to grow from $115b to $712b

In the last six years, Africa has seen the emergence of eleven $1 billion valuation companies with five of them coming from Nigeria.

New report from Endeavor Nigeria, titled: “The Inflection Point: Africa’s Digital Economy Is Poised To Take Off”, which revealed this, said Africa’s technology ecosystem is poised for exponential growth. Six out of the 11 companies are fintechs, with the other five spread across education/talent, mobility and logistics, and digital commerce.

The report listed the companies to include Jumia, Interswitch, Zipline, Fawry, Chipper, Andela, go1, Swvl, Opay, Wave, and Flutterwave. It noted that Jumia, Interswitch, Opay, Flutterwave and Andela are from Nigeria; Egypt (Fawry, Swvl), and South Africa (Go1).

It explained that most deals in Africa are in the $0.2-5 million range with the $1 million to $5 million bracket growing the fastest, adding that over 600 deals are in this bracket compared to the over 150 in higher brackets.

“Therefore, the demand in the $5 million to $50 million bracket is likely to increase in coming years when these 600 companies ‘graduate’. However, given the significant drop in deal activity from $5 million onward, it is likely that there will be insufficient supply to meet demand. This presents an opportunity for investors in larger brackets that is, those above $5 million,” it noted.

The Endeavor Nigeria report revealed that Africa’s digital opportunity is large and growing. It estimated the size of the digital economy to be $115 billion and is expected to be $712 billion by 2050, which is to be driven by strong underlying fundamentals, accelerated by COVID-19.

According to it, investors are taking notice; between 2020 and 2021, funding for digital startups grew two times (2x) faster than global rates, and investors are becoming increasingly active in Africa.

The report claimed to be seeing proven exit paths for early investors as illustrated by the increase in mega-rounds, liquidity events and unicorns.

“However, there remains ‘white space’ for investors to consider. Due to the quantum of deals in the $1 million to $5 million range in the last year, (600) relative to the $5 million to $50 million range (~150), it is unlikely there will be sufficient supply in the market as companies from the $1 million to $5 million range graduate to larger ticket sizes.

“Opportunities for digital disruption abound across Africa. A number of sectors are underpinned by informality and fragmentation, limiting the availability and affordability of products and services. Digital disruptors address this problem in numerous sectors, including financial services, health, transportation, and others, by building a ‘wedge’ and then a ‘bridge’. A wedge solves a specific problem and builds a sticky customer base. After which, innovators build a series of solutions that cater to the adjacent challenges of the customer, in effect building an ecosystem of solutions,” it emphasized.

Going forward, the report asked investors, who are keen on investing in Africa to consider the wealth of opportunities available and also be prepared to adjust their business models accordingly to capture these opportunities.

It explained that while Africa’s $115 billion digital economy is in its early phases with 33 per cent of its individuals using the Internet against the global average of 63 per cent; 41 per cent are active broadband subscribers against global’s 83 per cent.

The report said 89 per cent of the African population is covered by a mobile-cellular network, against the world’s 95 per cent, while 83 per cent of Africa uses mobile-cellular telephone subscriptions against global 110 per cent penetration. In the areas of Fixed broadband, the region has one per cent penetration, while the rest of the world has 17 per cent reach.

FURTHER, the report said the continent’s digital opportunity is concentrated in four countries Nigeria, South Africa, Egypt and Kenya collectively represent 32 per cent of Africa’s population; 51 per cent of the region’s mobile cellular subscriptions; 50 per cent of Africa’s professional developers; 53 per cent of Africa’s cities with over one million population; 51 per cent of Africa’s GDP and 73 per cent of Africa’s accelerators.

Managing Director/CEO, Endeavor Nigeria, Tosin Faniro-Dada, said the data gathered in this report is clear – Africa is the next growth frontier in technology. She said the combination of our young and digitally savvy population, increasing digital penetration, and the impact of the COVID-19 pandemic on behaviours, amongst others, has triggered an inflection point in our digitization journey.

Faniro-Dada said this report draws on multiple sources, including analysis from McKinsey & Company.