AFRICA, AS A DIVERSE
AFRICA, AS A DIVERSE CONTINENT CONSISTING OF 54 MARKETS, MUST NOT BE TREATED AS A HOMOGENOUS ENTITY BY INVESTORS To become a global leader in telecommunications, Africa must first shift some fundamental misconceptions about the continent, writes Bernard van der Walt, Audit Partner and TMT Sector Lead at BDO South Africa, and Roy Kinoti Nkandau, Director of Audit and Assurance in BDO Rwanda. Every country is different and conditions and regulations vary. The spread of mobile phones has boosted the market for electric motorbikes and ride-hailing services. Credit: Zembo Africa, with some of the world’s fastest-growing economies and a rapidly expanding population, has the potential to become a global leader in telecommunications. However, some basic misconceptions about Africa have to be corrected. We must move away from the belief that Africa is a unified market. It is not. The sheer size of the continent is massive, with the ability to accommodate China, Europe, the continental United States and a significant portion of India within its borders. This expansiveness is not just geographical, but cultural too. It is home to more than 1.2-billion people, not far shy of China’s populace. Upwards of 2 000 languages are spoken on the continent. By comparison, Europe houses a little over 200 argots and dialects. The truth to be told here is simple: Africa is a region, not a market. It is crucial for us to understand that Africa is not a homogeneous entity but a diverse continent consisting of 54 markets, each with distinct political dynamics and economic climates; our Africa of today and the future is a region of diverse nations. As such, the argument stands firmly that we cannot logically “invest in Africa” because it is not one country with a single currency, government and regulatory framework, social system or business ecosystem. From a business point of view, companies do not operate “across Africa”. They instead have the opportunity to win share in specific national markets. Without a doubt, over-generalisation cannot win in the region as operating in our context requires a tailored approach for each specific national market, and trying to extrapolate trends for consumer app adoption generically will only produce an inaccurate and dangerous conflation of no value. There’s wisdom in the opportunity of complexity The technology, media and telecommunications (TMT) industry serves as a prime example of the intricate dynamics that make it challenging to adopt a one-sizefits-all approach to doing business in the region. As providers of connectivity and 32
TELECOMMUNICATIONS essential services, telcos play a significant role in building trust among consumers as they enable them to connect with others anywhere in the world and make and receive payments. Looking at the sector, even from a basic perspective, we realise the depth of variations and nuances in market dynamics as there are extensive and innovative ecosystems. In East Africa alone, consider some of the giants in digital payments and mobile money solutions: Safaricom’s M-Pesa in Kenya, MTN Network’s Mobile Money in Rwanda and Uganda and Airtel Money in various countries. Within renewable energy and green technology spaces, there are companies such as M-KOPA Solar, BBOXX and Powerhive which offer affordable and clean renewable energy solutions using solar power and battery storage, leveraging the Internet of Things (IoT) and cloud technology for monitoring and management. Artificial Intelligence (AI) is also leaping ahead with the likes of Twiga Foods, Shield and Flare utilising AI and machine learning algorithms to optimise supply chain logistics, combat financial fraud and optimise emergency response systems. In terms of mobile technology, East Africa has witnessed remarkable mobile penetration, with this technology becoming the primary means of communication and Internet access. Mobile money services and mobile applications are now widely adopted, with efforts being made to expand broadband coverage deploying 4G and 5G networks. Network infrastructure is also progressive with significant investments made in submarine and national fibre-optic cables, improving international connectivity and broadband coverage – and this is just a glance at the full picture of the advances taking place. Roy Kinoti Nkandau There’s no x-factor in entrepreneurship Another common misconception is the belief that all African startups can be categorised as “X for Africa”. In reality, the startup ecosystem of the region has evolved in three waves. Initially, these businesses emulated e-commerce models like Amazon, followed by drawing inspiration from Asian counterparts. A third wave emerged with them adapting to the realities and requirements of local environments. This showcases the distinct entrepreneurial spirit and solutions originating from within the African ecosystem. Assuming that global values apply to startups on the continent is another fallacy. In reality, valuations in African countries differ significantly, challenging preconceived notions of Western investors. African deals are now valued at all-time highs, reflecting the growing confidence and willingness of investors to support these fast-growing businesses. Importantly, this discrepancy necessitates a more detailed method of appraisal, considering the factors at play in each market. But first and foremost, we have to get a global grasp of the continent right. Africa cannot be treated uniformly, and acknowledging and understanding the complexities of this is crucial to enabling a powerhouse of inclusive impact – across the region. About BDO BDO in South Africa is the South African member firm of BDO International. BDO is the brand name for the BDO network and for each of the BDO member firms. The global BDO network provides audit, tax and advisory services in 164 countries, with over 95 000 people working out of 1 713 offices worldwide. Service provision within the international BDO network of independent member firms (“the BDO network”) is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Brussels. Bernard van der Walt 33
