Although expectations for GDP growth in African countries at the beginning of last year were higher, a report from the African Development Bank showed that GDP in African countries grew by 3.4 percent compared to the previous year. Despite a slight slowdown in the growth of the oldest continent’s economies, as well as foreign investments, which nearly halved in 2022 compared to the previous year (44 billion dollars from a record 80 billion dollars in 2021, according to UNCTAD), African countries, primarily South Africa and Nigeria, have been slowly breaking through among developing countries in recent years. This is a result of improved business climate and better access to the internet and technology.
In the economic rise of Africa, the role of the IT sector is particularly highlighted due to the abundance of minerals needed for high-tech products (aluminum, cobalt, copper, lithium, and manganese) and a young, rapidly growing, and increasingly digitally literate population. A total of 633 tech startups from the oldest continent attracted 3.3 billion dollars in investments in 2022, representing a growth of 1694 percent compared to 2015. Seventy-eight percent of those investments, or 2.7 billion dollars, went to South Africa, Nigeria, Kenya, and Egypt. Almost half of the investments were raised by fintech startups, followed by those developing technological solutions in the e-commerce and retail sectors and healthcare.
Africa was one of the first major markets that the Croatian unicorn Infobip stepped into with its SMS messaging technology over a decade ago. In the last three years, since Infobip acquired the Shift conference and formed a developer experience department, they have been trying to bring their technological solutions closer to local companies, startups, entrepreneurs, and developers by organizing meetups. In addition to networking, Infobip aims to present its technological solutions to the African market, explains Marijan Čipčić, tech community manager at Infobip.
– Through our Startup Tribe, which operates within the Developer Experience Department at Infobip, we offer startups the opportunity to use free packages of Infobip communication services worth between 10,000 and 60,000 dollars. In this way, we want to help startups accelerate their growth. Through our meetups, we assist in the development of local developer and startup communities while presenting local success stories. The networking part of the meetups is also very important for expanding the business contacts of the meetup participants – says Čipčić.
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When asked why Africa, Čipčić responds that this market is significantly growing, has around 1.2 billion inhabitants, and is expected to double by 2050, with increasing investments in startups and existing unicorn companies on the continent. According to the report ‘Africa Developer Ecosystem 2021’ by Google and Accenture, there were 716,000 developers in Africa in 2021.
So far, Infobip has organized 14 meetups in eight African countries and cities – Lagos (Nigeria), Accra (Ghana), Abidjan (Ivory Coast), Nairobi (Kenya), Kampala (Uganda), Kigali (Rwanda), Casablanca (Morocco), and Cairo (Egypt).
In the mentioned countries, except for Uganda and Rwanda, Infobip has opened physical offices, as well as in the cities of Kinshasa (Democratic Republic of Congo), Dakar (Senegal), Johannesburg (South Africa), Dar es Salaam (Tanzania), and Lusaka (Zambia). Since they entered this market relatively early, they have clients in all African countries. Most often, these are banks and fintech companies.
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‘It doesn’t matter where you are’
Therefore, on the topic of doing business in the African market, another meetup was held last week at Infobip’s Zagreb office, Alpha Centauri, during which the film ‘New horizons: Developing African Tech Ecosystem(s)’ produced by Al Jazeera Balkans was presented. After the film, a discussion was held featuring Čipčić, Duncan Mochama, Account Executive at Infobip, Daisy Isiaho, co-founder and Chief Product Officer of the African startup Zuri Health, and Antonio Šeparović, co-founder and CEO of the fintech company Oradian, an entrepreneur of Croatian descent raised in South Africa. The discussion was moderated by Hanan Nanić, a journalist from Al Jazeera Balkans and the author of the aforementioned film.
Although he now lives and runs the company Oradian from Croatia, which he founded in 2012 together with partners from Nigeria, Germany, and the USA, Šeparović spent his childhood in South Africa, with parents from Korčula. Precisely because he understands their problems and needs, Africa (along with Southeast Asia) is his most important market. Today, he only goes to South Africa during holidays, spending one to two weeks each month on business trips to his markets. Fortunately, we caught him for a statement after the panel in Zagreb, as he is already on his way to Lagos this week and next week he is going to the Philippines.
– When we started our business, Croatia was on the verge of joining the EU, and we thought that if we could take all these great programmers to solve problems in developing markets, that would be great. We were a bit naive because there was no venture capital back then, but today things are different – says Šeparović.
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– Now we are glad to be surrounded by ‘titans’ like Infobip, Rimac, and Photomath. We can definitely see that it doesn’t matter where you are in the world. If you want to solve global problems, you can do it from anywhere – added Šeparović.
This interesting panel discussion, the vivid film about the technological ecosystem in Africa, and the inspiring speakers prompted us to talk to Croatian entrepreneurs from other sectors who have been doing business in the African market for years about the advantages that this continent brings.
There is still room for ‘entry’
That Africa has a future and is, in the long term, the best market was recently stated by Lider by Stjepan Šmit, owner of Šmit Electronic and the White Shark brand for distributing gaming equipment.
– The African market is largely underdeveloped, with a low standard of living and low purchasing power, and this will have to change over time, with some countries already showing signs of these processes. Those who secure good positions in time will have a significant advantage. Just as it is now very difficult to enter the markets of Germany, France, Italy, Spain, and even Poland, because the cards were dealt long ago, now is the opportunity to enter the African market as soon as possible because there is still plenty of room, and if we consider that their market development and increase in purchasing power will follow in the coming decades – believes Šmit.
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Despite the positive trends in economic growth, it is essential to consider the ongoing challenges of doing business in Africa, such as infrastructural limitations, low literacy rates, inequality, and corruption. Šmit points out the negative aspects of doing business in the African market that he has encountered so far.
– Cooperation with distributors in these markets is very difficult, complicated, exhausting, and frustrating, primarily due to cultural, traditional, and other differences, or to put it simply, due to different mentalities and different understandings of entrepreneurship – adds Šmit, but he still says that White Shark has an excellent distributor in Tunisia, while they also export some equipment to Egypt and Morocco.
– With Tunisia, we have been achieving around 300 to 400 thousand dollars in annual sales for years, and Tunisia has ‘only’ 12 million inhabitants. Morocco has 37 million, Egypt 109, Algeria 44 million, and South Africa 56 million inhabitants. Just these five African countries have 260 million inhabitants, which is more than half the population of the EU. The rest of Africa consists of about a billion inhabitants who are ‘hungry’ for all kinds of goods. Africa is generally very poor, but many countries are slowly improving, and in the coming decades, there will be very good markets there, so it is necessary to ‘secure shelf space’ in time – says Šmit.
Opportunities in agriculture
Given that Africa is very potent and rich in natural resources but also underdeveloped in the agriculture sector, the Zagreb-based company Ecovit, which produces organic soil enhancers, also sees significant business potential there.
– Nature, or rather the soil, is not yet contaminated, as is the case today in many agriculturally developed countries. Ecovit sees its great and concrete potential for business cooperation due to the diversity of agricultural crops that dominate African soil, as well as the size of the market, both in South Africa and neighboring African countries. Given the comparative advantages of our key product Agrovita, as an organic soil enhancer and biostimulant for promoting plant growth, we see our chance in systematically and permanently raising the quality and quantity of grape, olive, fruit, and horticultural cultivation, enabling as many local residents as possible, especially in areas where food shortages prevail, to produce agricultural products with significantly higher yields for themselves, and that organically – explains the owner of the company, Goran Štimac.
Ecovit has previously signed a long-term contract with a company from South Africa and is currently renewing its import license with the local Ministry of Agriculture, Agricultural Reform, and Rural Development due to legal changes regulating fertilizers and soil enhancers and introducing a new categorization. After renewing the license, Štimac explains, they will continue to distribute and sell their products to existing clients. They also plan to build a production facility with complete logistics that follows the production unit, consulting, and educating local agricultural producers, experts, and the local population.
– This opens up space for gradual and effective processing of currently harder-to-reach but potent markets such as New Zealand and Australia in the future – adds Štimac.
Tensions in the Red Sea
For the company SCAM marine from Viškovo near Rijeka, which produces diesel marine engines for fishing and tourist boats, as well as a wide range of other products for boats, the most interesting market is – Egypt.
– Due to the Suez Canal, the Nile River, and the Red and Mediterranean Seas, there is a high demand for vessels and equipment for them in Egypt, which gives us the opportunity to offer complete technological solutions tailored to that market and its needs. Unfortunately, the African market does not yet demand sophisticated products like Scandinavia – says Edi Superina, co-owner of the company.
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Regarding the current situation in the Red Sea and tensions in the Middle East, SCAM marine emphasizes that they do not currently feel any problems. However, they fear an escalation that would inevitably cause difficulties.
