Building African unicorns for economic growth

The Africa Financial Industry Summit (AFIS) 2024, themed “Building African Unicorns (and Gazelles) for Continental Economic Growth”, convened recently with discussions centred on nurturing the growth of startups in various sectors across the continent. Aigboje Aig-Imoukhuede CFR, Chairman of Access Holdings & Coronation Group, delivered insightful commentary on the aspirations and challenges facing African startups during the event.

Unicorns, defined as privately held companies valued at over $1 billion, represent the pinnacle of startup success. Despite the global landscape boasting around 1,200 unicorns, Africa’s unicorn count remains modest, with just seven identified as of February 2023, primarily in the fintech and digital sectors. These companies are tackling significant payment challenges and driving innovation across the continent.

The summit highlighted that while achieving unicorn status remains elusive for many African startups, structural deficiencies pose barriers. Aig-Imoukhuede identified five critical imperatives essential for transforming startups into viable gazelles and ultimately unicorns:

1. Talent Catalysation: Africa’s potential is anchored in its talent pool; however, skills migration poses a significant threat. The educational framework needs to foster innovation while ensuring local talent remains competitive.

   

2. Infrastructure Development: Many startups find it difficult to scale due to inadequate infrastructure. Basic services such as reliable internet and energy are still lacking in numerous regions of Africa. The success of the fintech sector illustrates that addressing foundational challenges in logistics and energy can unlock vast potential in other industries.

3. Startup Support Systems: Government-sponsored accelerators and incubator programmes have yielded positive results in nurturing small and medium enterprises, with Egypt setting a strong precedent: approximately 40% of its startups have benefited from such initiatives, propelling growth in the tech sector.

4. Access to Venture Capital: Venture capital is imperative for an innovation-driven economy, supplementing traditional banking avenues. However, to attract investment, a supportive legislative environment that reduces investment risks is essential.

5. Policy as a Catalyst: Effective policies, including tax incentives and regulations tailored to stimulate start-up environments, are crucial for nurturing gazelles and unicorns alike.

The private sector is also pivotal in this ecosystem. Africa’s banking sector has demonstrated its capability to facilitate growth through funding, partnerships, and advisory roles. A collaborative approach between the private sector and governments may provide the necessary support for startups aiming for scalability and sustainment.

Despite the opportunities, pursuing unicorn status brings challenges such as high revenue expectations and scrutiny from competitors and regulators. The recent economic landscape, influenced by the fallout from the pandemic and the market reset of 2021/2022, highlights the volatility that African startups face. To succeed globally, they must employ disruptive strategies alongside three essential traits: a compelling value proposition, a scalable business model, and a profound understanding of their target market.

As stakeholders unite to dismantle the hurdles impeding growth, the potential for an increase in gazelles—and consequently unicorns—is significant. Aig-Imoukhuede’s comments encapsulate the collective responsibility, urging governments, private sector players, and policymakers to collaborate in reshaping industries, generating employment, and fortifying Africa’s economic landscape. The potential for African unicorns and mega-companies, or elephants, to reshape the future of the continent remains optimistic yet contingent upon intentional efforts across all sectors.

Source: Noah Wire Services