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This Is Why Global Companies Should Enter the African Market

While it requires considerable time, money and energy to be among the pioneers in introducing your business to a new continent, it's essential to have a growth mindset and view it as an investment into future opportunities.

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In the early 2010s, China’s tremendous market size and the world’s largest number of mobile-internet users led many U.S. tech companies to enter the country and offer their services to the Chinese consumers. As technological advancements are introduced nearly every day, more nations embark on a steep modernization course. Rapid growth is creating expanding gaps for brands to fill with their products and services and near-limitless opportunities to achieve success. While there may be several niches and places you can tap into, it is important to select the right market for your business and enter at the right time. When it comes to the education space, Africa holds considerable potential thanks to its growing young demographic and wages, technological advancements and an increasing demand in quality education.

Africa’s GDP has been on the rise and is expected to grow by 3.5% in 2022, with Kenya, Nigeria and South Africa among other countries leading the way. This overall positive economic signal has been having an impact on education. In the recent year, we’ve seen an uptick in African students opting in to pursue study abroad programs in construction, engineering and STEM. 

In general, it’s not surprising that there’s been a growing demand for higher education from African countries. The continent has the youngest population in the world, with 70% of the Sub-Saharan population under the age of 30. This demographic dynamic combined with growing salaries presents opportunities to market to this progressive generation, who are willing to spend on quality education and improve their quality of life. 

Related: 4 Lessons for Entrepreneurs From Africa's Solar Industry

Despite the continuous economic growth and opportunities, there’s still a lack of competition from global companies on the African market. Developing infrastructure, expensive and unreliable internet and lack of payment methods were named among the barriers to entry. However, fintech companies and the world’s biggest digital players, such as Google, are betting on Africa with investments in the continent’s digital transformation

While many companies may still hesitate to tap into this market, it’s important to start establishing your presence in Africa now. From a cultural perspective, it takes time to understand the country and create a community that plays a significant role in the lives of the local population. From a business standpoint, it’s beneficial to establish your presence in a low-competition market and then scale fast once the business landscape becomes more advanced. While it requires considerable time, money and energy to be among the pioneers in introducing your business to a new continent, it’s essential to have a growth mindset and view it as an investment into future opportunities.

Growing demographic and wages

Africa's population as a whole is young and growing. The median age for the continent is 18, which is 14 years younger than any other, and the continent's population is set to double to two billion by 2050. The youthful demographic is considered a major advantage for the continent, with prospects of generating significant GDP growth. Today, more global investors come to Africa for the promise of its people than for its physical properties.

Rising wages make up another significant factor. While the situation is different in each sub-Saharan African countrу, when measuring wages in nominal terms, the research found that wages are increasing faster in Africa than anywhere else in the world. Countries like Ghana are among the strongest economies in terms of pay increase. At nominal wage growth of 14%, Ghana comes second after Turkey, which is at 20%. South Africa, for example, also introduced a national minimum wage in 2018 as well as more recent initiatives in efforts to extend protection to vulnerable workers.

Spearheading the technological domain

Africa is a hotbed of innovation, especially in the digital and payment spheres. Having for most part skipped the desktop revolution and jumped straight to the mobile, the rising smartphone ownership and a drop in internet are attractive factors for investors. Countries such as Nigeria, Kenya and South Africa have been cultivating robust start-up scenes. In South Africa alone, 90% of the population have a smartphone and 21% of them use mobile-banking services. Mobile broadband coverage is still facing major limits, however, with only 26% of Sub-Saharan Africa’s population connected to mobile internet.

Related: How South Africa Built a Booming Wine Business

Mobile money deployments have been growing 39% annually over the past decade in Sub-Saharan Africa. With nearly 66% of adults having no access to traditional bank accounts, mobile cash has provided people an opportunity to transfer, save or borrow money without bank accounts. As of this year, African fintech investment reached $1.35 billion, spearheading the fintech sector on the continent.

Rising demand in quality education presents opportunities for edtech companies

Quality education is progressively rising in value among African students, creating a widening demand-supply gap. While a number of grants and scholarships designated specifically for the continent’s population, especially for females, has been increasing every year, it still lags behind the rising demand of the growing young population seeking to pursue higher education. With 720 million people under the age 25 in Africa, there are only 740 universities spread across 10 most populous countries on the continent.  Educating Africa’s youth is a major priority for every country and remains a key challenge for many governments.

After decades-long “brain drain” in parts of Africa, fueled by unstable political situations and superior working conditions in the West, recent studies have shown a new trend among African students: They return home after studying abroad. This has also been the case with the Chinese students, where nearly 80% of students return home after graduating, according to the Ministry of Education. The growing economy and technology industries, increasing prestige of local companies and cultural mentality all tempt students to return. Furthermore, there is a strong and prevalent sense of giving back to the community. This trajectory, in turn, influences the choice of majors among African students, most of whom pick universal and applied degrees such as engineering and IT that will hold value in their localities. Interestingly, fashion and art were also the top picks among African students according to Studyfree findings.

Related: Why the Smart Money Is on Africa

Of course, as with any emerging market, starting a business on the African continent today holds certain risks and challenges even for business veterans with accumulated professional experience. Unstable and, at times, hostile political situations and corruption pose serious business risks for entrepreneurs seeking to open their ventures. While the majority of the population speaks English or French, total lack of local language and ties can create administrative and legal hurdles. Furthermore, levels of trust and loyalty in business in African countries are low. They can, however, be gained with time and the right strategy, and now is the perfect time to set on the course. It is essential to understand local mentality, exercise transparency and gain brand loyalty in order to achieve stable growth. If investors understand, anticipate and work alongside the growing African context and market, they can find themselves with long-term prospects far more promising and accessible than in more developed countries.  

Dasha Kroshkina

Written By

Entrepreneur Leadership Network Contributor

Dasha Kroshkina is an entrepreneur who makes international opportunities available for everyone in the world. She participated in the Techstars NYC 2020 program, is a Seedstars Global winner and is a McKinsey Next Generation Women Leaders award winner.