Startups to drive Africa economy in 2018

Posted on December 29, 2017 12:52 am

Sub Saharan Africa’s startups could add USD $3 billion to the economy and 50,000 new jobs over the next 12 months, if fostered properly, according to a report your blogger has seen.The data according to the authors will be used by as a starting point for those who are planning to invest in the region. The startup sector has potential to become a huge or a much bigger part of the Sub Saharan Africa economy.The report estimated that the sector could contribute 10 per cent of gross domestic product by 2025 in the region and one of the researchers revealed to your blogger that while there are many assumptions involved, the report’s USD $5 billion estimate is modeled around a most likely scenario. In her own words, researchers used a model that assumes one percent of startups reach $5 million in revenue and that a successful startup reaches USD $100 million per annum in its eighth year and generates USD $200,000 per employee. “In 2018 Contador Harrison, you will see some very small number of startups be wildly successful and a long tail of mediocrity and failure,” she said.In East and West African region, about 30 per cent of failed startups try again, she said. And successful startups tend to spin off new startups. The combination of those two factors leads to compound growth in the startup sector, he said. In Southern Africa, only 18% of startups attempt to do business again.The research defined a startup as a disruptive company with less than USD $1 million at launch that has technology at its core and intellectual capital.African startups have played a key role in helping major and small businesses achieve digital transformation, while helping create direct and indirect employment.They have also contributed to the economy by bringing direct investment from overseas venture capitalists and investors.

In 2018, the role of start-ups in Sub Saharan Africa is to play a role in generating employment. It is estimated that start-ups can help 50,000 people earn through both direct and indirect employment. Researchers expects that in the next seven years, Sub Saharan Africa can create many tech start-ups with company value of USD $50 billion. If there are such startups worth $1 billion they can help increase the region’s GDP immediately.Researchers predict that 2018 prominent start-up ecosystem would see collaboration between start-ups and large corporates. The role of a startup is to help corporates do innovation as part of corporates’ digital transformation journey. Apart from collaboration with corporates, the other prominent role of startups would be to draw direct investment from overseas to inject into Sub Saharan based start-ups as well as non disclosed value deals. The startups expected to play a prominent role in helping create jobs, careers and business in many economic sectors include real estate, healthcare, media, finance, banking and logistics. There are at least 30,000 startups in Sub Saharan Africa today, the report found with a valuation of $2m and above. Most of them are concentrated in capital cities. In addition, more than 60 per cent of Sub Saharan Africa startups target the information media, healthcare, finance, banking and telecom sector, it found. While there is no single solution to encouraging startup growth in the region, one of the report authors told your blogger that the key areas are education and building an open and inclusive startup community.African countries must reverse a decline in computer science skills, he noted. In addition, a strong entrepreneurial spirit must be taught at a young age to encourage more risk taking, he added. Africans have a greater fear of failure than people in the developed world like Europe, the report found.From the report, its clear that Sub Saharan Africa startups must view other startups as collaborators rather than competitors. The community is what is going to ultimately determine success and no one should seek handouts or social support if they want to make it to the next level.

Contador Harrison