August 07, 2023 Growing Strong: How Africa's Tech Industry Thrives on Innovation and Frugality

By Baxter Juds

4 smiling African Tech professionals.

The global tech industry has faced some challenges recently, with more than 225,000 layoffs happening from 933 tech companies this year. Africa seems to have bucked this trend. In 2023, the continent looks to double the amount of funding it raised in 2020. According to Africa: The Big Deal, only Europe is looking close to reaching this with a 30% increase from 2020. Africa’s tech industry thrives because of a commitment to innovation and frugality; join us as we explore how this works.

Cost-Effective Investment Opportunities

Africa makes up less than 1% of funding within the global tech economy, but the value of investments made is far more impactful than the rest of the world. Not only does it have favourable exchange rates and a relatively low cost of living, but Africa is a continent that has huge potential for long-term growth. Africa is a young continent, with a growing workforce, who recognise the value of tech and the tech industry.

In 2022, the Kenyan government instituted a coding curriculum in all primary and secondary schools across the country. Keen-eyed investors recognise these facts, coupled with the abundance of natural resources, as an excellent opportunity for long-term growth.

The investment network in Africa is still in its infancy, with just over 1100 companies making investments in the African tech market. The majority of these investments, around 70%, were made at the pre-seed and seed investment stages. It is always more cost-effective to get in at the ground floor of something; smaller investments have a bigger impact when the circulation of wealth is restricted, so investing in African tech is the most cost-effective investment strategy you can make.

Innovative Fundraising Strategies

African startups are not afforded the same opportunities that tech companies have in Europe and the United States. Seeing the economic writing on the wall in 2022, a lot of startups in Africa began opting for unpriced rounds to ensure they gathered income for financing long-term expansion despite the global economic outlook. This is an example of the flexible thinking the continent possesses to overcome the challenges that most tech economies rarely experience.

African fintech companies like Payhippo, Sycamore, and Bankly are redefining entrepreneurial success with strategies that contrast sharply with their Western counterparts. Instead of focusing on investors, these companies prioritise their customers, engaging directly through tailored marketing materials, testimonials, and community outreach. They also prioritise real achievements over mere capital raising. For example, Sycamore leaned towards a customer-centric approach and celebrated regulatory approval, while Payhippo communicated directly with customers and Bankly leveraged community influencers to speak to their target segment.

The success stories of these companies offer a lesson in what might be responsible for the impressive longevity of Africa-based companies compared to those in the West. By tailoring storytelling to customers, engaging stakeholder communities, and celebrating concrete milestones, they demonstrate a keen ability to initiate and adapt to change. This change-readiness, coupled with a focus on making a positive societal impact, reveals a unique and effective path to ensuring a startup's long-term success, one that could be instructive for entrepreneurs worldwide.

Adaptation to Macroeconomic Realities

Due to unstable political and economic conditions, lack of infrastructure, and limited opportunities, African tech companies have to adapt rapidly to their environments. It also means that tech in Africa has opportunities to address these issues and scale them immensely. Most African enterprises are designed with frugality, making them more resilient to economic downturns.

African tech companies act with greater foresight than most startup markets. They are willing to give up short-term market goals to achieve long-term stability and growth.

This innovation can be seen in their adaptation to digital marketing strategies. With internet penetration growing by 600% in the past twelve years, digital marketing is the most cost-effective marketing strategy available to African startups. Not only does this approach reflect their inherent frugality, it shows a connection with their audience, who are more likely to be reached through digital marketing as opposed to conventional marketing measures.

Growing Strong: How Africa's Tech Industry Thrives on Innovation and Frugality

The thriving tech industry in Africa is a testament to innovation, resilience, and frugality. With cost-effective investment opportunities, inventive fundraising strategies, and agile adaptation to macroeconomic realities, Africa has positioned itself as a burgeoning powerhouse in the global tech scene. African tech companies' emphasis on customer-centric approaches, societal impact, and long-term sustainability offers invaluable lessons for entrepreneurs and investors worldwide. The growth in internet penetration and the unique ability to turn challenges into opportunities speaks to a bright future for tech on the continent. As the world grapples with economic uncertainties, Africa's tech industry serves as a beacon of innovation, demonstrating that with the right mindset and strategies, growth and success are achievable, even in the most challenging circumstances.