Digital Transformation in Africa Requires Homegrown Solutions
Africa’s digital transformation offers an exciting opportunity, but success requires homegrown enterprise solutions that reflect the context and nuances of the continent’s market needs, including mobile integrations, a variety of regulatory and legal requirements across the continent, and the lack of a uniform data governance framework. The author offers advice for African businesses looking to develop these solutions.
Africa’s digital transformation is underway, and it’s creating opportunities for transformational change across all economic sectors. While sub-Saharan Africa is still behind the rest of the world in terms of internet penetration, the gap is quickly closing: Since the early 2000s, the population of internet users in Africa grown has tenfold, as compared to a threefold increase in the rest of the world, according to the International Monetary Fund. From financial services to power and agriculture, digital technology is being leveraged to deliver greater access and usher in the “future of everything” on the continent.
African businesses are grappling with this new reality. At its core, digital transformation fundamentally changes everything for businesses, from their internal processes to the ways they engage with customers.
Under the hood, digital transformation is powered by enterprise solutions, such as customer data platforms (CDP) that aggregate customer data from multiple sources to build a single, comprehensive view, and client relationship management (CRM) tools that help manage relationships with current and potential future customers.
Most of today’s global enterprise solutions on the market don’t meet the unique needs of African businesses, however. A wholesale technology transfer from abroad won’t work; enabling Africa’s digital transformation requires homegrown enterprise solutions that address the continent’s unique realities. With 1.2 billion people, more than 800 million mobile connections (477 million unique), and 26% mobile internet users, any meaningful solution must begin with available mobile network integrations. Consider:
- SMS is critical to reaching the majority of African consumers who own a basic phone, rather than a smartphone. This means enterprise systems, at the minimum, must possess SMS capabilities to communicate with the everyday African consumer.
- In Africa, mobile numbers are people’s unique identifiers for digital services, as many users do not have email addresses which are often the default for enterprise systems in other markets. Therefore, enterprise solutions for Africa need to factor the use of mobile numbers as unique identifiers, where required.
- USSD, a mobile protocol that is practically obsolete in other parts of the world, is an alternative digital channel that has been adopted by a lot of African financial and utility service providers. This means enterprise tools must account for the USSD channel.
- About 98% of subscribers in Africa use prepaid mobile phone plans. Prepaid usage can inform insights on consumer spending power, as compared to postpaid plans which reflect usage appetite.
A homegrown African enterprise solution must also factor in the variety of regulatory and legal requirements across the continent. Take data, for instance: Africa lacks a uniform data governance framework similar to Europe’s General Data Protection Regulation (GDPR). Given the volume of data being generated and processed, the continent’s businesses require a localized data governance solution with a good overview of the landscape across all countries.
Despite the strong case for homegrown enterprise solutions, challenges abound for innovators working to develop them, including a shortage of experienced talent, infrastructure deficiencies, and poor insights and data sources to power the creation of these solutions. Although tech talent in Africa is reported to be at an all-time high, with nearly 700,000 professional developers, this number pales compared to India’s 2.75 million (as of 2017). Other barriers include relatively low funding for African enterprise startups — they raised $158 million in 2020, less than half of what fintech startups raised. Plus, globalization fosters fierce competition from international enterprise providers with vast resources, who are making inroads in local markets despite their ill-fitting offerings
Regardless of these challenges, African entrepreneurs, investors, and governments must come together to champion and innovate homegrown enterprise solutions to capitalize on the significant potential Africa will deliver. At my company Terragon, based in Nigeria, we saw the opportunity to create a unique ecosystem relevant to Africa, made up of difficult-to-source consumer data from sources like telcos and global platforms like WhatsApp. We’ve created an on-demand marketing platform to help small and midsize businesses and large enterprises including banks, consumer goods, and other companies reach and engage African customers at scale.
In our experience, companies wanting to develop homegrown solutions must:
1. Create a plan to bridge the talent gap.
At Terragon, we acquired an R&D center in India in 2018 to help us attract and source scarce developer talent and upskill our local talent. We have also developed a management trainee program through which we onboard talent and provide on-the-job training.
2. Deepen your knowledge of the local terrain or partner with local companies.
Terragon takes a “boots-on-the-ground” approach, relying on our team with deep and contextual knowledge of local terrain, because Africa is an extremely diverse market. We currently have a presence in four African countries — Nigeria, Ghana, Kenya, and South Africa. Because of our deep knowledge of the markets we operate in, we know what products best serve specific markets. For instance, South Africa is a more technologically mature market than Kenya, therefore our Facebook Conversion Application Programming Interface (CAPI) solution is more suited to South Africa because they track events on websites and blogs more than other markets. Kenya on the other hand is big on WhatsApp, so our WhatsApp solution is more suited to that market.
3. Ensure your business is fundable.
The startup ecosystem in Africa raised about $1.43 billion in 2020, with fintech receiving the highest investments (about 25%). However, without sufficient investment diversification across other sectors such as marketing tech, educational tech, etc., the ability for Africa to fully realize its potential and build a strong ecosystem of fully functional sectors could be inhibited. To ensure that your homegrown enterprise solution is fundable, make sure that you meet industry standards at each stage of your business development, invest in the necessary talent and create enough traction to gain a competitive edge.
Africa’s digital transformation offers an exciting opportunity, but success requires enterprise solutions that reflect the context and nuances of the continent’s market needs. These three steps will help African businesses rise to meet the challenge.