11 big business opportunities to watch in 2021

Smallstarter Africa has just released its much-anticipated insights about the big market trends and business opportunities to watch in 2021.

Some of the opportunities on the list are quite familiar. But some will very likely shock you.

These are the most interesting opportunities that will likely inspire new business ideas and create significant wealth and jobs this year.

If you're thinking of starting a business or diversifying into a new business this year, this detailed list of opportunities provides some very amazing insights.

In fact, the business opportunities you are about to read are based on serious but unsolved problems, underserved and ignored needs, growing consumer demand, and shifts and changes in the market.

Branded food products

With over a billion mouths to feed, food is one of the biggest business opportunities in Africa.

In fact, the UN estimates that agribusiness on the continent could be worth $1 trillion by 2030.

But there is something very strange about how food is sold in many parts of Africa.

During the harvest season, most food products are abundant, fresh, and cheap. And the market glut and oversupply often leads to a lot of waste.

But on the shelves of many of the local supermarkets and international retailers in Africa’s urban areas, something very different is happening. There are lots of branded food products imported from other parts of the world — the USA, Europe, the Middle East, Asia, and South America.

And therein lies the conundrum:

Why does a continent that produces large amounts of food still spend over $35 billion annually to import food that is in canned, bagged, bottled, and other packaged formats?

While there are a couple of reasons for this, one thing is clear: Africa’s agribusiness value chain is too focused on production. Our farmers just keep trying to grow more and more food.

As a result, opportunities to add value and increase profit margins through processing, packaging, branding, and marketing of local foods are being ignored.

This is why most of Africa’s food products are sold as commodities. Our farmers produce tomatoes in abundance but we import and stock branded tomato paste, purees, and ketchup on supermarket shelves. We export grains and cocoa beans and then import branded breakfast cereals and chocolate.

Currently, while the continent has millions of farmers, there are only a handful of local companies in Africa that process, package, and brand food products that can compete with international brands on supermarket shelves.

Thankfully, this wide (and growing) gap in the market is attracting smart entrepreneurs.

In Tanzania, Jennifer Bash is the brain behind Alaska Tanzania Industries. The company packages, brands and distributes a range of products, including eggs, rice, processed maize flour, and sunflower oil to local supermarkets.

In Zambia, Monica Musonda became the first female indigenous player in the noodle business. After working for the Dangote Group in Nigeria, she returned to her native country to start Java Foods. Today, the company produces a range of noodle and breakfast cereal products made from local ingredients.

And in Senegal, former chef Pierre Thiam is proving that local African foods can be branded for global appeal. His brand, Yolélé, packages fonio (a local cereal) into shelf-ready formats targeted at the US market. He struck a deal with Whole Foods to distribute the products across the USA.

With a population of over a billion people that is fast-urbanizing and projected to double in size by 2050, the tastes and preferences of the African consumer are changing.

When it comes to food, people are paying more attention to quality, packaging, brand, nutritional value, shelf life, convenience, and availability.

And it is those entrepreneurs who can look beyond the production stage and add more value to locally-produced food who will be the big winners in this decade.

Cybersecurity & Data storage

11 Big Business Opportunities in Africa 2021 - Cybersecurity and data centres
The Samrand data centre facility in Johannesburg, South Africa (c: Africa Data Centres)

Every year, African businesses lose more than $3.5 billion to hackers and cybersecurity breaches.

Cybersecurity is fast becoming one of the key emerging business opportunities in Africa because of the potential damages and losses that are at stake.

Individuals and organisations of all sizes are being targeted. The attacks range from simple email scams to large-scale theft of customer data, fraud, ransomware, espionage, critical infrastructure sabotage, and other malicious activities.

And more threats are emerging every day.

According to the Africa Centre for Strategic Studies, up to 96% of cybersecurity incidents in Africa go unreported or unresolved — this means that cyber threats on the continent are likely much worse than the official statistics.

Worse still, Africa doesn’t have enough specialists to defend itself from the growing threats. The continent currently has a gap of over 100,000 certified cybersecurity professionals.

Interestingly, a growing number of entrepreneurs on the continent are rising to the challenge.

Last year, 26-year-old Charlotte N’Guessan became the first-ever woman to win the UK’s Royal Academy of Engineering’s prestigious Africa Prize for Engineering Innovation.

The tech entrepreneur from Côte D’Ivoire is the brain behind BACE API, a software that uses facial recognition and artificial intelligence to verify identities remotely. The solution is targeted at financial institutions and other industries that rely on identity verification to reduce cybersecurity risks.

The market for data storage services is also growing very fast in Africa.

In fact, it’s being called “the world’s next data gold rush.”

Industry experts project the size of Africa’s data centre market could reach $3 billion by 2025, growing at a 12% compound rate. In the last five years, major global cloud service providers such as AWS, Microsoft, and Huawei have been making inroads into Africa.

Recently, a company owned by Zimbabwe telecoms billionaire Strive Masiyiwa raised $300 million to build and expand data centers in South Africa, Nigeria, Ghana, and Kenya.

Also, Rack Centre, a data storage company in Nigeria that serves the West African market, has raised $250 million from a London-based private equity firm.

The demand for local data storage capacity in Africa is rising in line with its rapid population growth, urbanisation, smartphone use, and internet penetration.

As the continent goes digital, uses more data, and adopts cloud computing as well as co-location, local caching, and centralized networking capabilities, the demand for local data storage will continue to go through the roof.

Urban logistics

More Africans are moving to cities and urban areas. The continent is currently the world’s fastest urbanizing region and up to 1 billion people could live in Africa’s urban areas by 2050.

By 2030, Africa will be home to 17 cities with more than five million inhabitants, as well as 90 cities with at least one million people. And by 2050, the UN estimates there will be a total of 14 megacities on the continent.

While big cities provide significant economic opportunities, they also present very serious logistical challenges when it comes to locating people, and delivering goods and services.

A prime example is the lack of a formal address system in many urban areas on the continent.

Without accurate and verified addresses, doing business can be very frustrating in some parts of Africa. E-commerce startups, banks, utility companies, and a range of local businesses face significant challenges in identity verification, delivering customer orders, and tracking location data.

Interestingly, one startup in Kenya has risen to the challenge. Founded by an ex-Google employee, OkHi uses a combination of GPS technology, photographs, and phone location data to identify hard-to-reach addresses.

So far, OkHi has verified over 300,000 addresses and successfully raised $1.5 million from investors to expand its service into other markets.

Last-mile delivery of goods is another serious logistical nightmare.

As the population in Africa’s urban areas grows, it’s putting a major strain on the limited transport infrastructure, making it very difficult to move goods around.

These days, road traffic in most African big cities is hell — and it may only get worse!

The good news is, across Africa, a growing number of startups are trying to solve the last-mile delivery problems in urban areas by combining technology with a network of agents with motorcycles, cars, and trucks.

Sendy, an on-demand delivery platform in Kenya, has raised $20 million from a group of investors that includes Toyota. Also, Lori Systems, another logistics player in East Africa, previously raised $30 million from Chinese investors.

In Africa’s biggest economy, Nigeria, the competition to dominate the on-demand delivery space is getting intense.

While regulatory hurdles have forced motorbike hailing operators like Gokada, MAX, and ORide to pivot from transporting people to delivering goods, new players like ShapShap are innovating in interesting ways to differentiate themselves from the growing competition.

In North Africa, Egypt’s Swvl leads the pack. After raising $42m from investors in 2019 — the largest funding round for any Egyptian startup — it raised an additional $25m in 2020.

More investor money is betting on African startups that provide solutions to urban logistics on the continent.

And that’s because they understand one important fact: as the populations in Africa’s urban areas continue to grow, the demand for fast, convenient, and flexible last-mile delivery services will surely be on the rise.

Challenger banks

Last year, even in the middle of the COVID-19 lockdowns, the $200-million acquisition of Paystack — a Nigerian startup that processes payments for businesses — got everyone’s attention.

After decades of dominance by traditional brick-and-mortar banks, young and creative entrepreneurs are using technology in clever ways to challenge and transform how financial services are delivered in Africa.

The biggest factors behind the rise of challenger banks and fintechs in Africa are the continent’s youthful population, increasing internet and smartphone use, and a serious regulatory drive in many countries to increase financial inclusion and cashless payments.

And there’s a lot of investor money pouring into these challenger banks. In 2020 alone, fintechs received the lion’s share of the $1.3 billion invested in African tech startups.

In August of last year, Sendwave, a digital remittance service in Kenya that serves the East and West Africa markets, was acquired by WorldRemit in a $500 million deal.

South Africa’s JUMO raised $55 million, Flutterwave and Kuda in Nigeria raised $35m and $10m respectively, and Egypt’s Paymob got $3.5 million.

Interestingly, as the number of challenger banks and fintechs rises across Africa, new players in the space are differentiating themselves by focusing on underserved niches and market segments.

Take women in Africa for example.

Compared to men, women have less access to financial services in Africa. According to this report by the Bill & Melinda Gates Foundation, more than 60% of the adults who still don’t have access to financial services in Africa are women.

That’s why challenger players like Shecluded — a finance club that provides loans, financial education, and wealth management services exclusively to women — is a great example of product differentiation.

Another niche opportunity is to offer bespoke capabilities that serve the unique needs of specific industries. Jochebed Apps, whose co-founder is a member of our Insiders community, is proving this strategy quite well in serving Nigeria’s thriving gaming and betting industry.

As we progress into this new decade, the evolution and growth of Africa’s challenger banks, both in terms of size and sophistication, will surely be a joy to watch.

Animations & Comics

In December 2020, Disney announced a first-of-its-kind co-production deal with Kugali Media.

Founded in 2017 by three young and talented comic book artists from Nigeria and Uganda, Kugali Media has become one of the largest entertainment companies on the continent that sells comic books, art, and augmented reality that’s inspired by African stories.

This is the first time in history that a Disney project set in Africa will be envisioned and told by African storytellers and animators.

According to MarketWatch, the global market for comic books is valued at just over $3.8 billion and is dominated by Japanese manga, and comics from the USA, Canada, and France.

However, for more than a decade, comic book sales have slowed down in North America and Europe. And this is exactly why Africa presents a major growth opportunity for the industry.

First, Africa currently has both the world’s youngest population and the fastest-growing population of young people.

With 60% of Africa’s population below the age of 25, the continent presents just the right youthful demographic and growth market for comic books and animated experiences.

Second, Africa has the world’s lowest representation in animations and comic books.

Dominated largely by Western storylines and superheroes like Superman, Batman, Wonder Woman and the X-Men, Africa has a major opportunity to refresh the global appetite for comics by infusing new superheroes and exciting storylines that are inspired by Africa’s rich culture, heritage, and mythology.

As new technology and the internet make it easier for more African animators to expose their works to the world, comic book series and animation studios are springing up across the continent — there’s the Comic Republic in Nigeria, Etan Comics in Ethiopia, and several others in Southern Africa.

There is no doubt that Disney’s landmark deal with Kugali Media will likely open more doors to more deals with African animators and creatives within this decade.

Telemedicine

The COVID-19 pandemic proved just how fragile Africa’s healthcare systems really are.

Even though the continent makes up only about 16% of the world’s population, according to the WHO, Africa carries 23% of the global disease burden. Worse, the prevalence of diseases like diabetes, cancer, and heart conditions is rising.

Africa doesn’t just have inadequate hospitals and healthcare infrastructure. The brain drain — the loss of thousands of trained African doctors, nurses, and other healthcare workers emigrating to the USA, Canada, Europe, and the Middle East — is a much bigger problem.

As a consequence, there is only about 1 doctor per 5,000 people in sub-Saharan Africa (compared to the global average of 6). This means that Africa needs to optimize the use of its limited healthcare resources.

That’s why telemedicine — an innovation that allows patients to get medical services remotely without visiting a hospital — presents significant opportunities for Africa.

A telemedicine revolution in Africa means that one doctor can serve far more patients, and hospital visits can be reserved only for serious cases and medical emergencies.

The concept is working. And there are already several success stories.

Nigeria’s Helium Health digitizes patient data and has built a virtual platform that could power telemedicine across Africa. Last year, Helium raised $10 million to expand its presence across the continent.

In South Africa, Udok is a digital healthcare startup that allows patients to receive care, advice, and prescriptions from qualified doctors via chat, phone, or video call. Recently, Udok raised R10 million to expand its services.

The government of Rwanda has signed a 10-year deal with Babylon to provide free telemedicine services to all its citizens over 12 years old. Babylon, a digital health company, raised $550 million in a Series C round last summer.

And there are over a dozen more promising players in Africa’s emerging telemedicine field: there’s Tenacare in Ethiopia, Vezeeta in Egypt and North Africa, Redbird in Ghana, Ilara Health in Kenya, OuiCare in Cameroon, and several others.

COVID-19 may just be the big push that launches telemedicine into the mainstream across Africa.

And if investors are already betting their millions on the potential of telemedicine on the continent, that indeed says a lot.

Affordable real estate

Africa is currently the world’s fastest urbanizing continent. Every single day on average, 40,000 new people move into cities across the region.

These people, many of them from rural areas, need a roof over their heads.

Unfortunately, most of them end up in slums, shacks, and informal housing arrangements because they can’t afford the cost of a decent home.

While the real estate market in Africa’s urban areas is booming, the majority of property developers and investors are focused on the top end of the market; specifically on high-margin residential homes, commercial, and industrial real estate.

As a result, there is a huge, unserved, and untapped market for affordable residential homes across Africa.

In Kenya, the housing gap is estimated at over 2 million homes. In Egypt, more than 12 million people need formal housing. And in Africa’s biggest market, Nigeria, there is a current demand for over 18 million housing units.

In total, the unmet demand for affordable housing in Africa is estimated at over $1 trillion.

If such a huge market for affordable housing exists on the continent but remains unserved, is it because it’s not lucrative?

Several African developers are proving there is a big opportunity in selling real estate at low cost and lower margins.

In Uganda, Smart Havens Africa (a member of our Insiders Program), is a real-estate startup that’s taking an innovative approach to affordable housing in Africa.

Using soil-based blocks and building techniques that reduce the total cost of construction, the company provides a rent-to-own plan that allows low- and middle-income families to own a home.

For their ingenuity, Anne Rweyora and Will Broad emerged runners-up for the 2019 Africa Prize for Engineering Innovation and entered a partnership with Reall, a major global investor in affordable home projects.

In Kenya, Karibu Homes have become one of East Africa’s most successful project developers that specialise in mass housing projects.

In South Africa, companies like Container Home SA and Berman Kalil are recycling shipping containers into stylish, tasteful and affordable accommodations for urban families and small businesses.

The huge and growing demand for housing, especially in urban areas, means that real estate will remain one of the biggest investment and business opportunities in Africa in this decade.

While high-margin real estate is still a big opportunity, the entrepreneurs and investors who can serve the high-volume segment of the market could be the big winners of this decade.

e-Sports & Gaming

Last year, South African e-sports athlete Thabo “Yvng Savage” Moloi made history by becoming the first-ever player from Africa to be sponsored by Red Bull.

At just 18 years old, he is South Africa’s top-rated FIFA player on PlayStation (PS4) and is ranked 73rd in the world.

In Kenya, 22-year-old law student Sylvia Gathoni has become the first woman pro-gamer in East Africa to be sponsored by a global e-sports brand.

The world of competitive virtual sports and video gaming has found fertile ground in Africa.

It is a global market that has significant earning potential and brings in annual revenues of $1 billion. And over the next 5 years, Africa’s gaming industry is projected to grow by 12% per year, with Egypt, South Africa, and Nigeria leading the pack.

Africa is the only region in the world where the youth population is increasing. And by 2050, the number of Africans below the age of 24 is expected to rise by nearly 50 per cent.

As a result, Africa represents a key market for growth and innovation for the global gaming industry. That’s why a growing number of entrepreneurs are cashing in.

Carry1st, a game development company focused on the African market, has raised $4 million to expand its game catalogue.

Founded by a trio of entrepreneurs from Sierra Leone, Zimbabwe and the USA, the startup is positioning itself as a leading publisher and distributor of virtual games in Africa.

Last year, Tamatem, a major mobile games developer for the Arabic-speaking North African market, raised an additional $3.5 million to scale up the share of Arab-focused content in the gaming world.

As the access to the internet and smartphone adoption continues to rise in the world’s youngest market, the growth of Africa’s e-sports and gaming industry will be interesting to watch in this decade.

Outsourcing & Export

If the coronavirus pandemic taught the world one thing about international trade, it is the high risk of depending solely on China, India, and south-east Asia for all our sourcing and manufacturing needs.

Several of the world’s big corporations and brands, especially in the USA, Canada, and Europe, are now seriously considering diversifying their supply chains to new destinations.

Africa stands to benefit significantly from this global repositioning.

Compared to China and south-east Asia, Africa is much closer to the European market and America’s east side and hence presents a strategic geographic advantage.

Also, as wages and the cost of labour rise in Asia, Africa presents other strategic advantages to global businesses.

The continent has a young and less-expensive labour pool than Asia; many people on the continent are fluent in global languages — mainly English and French; and the continent has an abundance of many of the raw materials used in manufacturing and production.

Ethiopia, for example, is fast becoming the world’s next top destination for textile and apparel production. A growing number of factories in the country now make products for top fashion brands like H&M, Levi, and Tommy Hilfiger.

Last year, in Ghana, Volkswagen opened its fifth vehicle assembly plant in Africa. It already has plants in South Africa, Kenya, Nigeria, and Rwanda. Other automakers such as Nissan, Toyota, Suzuki and Renault are making similar moves on the continent.

And when it comes to the service industry, Madagascar has joined the ranks of Tunisia and Morocco as a top destination for the business process outsourcing (BPO) needs of French companies.

The ongoing global shift in supply chains could significantly influence the demand for made-in-Africa products and services beyond the raw commodities that currently dominate the continent’s exports.

Thankfully, some smart entrepreneurs are already building the infrastructure for this emerging inter-African trade.

Ghana’s Kuueza, the brainchild of Maxwell Adew (a member of our Insiders Program), is exploiting a unique exported-oriented opportunity in e-Commerce that allows buyers in North America, Europe, and the Middle East to easily find, source, and order products from merchants on the African continent.

With the new African Continental Free Trade Agreement (AfCFTA) which could transform the continent into a major global trading bloc, Africa may now have a real chance to position itself as a valuable player in the global export value chain.

Virtual education

The education system in most African countries is broken.

Now home to the world’s youngest population, Africa’s existing school infrastructure is just not enough to serve a population that is set to double in size to 2.2 billion over the next 30 years.

According to UNESCO, sub-Saharan Africa has the highest rates of education exclusion. It’s estimated the region has over 100 million out-of-school children.

The poor quality of education in most public schools has led to a surge in private schools on the continent. Still, demand outstrips supply and many families continue to struggle with the rising cost of school fees.

Virtual education is an innovation that leapfrogs the capacity limitations of Africa’s physical school infrastructure and provides a decentralised model of education that is both low-cost and good quality.

However, before COVID-19, even with rising smartphone and internet use on the continent, most governments, school administrations, and parents were largely hesitant to adopting a virtual education model.

And then the coronavirus pandemic took everyone by surprise.

While there were already dozens of virtual education platforms and edtech startups across the continent before COVID-19, the lockdowns gave a big boost to their adoption.

And a lot of money has been pouring into Africa to ride the big potential of virtual education.

In January 2021, roughly one year after it first raised $3.1 million from investors, Nigeria’s uLesson raised an additional $7.5 million to expand its virtual education platform for secondary school students.

In South Africa, edtech startup Valenture Institute recently raised $7 million to support its hybrid education model, and Syafunda raised $140K to scale its digital library platform.

In North Africa, Egyptian ed-tech startup Akhdar raised over $100k to introduce gaming features that will improve the learning experience on its platform.

And last year, 12 African startups working in the virtual education space received $40,000 in grants from the Mastercard Foundation to further develop their e-learning solutions.

Globally, annual spending on virtual education products is already worth $144 billion and the market is growing fast.

Across Africa, the demand for education is huge and diverse, and ranges from primary, secondary and tertiary tuition, to vocational and professional skills acquisition.

As the continent’s population grows and smartphones and the internet play a bigger role in people’s lives, the market for virtual education services on the continent will likely grow in lockstep with global demand.

Mini-grid solar

Around the world, there are still 1.2 billion people who have no access to electricity.

Most of them are in Africa.

In fact, the IEA estimates that unless steps are taken to close Africa’s huge energy gap, up to 80% of the global off-grid population will be in sub-Saharan Africa by 2030.

For a continent that is blessed with year-round sunshine in most parts, solar presents one of the quickest, cheapest, most efficient, and most eco-friendly options to power Africa.

It’s no surprise there has been a growing range of low-capacity rooftop solar home systems, PAYG products, and gadgets (such as phone chargers and lighting units) that cater to African consumers.

But the continent’s energy demand is growing fast. More and more consumers have bigger energy needs that go beyond a few gadgets and low-energy appliances.

That’s why mini-grids are critical to the success of Africa’s solar revolution.

Solar mini-grids are high-capacity systems that provide electricity to one or multiple consumers at the same time. They are designed to provide high-quality, reliable electricity and can be incorporated with technologies such as smart meters and remote monitoring systems.

Solar mini-grids present a major market opportunity for the private sector. In fact, the Mini-Grid Partnership projects that the solar mini-grid market in sub-Saharan Africa could be worth $128 billion by 2030.

Also, according to the World Bank, mini-grids present a $3.3 billion annual profit potential between 2019 and 2030 for private developers.

As a result, of the 7,500 mini-grid projects planned across the world for the next few years, 4,000 of them (53%) are in Africa. Senegal, Nigeria, and Tanzania are in the global top 5 countries for planned mini-grid projects.

In the last 7 years, global investors and fund providers have deployed over $1 billion to mini-grid projects in Africa. And more money is still flowing to solar entrepreneurs and startups on the continent.

In 2020, Power Africa awarded grants totalling $1.2 million to three mini-grid developers lighting up more than 5,200 households and businesses in rural Madagascar.

And just recently, Daystar Power, a Nigerian solar energy provider, raised $38 million from a group of investors that included Morgan Stanley Investment Management to develop solar mini-grids across West Africa.

As the solar revolution across Africa kicks into high gear in this decade, it will be thrilling to see the large-scale social and economic transformation it brings to households and businesses across the continent.