As Africa heads towards recession, it’s not easy to know where to invest. Akinyi Ochieng and Isaac Kwaku Fokuo, Jr. highlight three areas that are likely to fare better during the downturn
Back in January, Africa’s economic outlook for the year was bright. African Development Bank projections predicted 3.9% growth in 2020 and 4.1% in 2021. But then, coronavirus upended the global economy.
Less than two months later, with only 61 confirmed Covid-19 cases in Africa, the United Nations Economic Commission for Africa (UNECA) <span “=””>revised the continent’s growth projections downwards to 2%. Last week, The World Bank said that Africa is headed towards its first recession in 25 years.. These gloomy figures can largely be <span “=””>attributed to disrupted value chains, reduction in FDI and remittances, and direct hits to sectors such as tourism and oil.
While no industry can truly be recession-proof, tech-enabled sectors may be more likely to withstand these shocks. Digital technology is getting a boost as people find new ways to work and communicate and sectors take their services onlines. Below, Botho Emerging Markets Group identifies three sectors that are likely to survive and even grow in the face of the coronavirus-sparked economic crisis.
Mobile payments are likely to become more popular, spurred by stay-at-home orders and debates over the risk of infection due to the handling of cash. Companies like Kenya’s <span “=””>Safaricom, which operates mobile money service M-PESA, and Nigeria’s <span “=””>Paga are enabling that shift by reducing fees during this period.
Even prior to coronavirus, fintech was the <span “=””>largest destination for venture capital investment in Africa, <span “=””>attracting over 50% of the $1.34 billion raised by African startups in 2019. Through tech-based solutions, companies in Africa have pioneered mobile money and introduced new approaches to online payments, lending and investments in a region where retail banking and consumer lending remain underdeveloped. COVID-19 is likely to further accelerate this trend as more people manage their finances digitally.
Traditional classroom learning has taken a backseat in the face of this crisis, causing an acceleration in the adoption of e-learning as schools attempt to minimise interruptions to learning for their students. According to OECD head of education, Andreas Schleicher, “All the red tape that keeps things away is gone and people are looking for solutions that in the past they did not want to see.”
Several education innovators have developed new, promising solutions to enable students to continue learning while at home. Tanzania’s Ubongo recently launched its Ubongo Toolkits platform, a large library of quality, African-made early learning materials and educational resources for kids aged 0-14, covering various topics from early numeracy, pre-literacy, and social and emotional skills to engineering, science, and technology. Meanwhile, Kenya’s Eneza Education has partnered with telco giant Safaricom to offer a government-accredited curriculum designed and refined for feature phones. If these technologies take hold across countries searching for solutions to scale quality education, they may spur more widespread use of digital tools in the classroom and remote learning in the post-Covid world.
Africa’s fragile health systems can only cope with a small number of infected patients due to the number of limited hospitals and the lack of enough medical personnel. Technology can help the region bridge these healthcare gaps by providing software for self-assessment and symptom checking freeing doctors to attend to severe and urgent cases. Wellvis, a Nigerian company has created the COVID-19 Triage Tool through which users can check their COVID-19 risk category, the Tool also provides for remote medical consultations. Moreover, technologies can support the delivery of medical equipment to remote places reaching places where they are urgently needed.
Zipline, a medical drone company currently operating in Rwanda and Ghana, for example, is currently holding emergency stocks of masks and gloves so that they can be delivered to hospitals and clinics within minutes. Meanwhile, Ghanaian start-up, mPharma, a prescription drug manager for providers and payers in Africa, is developing software that will enable doctors to schedule tests and receive results once completed. Should these technologies be widely adopted during the coronavirus pandemic, they are unlikely to be rolled back when the crisis subsides.
In the midst of a pandemic, we cannot be fully certain that a sector or company will survive let alone generate returns. However, due to the nature of COVID-19, tech-enabled companies are likely to witness increased demand from individuals, businesses and even governments to bridge existing healthcare gaps. For investors looking to build a recession-resilient portfolio or business leaders looking for new opportunities, fintech, digital education, health and other tech-enabled sectors may be better equipped to thrive during this pandemic.
Akinyi Ochieng is Esther Ocloo Fellow at Botho Emerging Markets Group. Isaac Kwaku Fokuo, Jr. is Founder and Principal of Botho Emerging Markets Group.
Source: African Business