Lagos: The titans of Silicon Valley are undeterred by the economic slump afflicting much of Africa.
Facebook Inc., Google, Oracle Corp. and Uber Technologies Inc. are at the leading edge of turning the world’s frontier markets digital. As the commodity crash buffets the continent’s biggest economies, the interest and investments couldn’t come at a better time.
Almost half of foreign direct investment projects in Africa last year were in technology, telecommunications, financial services and consumer products.
The amount dedicated to oil, gas and mining dropped to 6%—from almost a quarter in 2005 —according to EY, a consultancy firm.
“There’s been a big shift from an almost exclusive focus on extractive sectors to those such as consumers and renewable energy,” said Michael Lalor, the Johannesburg-based head of EY’s Africa Business Centre. “There’s a growing base of consumer demand as that happens.”
African growth has slowed since 2014 as waning demand from China hammered prices of raw materials from oil to copper and coal. Of the three biggest sub-Saharan economies, Nigeria’s is shrinking and South Africa and Angola are barely growing.
Investors have adapted by focusing more on the continent’s young population and rising middle class as harbingers of opportunity.
Countries less exposed to commodities are reaping the benefits. The number of foreign direct investment projects carried out by private-sector companies in Kenya rose to 95 in 2015 from 62 the previous year, the biggest increase among African nations, according to EY.
“Kenya is really benefiting in terms of long-term investment,” said Martina Bozadzhieva, an analyst at London-based Frontier Strategy Group, which advises firms looking at emerging markets. “A lot of companies see it as a much more reliable, less vulnerable destination than, say, Nigeria or Angola.”
Investment in West Africa’s Ivory Coast, which the International Monetary Fund said will grow 8.5% this year, more than anywhere else on the continent, is also booming. Heineken NV announced a new brewery last year, French retailer Carrefour SA opened its first store in December and Burger King launched its first sub-Saharan restaurant outside of South Africa there the same month.
To be sure, the gap between promise and reality has bruised earlier generations of foreign investors in Africa. Heineken chief executive officer Jean-Francois van Boxmeer said he was “praying” for higher oil prices to boost beer sales, while retailer Truworths International Ltd pulled out of Nigeria in February, citing red tape and capital controls.
Still, Facebook CEO Mark Zuckerberg just travelled to Kenya and Nigeria on his first visit to sub-Saharan Africa. In Nigeria, where his personal fund in June invested $24 million in Andela, a Lagos-based start-up software developer, he said he was “blown away by talent and entrepreneurs in this country”. In Kenya, he said he wanted to learn how businesses were using mobile money.
Oracle said this month that Africa was a “priority market” in which “cloud technology will undoubtedly drive the next phase of growth for businesses”.
Since launching in South Africa in 2013, Uber has entered Nigeria, Ghana, Uganda, Tanzania, Kenya, Morocco and Egypt.
Last year, Uber chief executive officer Travis Kalanick named Africa as one of his priorities, along with China and India. Bloomberg