The Next Great Data Market
In the last decade the field of data analytics has revolutionized the way business is conducted in the industrialized world. Data collection and analysis have allowed companies to boost efficiency and innovation and better tailor services to reflect consumer needs. Likewise, mobile phone apps have created new opportunities for collaboration and investment and allowed for crossover between sectors.
However, these rapid changes have barely made a splash in Africa, where only about 1% of the world’s research data is produced. This is changing rapidly and the current dearth of data analytics means that there’s huge unrealized business potential waiting to be tapped, especially for first movers. This is in large part because data analytics is not just a useful tool but rather a disruptive, market altering paradigm. In the Western tech sector, the vast stores of data built up by giants like Google, Amazon and Facebook have given them an enormous advantage over competitors. If done right, harnessing the potential of unexplored data in Africa can give that same edge up to those who move fastest and first.
While there may not be a traditional electric Macrogrid in much of Africa, modern market penetration is still possible through the recent rise of cheap smartphones. With much of Sub-Saharan Africa looking dark at night on the map, over 90% of the region is now covered by 2G internet, with 3G rapidly expanding and of course 4G in many of the major cities. This basic coverage allows for access to low data apps, and mobile internet use has been rising rapidly in tandem. Now, with 5G technology soon ramping up across much of the developed world, the ability of African countries to leapfrog from 3G to 5G, notwithstanding the fact that 4G does exist, the potential for such technological advancement are quite plausible.
These factors together mean that even in remote, rural locations, a smartphone and an app can forge a data driven connection between a consumer and a company, but only time will tell how quickly this happens. Moreover, with the potential population boom the continent is experiencing, implementation of 5G networks will definitely be a major driver of technological deepening within much of the rural areas. This of course will be a significant source of data. Who controls this, may be Africa’s next king!
Also Read: East African Data Centres rolls out $1.2Million solar investment
Where Do We See the Influence of Data Analytics?
- Microfinance
Perhaps more than any other field, financial services and financial tech in Africa have been revolutionized by data analytics. The trend began with the advent of M-Pesa, a company, which was a precursor to the American mobile money transfer system, Venmo, which is today a very common smartphone mobile money transfer system in North America.
M-Pesa initially launched in Kenya and has largely supplanted cash transactions in many places, while copycat companies have been spreading across Africa. Many microfinance companies jumped on the technology and now conduct most of their business through apps, allowing customers to both apply for, and pay back small-scale loans on their phones. The use of such apps gives these small and medium–sized lenders the ability to collect data for each customer, track when payments are missing and draw conclusions on what makes a reliable borrower, and which projects are likely to succeed.
The strategy was first pioneered by Tala, a microloan company that came up with the idea of using data analytics to generate “digital credit scores” for their customers. So far Tala boasts over a billion dollars in profit, and similar companies such as Branch and Okala have been reaping heavy windfalls. Meanwhile, credit is now being extended to customers who would otherwise have no means of access.
- Energy Distribution
While large scale solar systems are often too expensive to bring in numerous customers, the past decade has seen an explosion in small scale solar products, such as lanterns and low wattage home systems. One of the key proponents of M-Pesa, Nick Hughes, who initially led the team to take the money transfer platform from a mere concept to scale, is now taking another revolutionary stance by leading the charge in energy distribution. As Co-Founder with his follow-up company M-Kopa, which allows customers to pay for electric use bit-by-bit through their phones, he hopes to revolutionize the electricity sector in Africa. This “Pay-As-You-Go” (PAYG) pricing scheme has opened up access to a new market of low income, “last mile” customers who might struggle to pay a large up-front sum. The rise of data-driven PAYG has led to a proliferation of small solar companies operating across East Africa, and has been turning lights on far past where the electric lines end. Companies to watch for include not just M–Kopa, but D.Light, Peg Africa, Zola Electric and Tizeti, the last of which aims to become “the Comcast of Africa.”
- Telecommunications
Traditionally phone service carriers relied on service centers based in large urban areas with high populations. This centralized model required buyers to physically reach the center to recharge their phone bill, unfortunately cutting off most remote and low–income customers in the process. Smartphone payments now allow customers to pay for a set amount of minutes or megabytes from any conceivable location, or even purchase specific app bundles like the WhatsApp-Facebook-Twitter package. Switching to the decentralized model has created a surge of new business opportunities for both phone manufacturers and service distributors, and created possibilities for partnerships between carriers and companies with digital products.
What Should Entrepreneurs Be Aware of?
- Choose Your Market Carefully
Financial tech and energy distribution are hot fields right now and could always use more players. But don’t ignore the many fields where the demand for data driven services is high but the market saturation is still quite low. Agriculture can utilize data to track trends on crop yields and stay updated on fluctuating prices. Education can use data to accurately track student performance and augment student engagement, especially in places where students are forced to walk long distances to access public schools. As industry-specific technologies evolve in tandem with the spread of electricity, there are more and more business opportunities opening up not just in agritech and edtech but also medtech, retailtech, insurancetech and many more. National and local governments will also increasingly play the role of high value customers because more and more countries in Africa are realizing that potential data analytics presents for public administrations.
Also Read: African tourism turns to tech to survive
- Tailor Your Products to the Market
While internet networks are spreading and improving rapidly, keep in mind that loading speeds may still be slow and data is expensive, especially on the continent. With internet penetration increasing, the market for the 1.3 billion Africans stands to be a goldmine. Companies like Facebook, WhatsApp and Twitter that have had success penetrating remote, rural locations, and each of them produce data-friendly “lite” alternatives to their standard apps for use in the developing world. Entrepreneurs trying to reach those crucial last mile customers would be wise to follow suit and invest in “lite” apps which won’t take up much storage space or require heavy data use.
- Be Aware of Government Regulation
As with many rapidly evolving fields, the potential for abuse is present in these new markets. The micro-loan company Tala and its many copycats have been attributed with revolutionizing financial inclusion, but have also come under criticism for giving predatory, high interest loans to desperate customers. Such is the case in Kenya and Tanzania where both Branch and Tala have been accused of ripping off clients, yet, they provide opportunities that local governments and businesses wouldn’t be able to service.
As such, more governments are rightfully considering active regulation of the industry. The private sector has already begun to trend this way with coalition groups like the Digital Lenders of Kenya promoting internal self-regulation and Google announcing that it will crack down on predatory loaning apps released on its App store.
Also Read: Rwanda embraces cloud based OTT messaging apps
- Be Conscious of Advantageous Business Partnerships
The African data analytics specialist sector is still in its early stages but is growing year to year. A few larger names dedicated exclusively to data crunching include Super Fluids lab, Softworx, RasXP, Entellet, and a number of smaller, location specific companies which can be found throughout Africa. Interested investors should keep an eye out for whatever data analytics resources already exist. These companies can provide new businesses with a wealth of useful data at low costs and also provide an opportunity to invest in local workforces.
- The Full Potential of Data Analytics has Still Not Been Realized
Reading about some of the above ventures in finance and energy may lead investors to believe that the first mover advantage has already been lost. This could not be farther from the truth. African financial services and energy distribution are two of the markets most affected by data, and both are still considered highly competitive fields with significant potential for market disruption. The invention of M-Pesa-style or rather USSD (Unstructured Supplementary Service Data) payments common to feature phones, essentially changed the entire Kenyan economy almost overnight and is now spreading from country to country. The switch from large scale solar systems to cheap PAYG products transformed the energy industry almost as fast. Most sectors are even less unexplored and are waiting for the right entrepreneur to shake up the paradigm
More importantly, while there are a number of companies using data to augment their services, the potential for Big Data is still unexplored. Currently every new customer using their smartphone for a mobile service is adding a new data point. Successful Big Data will combine thousands of these data points together and use the aggregate to predict large scale trends, shaping future business decisions on a scale unrealizable with conventional methods. The volume of data necessary for this isn’t available yet within Africa, but is becoming more and more attainable every year. Those who are positioned to access large scale predictive analytics first, will have a sharp advantage in a currently unrealized market.
