Why Singapore tech firms think Africa is the next big thing

Africa has become the new frontier for Singapore’s startup movement, as more technology and venture capital firms eye the continent’s largely untapped market for the next wave of growth despite the challenges it presents, experts say.

From ride-hailing and ecommerce to trade finance and infrastructure, companies from the city-state have in recent years been drawn by the sheer size of the African market – 1.2 billion people – and the opportunities it presents as it seeks to keep pace with Asia and the rest of the world.

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One such budding firm is Gozem, a Singapore-based transport company with ride-hailing services in West African nations Togo and Benin that plans to enter 15 more African markets within five years.

In both Togo and Benin, where owning a vehicle is considered a luxury, hailing a moto-taxi from the pavement has long been the only way to get around. But Gozem’s plan may well improve that by bringing the pre-booking driver app to the tiny Fancophone countries. In a nutshell, the company wants to replicate Southeast Asia’s widely successful apps Grab and Gojek.

West and Central Africa have some of the world’s poorest economies. But it’s the unmet demands and the need for new digital infrastructure that partly drew Raphael Dana, co-founder of Gozem.

“We targeted West and Central Africa first, as fiber optic and 4G systems are deployed. Ninety percent of phones sold are smartphones and an open regulatory framework for fintech services is in place,” he said. “Despite the boons, these regions are relatively neglected by investors and entrepreneurs yet present an equivalent potential as Africa’s top three economies.”

Gozem’s decision to first enter Central and West Africa indeed stands out from other Singaporean startups, which tend to target the continent’s larger or rapid-growing markets.

“Apart from Africa’s top three economies, namely Nigeria, Kenya, and South Africa, Singapore also eyes Mozambique, Angola, Ethiopia, Tanzania, Rwanda, Ghana, Ivory Coast, Egypt, and Morocco for growth,” said Rahul Ghosh, regional group director for Sub-Saharan Africa at Enterprise Singapore, a government agency that facilitates such investments.

Kelvin Tan, secretary general of Africa Southeast Asia Chamber of Commerce (ASEACC), said there were numerous reasons Singaporean firms have so far preferred East African Commonwealth nations.

“They tend to shun Southern Africa partly due to concerns of corruption, safety, currency volatility, and underdevelopment,” he said.

More widely, however, Africa has all the hallmarks of a continent ripe for startups and new ideas, especially when it comes to ecommerce, cross-border trade, and government administration.

It has the world’s largest share of adults with mobile money accounts but poor cross-border payments; intra-African travel and trade is on the rise but government administration is poor; it has an aspirational working and middle-class population spurred on by the need for better infrastructure and resources; and it has regimes largely keen to improve their reputations on the world stage, according to Robert MacPherson, junior partner of M&A advisory firm Reciprocus International.

“Several African governments are echoing international trends of reducing operating costs, improving communication quality with remote geographies, and enhance transparency and accountability,” he said.