AFRI-CONVERSE 2023 #04 “Rise of Innovation in Africa: Unleashing Entrepreneurial Solutions for Sustainable Development” to be held on December 18th

The African economies are endowed with abundant resources, such as commodities and a youthful population, offering opportunities for growth and development. Yet, some countries still exhibit significant levels of poverty and inequality, with inadequate economic foundations and social infrastructure. Most of the African countries continue to display lower human development indicators compared to world average.

Against this situation, the private sector plays a crucial role in addressing many of the socio-economic challenges in Africa. In particular, startup companies have been experiencing rapid growth in recent years, generating innovations to address the region's challenges and offering new solutions in fields such as education, agriculture, healthcare, energy, and finance. For example, WASSHA Co., Ltd. partners with small-scale retail stores (referred to as kiosks) in East Africa to provide a service that focuses on serving low-income consumers. They offer solar-powered LED lanterns for daily rental. In Africa, over 600 million people live without access to electricity. WASSHA's service for instance, is contributing to the alleviation of energy poverty by making it affordable for these individuals to access electricity.

Startups are also playing an active role in the financial sector. Many regions, in Africa especially in non-urban areas, lack of branches and facilities for banks, ATMs, and other financial institutions, making it difficult to provide financial services. This situation is particularly prevalent in the borderlands, which are usually underserved in infrastructure. On the other hand, mobile communications are spreading rapidly in Africa, providing opportunities to make access to finance through digital means. In response, startups and other businesses in the fintech field have been remarkably active in Africa in recent years. These companies are making digital finance-literacy and services more accessible by offering mobile payment platforms and mobile banking apps, including off-corridor border locations. In 2021, 5 out of 7 tech Unicorns (that is, privately held start business with valuation beyond 1 billion US Dollars) were in the field FinTech.

As mentioned above, African startups are making a significant contribution to solving socio-economic issues in the region, and investment in African startups has grown rapidly in recent years, reaching a record $5.4 billion in 2022 (Africa Business Partners 2022 ). This figure is a 20% increase from the $4.4 billion in 2021. In addition, Japanese investment in African startups is on the rise. Japanese companies and investors are increasingly interested in Africa's growth markets and are exploring new opportunities. Several Japanese venture capital and investment funds have also established funds focused on African startups. These funds are promoting investments in the African technology sector. In addition, academic institutions as well as the private sector are supporting startups entering Africa. As part of its support for entrepreneurship, the University of Tokyo operates an incubation facility for startups aiming to put research and educational results to practical use and return them to society, and also supports start-ups entering Africa.　Also, JICA has been committed to create business innovation in Africa via a platform such as Project NINJA (Next Innovation with Japan).

Against this background, Japanese investment in African startups has the following three significance. First, it will drive inclusive economic growth in Africa. Africa has the fastest growing population and is expected to continue to experience economic growth, amplified by more integrated markets under the African Continental Free Trade Area (AfCFTA). Investment in African startups will drive this economic growth and create new business opportunities, particularly for the most vulnerable and least capitalized businesses. This will ensure that the promise to leave no one behind in the SDGs is concretized. Second, there is a potential for technological innovation to be promoted. African startups often have innovative and unique business models that solve problems. For instance, digitization of Village Savings and Loans Associations in Africa borderlands regions have improved capitalization, reduced interest rates, strengthened the establishment of value chains, and overall provide access to finance for small businesses. Investment in African startups will enlarge the scope and the impact of small and micro businesses, for the overall achievement of the SDGs. Finally, international cooperation will be promoted, through south-south and north-south knowledge and capital transfers. This will enable Japanese businesses to leverage new market opportunities in Africa whilst contributing to local job creation and economic development. This will contribute to poverty reduction and resolution of social issues in Africa, as well as strengthening economic and political ties between Japan and Africa.

In this connection, in November 2021, the Japanese government formulated the "Strategy for Promoting Business in Africa" and has a policy to increase investment in African startups. It is expected that Japanese companies will collaborate with African startups to create new business opportunities and contribute to Africa's economic development and resolution of social issues. The session will discuss about the future perspective of development in the continent with the perspective of investment in startups. The panel members will identify potential opportunities for the future of innovation and startup investment by businesses in Africa and Japan.