Africa’s digital opportunity isn’t evenly distributed.
The NEKS countries — Nigeria, Egypt, Kenya, and South Africa — are home to about a third of Africa’s population cumulatively, but attract ~75% of the total funding raised across the continent.
Why is that?
Here’s some data.
NEKS countries account for:
- ~51% of the continent’s GDP
- ~51% of the continent’s mobile subscriptions
- ~50% of the continent’s developers.
- and more.
While Total Addressable Market (TAM) is a relatively well-known concept — and sometimes population size is used as a loose mental proxy for it — there’s a related concept of ‘digital TAM’ that’s widely underappreciated and often unmentioned.
Writer Mario Gabriele alludes to it in his essay on specialist frontier market VC firm Sturgeon Capital:
[Population] size is important. For a company to succeed, it must have a sufficiently large market… [but] a large population is not sufficient in and of itself. There must be a sizeable digital opportunity to make a country interesting as a venture market.Mario Gabriele, Founder, The Generalist
And Sturgeon Capital’s own Alexander Branton puts it bluntly:
The common thread of success in frontier markets is investing in fundamentally sound businesses at the forefront of GDP digitalization and acquiring an ever-increasing Digital TAM.Alexander Branton, Partner at Sturgeon Capital
Today, Africa’s digital opportunity or digital TAM — as calculated by a mix of smartphone ownership, internet usage, digital payments, GDP (per capita), and other inputs — is concentrated in the four NEKS countries.
That said, there are a number of upcoming venture markets across the continent that are earlier in their digital supercycles and offer interesting risk/return opportunities to ride the long-term digitization wave.
Interested in hearing more about these opportunities and investing in the most promising ones? Fill out this form and I’ll be in touch.
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