Experts predict that a golden year or two lies ahead for the technology and telecommunication sectors in Africa with an uptick in investment driven by a range of factors.
Demand for high-performance broadband connectivity is increasing across the continent, translating into opportunities for wholesalers to deliver next-generation connectivity through strategic partnerships with flourishing markets in Africa.
Surge in mergers and acquisitions
The latest from Baker McKenzie’s forecast (2018) brims with optimism, highlighting some positive global trends. Dealmakers around the world are rediscovering an appetite for investment in 2018, the report states, “amid the easing of key economic and political risks and the emergence of positive macroeconomic deal drivers”. This is becoming especially apparent in Africa’s telecom sector.
The forecast (McKenzie, 2018) predicts an increase in mergers and acquisitions (M&A) activity in the telecommunication sectors in Africa and the Middle East this year is due to increase four-fold. This is evidence of investors gaining confidence in the business prospects of acquisition targets and newly listed businesses. In 2017, M&A in the tech and telecoms sector in Africa was valued at roughly R16.2 billion, but in 2018 and 2019 this is expected to increase to about R76.7 billion. By 2020 the figure is expected to drop back to R48.8 billion (at current currency values).
Growth factors for Africa’s telecoms
McKenzie attributes this surge of investment in tech M&A to a more positive global economic outlook from 2017. In Africa, this is helped by the rapid expansion of emerging technologies affecting industries and an increase in investments from local emerging markets. Major networks are now working to consolidate their positions and build economies of scale by absorbing smaller regional competitors and niche operators.
Africa’s growing telecoms infrastructure has allowed for greater access to online platforms and services, which is fuelling the continent’s digital economy. This is evident in the financial services sector, which is experiencing significant growth in Africa as domestic banks invest in technology to offer innovative services and solutions. Multinational telecommunication and technology companies have also been taking note of the increased demand for state-of-the-art products and services and moving in to seize those opportunities.
Availability grows demand
Competition in Africa’s fibre market has been accelerating in 2018 because large telecom players have been working hard to entrench their positions and capture a slice of the market. In East Africa and Southern Africa in particular, there’s a rush to furnish metropolitan areas with fibre infrastructure.
In the long term, end users who receive better broadband connectivity can benefit from added telecom services, further fuelling demand. This exponential growth helps to make the business case for greater investment by telecom networks while opening a world of possibilities for wholesalers.
The case of fibre exemplifies how opportunities in Africa’s ICT sector are set to increase. This growth surge could find enough momentum to keep it going well beyond 2019 as growing capacity fuels growing demand for sophisticated technology solutions and telecommunication services – and wholesale solutions have a vital part to play here.
To learn more about the opportunities that await wholesalers, take a look at mapping the telecommunications landscape in Africa.