Do you want to start a business in Africa and attract FDI? If YES, here are 50 best innovative small business ideas & investment opportunities in Africa for 2020.
There is a popular saying that “No man is an island”. It is used to point to the fact that we all need the help of one another to survive as humans.
This saying can also be extended to nations because when it comes to economic growth and development, no country is able to do it on its own without help and input from other countries. Even the most advanced nations in the world still need help from other developed countries every now and then.
Why Start a Business in Africa?
Africa is a fast developing continent and many foreign investors understand that there is a lot of money to be made in Africa. There are a great number of opportunities in Africa that many investors and businesses aren’t aware of especially as the economy of the continent is not only small but poor.
This however doesn’t mean that Africa hasn’t been evolving as there are several countries who having undergone economic reforms are one of the best places where investment can be done when compared to other countries in other regions of the world; especially as the returns can be much greater than those found in the developed world.
According to statistics, countries in Africa generated a 14 percent annual return on investment with 9 out of the 15 fastest growing economies in the world being in Africa. The African continent is not only rich in farmlands but human and natural resources abound and as the population in the world continues to grow, these resources will become more valuable.
Africa is regarded as a region where low wages still abound and due to its close proximity to North America and Europe than Asia, there will be an opportunity for Africa to grow its manufacturing base. Africa majorly trades with North America, Europe and China with only 12 percent of its trade staying within the region.
Investors that are smart and innovative are seeing the endless opportunities that abound in Africa as China has more than 70 percent of its Foreign Direct Investment (FDI) in several African countries. Asides from China, the Western world and other countries such as Russia and Turkey are doubling their investment efforts in Africa.
Understanding the Fundamental Challenges of Doing Business in Africa
The problem with Africa is that unlike other developing and emerging markets, the region is fragmented due to the fact that there are 54 countries with different laws in the continent.
For example, investors who want to invest in India know their target market upfront but it is not so with Africa, as investors have to choose a country to invest in and with the poor infrastructure, bureaucracy and high tariffs, it makes it difficult for an investor to move capital and other resources freely across the continent.
The continent has been making progress in certain issues such as tariffs as there has been regional trade blocs formed such as Economic Community of West African States (ECOWAS), Southern African Development Community (SADC), and the East African Community (EAC); there is still a lot of work to be done in order to ensure that the continent is not only united but also integrated with other countries and regions in the world.
However as with all frontier markets, the risks that come with doing business in Africa is still huge and so it is important that potential investors carry out their homework in order to understand the market that they intend going into.
There are still a lot of facilities and trends that are being enjoyed in more advanced countries that are yet to make it to Africa. If such trends can be brought to Africa, they have potentials of becoming huge money spinners. If you are looking to attract foreign investment for your African based business, we have come up with 30 trending innovative business ideas for you to choose from.
50 Best Small Business ideas & Opportunities in Africa for 2020
1. Waste Water Recycling: Waste water recycling is a growing technology in the world and it is especially beneficial for African countries with water scarcity problems. The waste water recycling technology makes it possible for used or impure water to be filtered and made clean again for drinking or for other uses. This is one of the trending business ideas that are attracting foreign investors from all over the world to African countries.
2. Agricultural Processing: Even though Africa is blessed with a lot of food resources, the culture of importing processed foods from other continents especially America and China has been the norm.
African businesses are now beginning to demystify food production and realizing just how easy it is to process and package these food items. Home grown and processed food is also cheaper and much more profitable hence the reason why businesses within this category are attracting foreign direct investment.
3. Internet Service Providers (ISP): GSM Service providers made a lot of money when they penetrated African countries. However nowadays, GSM is fast taking the back burner because most people now communicate via texting apps that also have calling features. Internet service providers are poised to take over from GSM service providers in the next few years and Foreign investors are targeting African ISP’s.
4. Electrical Vehicles: For African countries that enjoy consistent power supply, a TESLA dealership is a perfect business idea to attract foreign direct investment. TESLA is an American company that produces automobiles that run on electricity instead of gas. The innovation is receiving wide acceptance in the US and in other continents but as of the time of this write-up, there are no TESLA dealerships in Africa.
5. Artificial Intelligence and Robots: Businesses that rely on artificial intelligence are also receiving widespread attention from foreign investors- supermarkets with robots as attendants, hotels with robots offering room service, logistics companies that use artificial intelligence to facilitate movement of their merchandise and so on. Artificial intelligence helps to promote efficiency and reduce the costs associated with human resources management, thereby making businesses more profitable.
6. Healthy Food Manufacturing: Africans are not left behind on the fitness trend that has taken the world by a storm in recent years. However, Africans still have to rely on importation of healthy food items like gluten-free powders, protein powders, healthy shakes, smoothie powders, and sugar substitutes. Some of these items can be made easily in Africa and foreigners are always happy to invest in businesses that help to satisfy a growing demand.
7. Green Engineering: Businesses that embrace green engineering technology and processes are also attracting foreign investments and grants especially from governments, individuals and groups that have world environmental protection and global warming prevention on its agenda.
8. Home Automation Devices: You may have heard about devices like Google’s Alexa which allows you to control your home devices and systems remotely.
For instance, you can turn your security lights and cameras on and off, or turn off the oven or the dish washer while you are at work. Home automation deices help to promote security and reduces stress and a lot of people from all around the world are embracing this trend which is yet to make its way into the African market.
9. Self-Driving Vehicles: Another innovative trend that can attract foreign direct investment fast is to start a self-driving vehicle dealership, or to start manufacturing self-driving vehicles for African markets. The GPS technology has made it possible for some specially designed vehicles to drive themselves without being driven or controlled by a human.
10. Drone Technology: Many foreign investors are shelling out funds for African businesses that are using the drone technology to provide solutions and make life better for the citizens. Drones for instance, can be used by the military or security agencies for surveillance and crime fighting purposes; they can also be used in rescue missions, on engineering sites, and for several other uses.
11. Automated Goods Delivery: Some businesses in the United States have started using automated delivery services to facilitate the delivery of their products to customers. African countries can benefit a lot from such services due to the bad road network in many African cities. It can also help to guard against robberies and other security challenges that logistics companies often face in the process of trying to deliver goods to consumers.
12. Tourism and Hospitality: Africa is a choice destination for people from all around the world who troop in regularly to have first-hand experience of the rich culture and the beautiful scenery in Africa.
There are still a lot of untapped niches in the African tourism industry that you can tap into. For instance, Air B’n’B received a lot of direct funding when it came up with the innovative concept; you can come up with an innovative idea of your own too.
13. Shopping Malls: Many African countries are only beginning to embrace the shopping mall culture. You can get sizable foreign investment to finance your shopping mall project if you can find a strategic location that is sure to bring in a lot of traffic and income. Nigeria for instance, had a lot of foreign-funded shopping mall projects in some of its major cities in the last few years.
14. Mobile Phone Manufacturing: Most of the mobile phones that Africans use are imported from other countries like China and the United States. You can easily attract a lot of foreign investors if you can come up with an innovative business idea that allows quality mobile phones to be manufactured and assembled in Africa.
15. Fashion Lines: Another item that is sadly being imported into Africa in alarming quantities is clothing items, especially shoes and bags. Considering the fact that Africans are highly fashionable, a business that manufactures ready-to-wear clothing items, and reduces the need for importation of these items is sure to attract foreign investments due to its huge profit potential.
16. Bio-Fuel Production: Another business idea is production of bio-fuel. One of the major challenges that Africans face in their day-to-day lives is the high cost of fuel that they have to deal with, not just for their vehicles, but for cooking and manufacturing.
Bio-fuel helps to eliminate this problem by making it possible for waste items to be converted to fuel. A Bio-fuel refinery is another business idea that has the potential to attract foreign direct investment.
17. E-Commerce: There’s still a lot of room for fresh ideas and niches in the E-Commerce industry. Shopify came up with a unique type of E-commerce business that recorded a huge success in spite of the fact that the E-Commerce giants like Amazon and eBay seemed to have the entire market in their pockets at the time.
E-Commerce is one of the most profitable businesses in the world today as many people find it convenient to make their purchases from the comfort of their homes. Come up with a unique idea like Shopify and you can be sure that foreign investors will be willing to partner with you.
18. Cryptocurrency Startups: The Cryptocurrency revolution can no longer be ignored and foreign investors know this. Cryptocurrency startups are attracting a lot of foreign investors in Africa, and all over the world.
19. Medical Marijuana: A medical marijuana farm with processing and packaging facilities is another trending business with a lot of foreign investment potential especially since the concept of medical marijuana is still a new one in Africa.
20. Cyber Security Solutions: Cyber security startups are also receiving a lot of attention from foreign investors all around the world. Almost every individual and business owner uses the internet and the need for internet services is expected to increase over the next few years as many brick-and-mortar businesses are expected to take their businesses online.
21. Sharing Economy: Any business that promotes the sharing system is also getting a lot of attention. People love these services because it helps them save money. You can also get foreign investments for business ideas that promote the sharing economy like Uber, Air B ‘n’B.
22. Money Lending Apps: Many people find themselves needing some quick cash before payday and many African countries do not have access to credit cards that can be used to settle some emergency bills before payday. This is what gave rise to money-lending apps that allow people to borrow money to offset some emergency bills. This is another business concept that can get you the attention of foreign investors looking for business opportunities in Africa.
23. Digital Banking Solutions: Digital banking solutions such as M-pesa in East Africa, is another innovative business idea. Due to the success recorded by M-Pesa in East Africa, many investors are looking for ways to break into the market as well.
24. Alternative Energy: Alternative energy is another lucrative business that will always attract foreign investors to Africa. There are many African countries that are yet to figure out how to provide 24/7 electricity to their citizens. An alternative source of power that bypasses the traditional systems is sure to be embraced, both by investors and citizens of countries that suffer from energy problems.
25. Low-Cost/Affordable Housing: Shelter is very important for human sustenance but unfortunately, many Africans cannot afford the exorbitant costs of housing especially in the urban centers. Affordable houses like trailer houses, tiny houses or houses that make use of non-traditional construction materials thereby making them cheap to construct, can go a long way in solving accommodation problems in African cites. This type of business that solves life-threatening challenges is one that you can receive foreign investment or grants with ease.
26. E-Health: E-Health services make it possible for ailing patients to receive doctor’s consultations and prescriptions without leaving their homes. The consultations are usually done over the phone or over the internet. This is another trending business idea that you can explore for foreign investments.
27. Nanorobots: Nanorobots are tiny robotic devices that are used to destroy bacteria and disease causing organisms in the body. They are used in place of synthetic drugs and chemicals, and they are fast gaining popularity all over the world. A business like this is an innovative one that can easily grab the attention of foreign investors when you decide to bring it to Africa.
28. Solid Minerals Extraction: Africa is blessed with a lot of solid minerals including Gold, Iron Ore, Tin, Columbite, and Diamonds among several others. You can start a business that explores and extracts these minerals for sale. Businesses like this get a lot of foreign investment.
29. Virtual Reality Centers: Virtual reality centers are trending in the tourism and entertainment industry. You can also get foreign funding from investors who are interested in the entertainment and tourism industry.
30. Gaming Apps: Gaming apps have a huge profit making potential. Some gaming apps rake in profits worth hundreds of millions in dollars. This is another business idea that can get you the attention of foreign investors from all over the world.
How You Can Invest in Africa
Even though investing in Africa is prone to many risks from lack of infrastructure, regional conflicts and problems from government; there are still several benefits, such as natural resources, large population and the fact that most of Africa is still undeveloped – that can be gotten from investing in the continent.
As an investor, you can invest in Africa majorly through two ways; buying Africa directly or buying Africa indirectly. It is however important that you make findings regarding the investment trust you intend investing in because while unit trusts allow investors to put in and withdraw money every day, it is usually costly for them unlike investment trusts where investors have to buy into the trust only from an existing shareholder.
- Buying Directly
This refers to investing in specific African funds by choosing to have stakes in one or diverse Exchange Traded Funds (ETF) thereby mitigating your risks. Most ETFs are spread across several countries in Africa and deal in sectors varying from financials, customer staples to customer discretionary and have varying charges for those that invest with it.
- Buying Indirectly
These kinds of ETFs have stakes in other regions and not just in Africa and most times Africa don’t even represent a majority of the weight of the fund and the funds aren’t diverse geographically.
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