Africa: 14 business ideas with strong profit potential
A selection of business ideas that have come across our desk.
1. Electric motorbikes for Africa’s urban centres
“I see a huge opportunity in electric motorbikes in urban centres across Africa,” says Mansoor Hamayun, CEO of pay-as-you-go solar power company BBOXX. “There is a strong market for motorbikes, and they are often the main mode of transport for many people.”
“The transition from traditional fuel to clean energy has huge potential and a number of positive implications for the environment and people’s health in Africa’s big urban centres. It is innovations like these that will enable us to move the dial on the Sustainable Development Goals as the driving force for wider economic development.” Read the full post.
2. Tapping into Kenya’s affordable housing market
“I believe that the best business opportunities are those that address significant and untapped consumer demand,” explains Ivan Mbowa, regional general manager of financial services company Tala (former CEO of Umati Capital). “For anyone starting a business in Africa, I would advise you to look at the fundamentals. One fundamental business opportunity that I see is in affordable housing. Affordable housing options have not caught up with the rate of population growth and urban migration.
“Whether you look at this from the spectrum of student housing or single accommodation options, I believe that the right mix of price and quality is a sure bet and one that will reward a business person/investor with returns at least equal to, if not greater than, the 25% per annum appreciation in real estate that most investors have seen in real estate in Kenya.” Read the full post.
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3. Garbage disposal: the next big thing?
Hasnain Noorani, the CEO of Pride Group, a Kenyan-company involved in the hospitality, transport, travel and energy industries, believes garbage disposal could be the next big thing in Africa.
“One of the biggest challenges that Africa is facing at the moment is hygiene and cleanliness, perhaps because of widespread poverty. Hygiene has become an issue that needs to be tackled. The amount of garbage that is collected on a day-to-day basis in Africa is huge.
“But disposal of all that waste is something that has been a problem in Africa, especially with the usage of plastics, which don’t decompose over time and create litter.
“One of the opportunities, which, I believe, is untapped and has huge potential, is coming up with a cheaper solution of trying to see how garbage can be disposed of not only on a small-business level but perhaps also at the city level. This may involve coming up with equipment that can take in all that garbage and using it to produce a renewable energy source.” Read the full post.
4. Opportunity for more value retailers in Nigeria
Michael O’Malley, director of real estate development company RMB Westport, says there is an opportunity for value retailers to enter the Nigerian market, which will drive the development of shopping centres.
“The retailer base in Nigeria at the moment is not broad enough for even the smaller centres to gain a lot of traction. The types of retailers that are currently present in Nigeria are not offering a discount product to the public. We need value discount retailers to… look at the market opportunity in Nigeria.” Read the full post.
5. Battery recycling – a spin-off from the small-scale solar boom
In recent years, the off-grid pay-as-you-go (or PAYGo) solar energy industry has provided electricity to millions of households in Africa. What started off as a niche industry is quickly growing into a massive business. Prominent companies in this industry are M-Kopa Solar, PEG Africa, Lumos Global and Zola Electric, to name a few. Although there are slight differences in these companies’ respective offerings, the packages generally comprise a solar panel and battery, with accompanying appliances such as light bulbs, a torch, a mobile phone charger and a radio. Some packages even include a digital television.
Stakeholders have suggested a potential spin-off opportunity from the household solar industry: the recycling of the systems’ batteries. It has been said that it could lead to an environmental disaster if the industry grows as large as many expect, without the proper disposal of old batteries. Read the full post.
6. An efficient maintenance repair operations (MRO) industry
Africa doesn’t produce many of the inputs needed to manufacture at scale, says Isaac Kwaku Fokuo, founder of investment advisory firm Botho Emerging Markets Group.
“I believe we are at a point in time on the continent where we are starved for projects that will have a profound ripple effect on other activities. So, if I had $100 million to spend, I would build a company that focuses on building the value chain of an efficient, effective, and highly profitable maintenance repair operations (MRO) industry.
“MRO simply refers to supplies and goods within the production process that guarantee that all areas of business operations can function properly. This is different from an original equipment manufacturer (OEM) product which is an end product. For example, a car is an OEM product, but its steering wheel is an MRO product.
“Our continent is poised for growth and we keep talking about the fourth industrial revolution and some even argue that China will outsource its manufacturing to Africa (I am not one of the proponents of this argument). Yet, we do not produce a lot of the inputs needed to manufacture at scale and boost intra-African trade on “made in Africa” manufactured goods.
“Currently, if I am a production manager in many African factories and my conveyor belt breaks, it will be difficult for me to find a part and get the line working in under a day, let alone less than two hours. Picture the loss of productivity in such a case and think of how often essential parts of production lines tear or need to be replaced.
“To solve this, my MRO distribution centres will serve the demand from local manufacturers and they would also feed inputs into critical operations of different industries such as manufacturing, construction, and more.
“In addition to this, the company would help build an effective, scalable e-commerce platform that allows businesses to get what they need promptly because one of the biggest impediments to business in Africa is that we do not have time-efficient solutions to some of these foreseeable problems. We import a lot of things, and this not only stalls processes but it also has significant financial implications, which creates a lot of inefficiencies.” Read the full post.
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7. Starting a tourism-related business in Côte d’Ivoire
Ivorian Minister of Tourism, Siandou Fofana, earlier this year presented a strategy document aimed at making Côte d’Ivoire Africa’s fifth biggest tourism destination from 2025. The strategy will rest on nine new flagship projects and would require a $5.8‑billion investment.
“One of these is the Abidjan Business City, which will be a central point for holding conventions in Côte d’Ivoire. We do not currently have a conference centre and we do not have a hall with the capacity to accommodate 5,000 people. There is, therefore, a need to move quickly in that regard,” he said.
“We will also have a beautiful beach for all, with a 550-km coastline that has yet to be exploited. In addition, we will build a 100-hectare leisure park to be a place of entertainment for the sub-region, and develop press trips and seven flagship tourist areas,” Fofana added.
Projects envisaged under the strategy include strengthening of the tourism code, establishing additional tourist attractions with a land reserve of 6,000 hectares, the creation of a bank of tourism-sector projects and redesigning of a tourism ‘one-stop shop’. The government also plans to strengthen security and health care, develop the aviation sector and increase airport passenger flow to three million, and train and certify 230,000 sector professionals. Read the full post.
8. Add value to Ethiopia’s local commodities … and then export
Which sectors provide the best opportunities for investors in Ethiopia? Africa Private Equity News (download the mobile app here), recently posed this question to Matthew Davis, CEO and partner of private equity firm RENEW.
Davis says there is a sweet spot in adding value to locally sourced commodities, and then exporting the finished products internationally. He highlights “anything manufacturing that is leveraging a competitive advantage of [Ethiopia], which has really affordable labour and power right now [as well as] some very attractive tax regimes and incentives”.
Another advantage of investing in export-oriented companies is their ability to generate much-needed foreign exchange. According to Davis, Ethiopian banks are so hungry for foreign exchange, they are often willing to give favourable interest rates on loans for companies participating in the export markets. Read the full post.
9. Become a supplier to Chinese companies in Africa
A report by McKinsey & Company states that there are an estimated 10,000 Chinese-owned businesses in Africa, significantly more than what official figures indicate. Local African companies can either view these Chinese firms as a threat, or an opportunity to forge new business relationships.
One way African companies can benefit from the Chinese presence is by becoming their suppliers. Chinese firms in Africa currently only source 47% of their inputs from local companies. Read the full post.
10. Don’t underestimate the rural middle class
Consumer goods companies shouldn’t underestimate the purchasing power in Africa’s rural areas.
According to a report by the Food and Agriculture Organisation, titled The state of food and agriculture, even some of the poorest regions have seen the emergence of a rural consumer class. For instance, it is estimated that 55% of the middle class across Ethiopia, Malawi, Mozambique, South Africa, Uganda and Tanzania live in the countryside. Read the full post.
11. Trade in education services
Opportunities exist for educational institutions in Africa to target students outside of their home countries. A report by the World Bank, titled The Unexplored Potential of Trade in Services in Africa, highlights new commercial opportunities opening up in areas such as franchising and the twinning of academic programmes, which allows students to earn credits for courses from universities besides their own.
“These relatively new forms of trade are beginning to gain in importance in sub-Saharan Africa, and have high potential for further expansion… Trade in education and health services also features high on the agenda of policy makers and regional organisations in sub-Saharan Africa,” notes the report. Read the full post.
12. Converting street hawkers into powerful marketing activators
“Someone has to build a solution that turns hawkers into a far more productive activation force for businesses,” notes Bright Simons, founder and president of mPedigree.
“Make no mistake about it, a lot of African business models simply can’t scale without boots on the ground. Building large teams of door-to-door activators is tough, expensive and … frustrating. Few companies can pay well, leading to shirking and general effort-avoidance.
“The best way out is for companies to share the costs and risks by using an organically formed network of micro-entrepreneurs hardened by experience and relatively skilled in customer interfacing. Converting the teeming hawkers on the streets of Accra, Nairobi and Lagos into powerful brigades of marketing activators can seriously disrupt many industries, [including] banking, private health/education, hospitality, insurance [and so forth] that are currently struggling for their next infusion of animal spirits.” Read the full post.
13. Intra-country tourism in Nigeria is a gem in disguise
“Domestic travel and tours are underrated, says Nigerian entrepreneur Chude Jideonwo, founder of Joy, Inc. “Nigeria’s tourism space is poorly managed, but there is a vast number of people across market segments who can hardly afford to travel out of Nigeria for holidays, breaks and sightseeing. However, there is a tapestry of locations, scenes and sites that Nigerians are unaware of within the country that can count for aspiration while being cost-effective.
“The first mover in this market will have to make heavy investment in re-shaping tastes towards these imperatives, but the fact that these sites are hidden to big money, and that the costs of moving in this market are yet prohibitive for small businesses means that an opportunity is yet untapped, everywhere from the serenity of Uyo in Akwa Ibom to the abandoned castles in Kano.” Read the full post.
14. Manufacturing of matches in Rwanda
Name one untapped business opportunity in Rwanda?
This was the question How we made it in Africa posed to a panel of business leaders at an investment conference in the Rwandan capital Kigali.
Jean de Dieu Kagabo, founder of packaging and plastics company Soft Packaging, responded by identifying a simple but widely-used product: matches.
He says virtually every household – whether they are lower or upper class – use matches. Yet, the product is still imported instead of manufactured locally. “It is very easy to produce, but no-one has thought about doing it – it is a big opportunity.” Read the full post.