Artificial Intelligence in Africa: Levelling the Narrative
Written by Frost & Sullivan’s Consultant, Hannah Kebble.
According to the World Economic Forum, artificial intelligence (AI) can contribute up to USD 15.7 trillion to the global economy by 2030. However, in Africa, AI market growth has stagnated. Estimated at USD 870 million in 2021, with marginal growth forecasted until 2024. It has been argued that continents in the Global South will continue to benefit less from AI than those in the North. Oxford Insights highlights this because governments require the appropriate environment to support AI development – including adequate data infrastructure and an innovative vision to implement progress at the state level. Nonetheless, AI is of imperative value to multiple industries in Africa (such as fintech and agritech), and progress is being made in key areas to harness the power of AI in the continent. Through the continued development of reliable and far-reaching internet infrastructure and progressive AI policies, Africa is well positioned to benefit greatly from AI, not only economically but also socio-environmentally.
AI involves a constellation of technologies that allow machines to function with high levels of intelligence to the extent that they may emulate human capabilities. In addition, the machine’s capacity is sharpened through its ability to learn from experience and adapt over time. As such, AI application is widespread and flexible, requiring a strong internet connection to comprehend information and generate meaningful outputs. Historically, internet infrastructure in Africa has been underdeveloped, with only 16% of the population accessing the internet in 2013. In contrast, by 2022, Southern and Northern Africa boasted internet penetration rates above the global average of 62.5% (at 66% and 63%, respectively). Another key area of growth for AI in Africa is in the regulatory arena, where digital health is a key pillar in the African Union Digital Transformation Strategy. On a national level, state infrastructure is key for implementing a progressive policy, such as in Mauritius, which has been voted Africa’s most innovative country in 2022 by the World Intellectual Property Organization Index, which also has a strong national AI framework. In South Africa, various state bodies have been built for the governance of science and innovation, such as the Technology Innovation Agency and the National Intellectual Property Management Office (NIMPO), which assists in protecting and advancing the knowledge economy. AI spending has been forecasted to expect a record compound annual growth rate (CAGR) of 36.3%, increasing from USD 74.7 million in 2019 to USD 651.4 million in 2025.
As such, strong regulations and increasing internet infrastructure serve as the cornerstone for AI to thrive – both of which are recorded in the continent. While AI can benefit multiple industries, in Africa the key sectors which stand to gain from AI are financial services (specifically fintech) and agriculture. Fintech startups in Africa have shown significant growth in the past five years, from 301 startups in 2017 to 576 startups in 2021. As a corollary of the growth in this sector, funding has increased – clearly indicated between 2019 – 2021, where annual fintech funding had expanded from USD 107 million in 2019 to over USD 1 billion in 2021. Venture capital funding has become so prolific in Africa that in 2022, KuCoin, a Seychelles-based crypto exchange startup received international funding to the extent that it developed into the years sole Decacorn (a private, venture-backed company with a value exceeding USD 10 billion). It has been estimated that revenue generated by fintech startups in Africa is set to grow to USD 30 billion by 2025, with some fintech firms seeing revenue of USD 4 billion – USD 5 billion, in line with global market leaders. These startups have a socio-economic impact, assisting the unbanked (45% of the sub-Saharan African population) and creating larger financial inclusion.
AI is of key importance in the fintech sector for a myriad of reasons. On one level, AI may be used solely for the purpose of writing application codes. In 2022, 52% of people surveyed by the BBC between the ages of 18-24 in Africa stipulated that they have concrete plans to leave the continent. This significant brain drain leaves industries, such as software development, vulnerable to underdevelopment and lack of innovation. To combat this, AI can contribute to app development and assist in the creation of low-code tech – a growing trend in the fintech sector, estimated to encompass 70% of app code by 2025. Moreover, it may assist in retaining talent within the workforce. On the other level, AI can be used within the app functionality to run programmes faster and more effectively. Some of the main applications of AI in the financial sector include fraud detection, assessing risk, and evaluating customer credit ratings.
A key example is JuicyScore, a Nigerian fintech company that relies on AI to assist in credit decision-making with alternative and non – personalised data. An additional example is Nokwary (Ecobank Group winner of the 2020 fintech challenge), a Ghanaian firm that uses AI to allow for payments to be made in a wide number of languages. Closer to home, there are currently 32 AI fintech startups in South Africa, such as Jumo, a smart financial services platform promoting accessible banking in Africa, which received USD 305 million in funding.
Outside the fintech sector, AI has a positive role to play in the agricultural sector, such as by detecting plant diseases, pests, and nutritional deficiencies on farms. Utilising internet of things (IoT) solutions in agritech stimulates outputs in the agrarian sector and boosts food security and economic gains. The effective analysis of current and historical data by AI allows farmers to be more informed and protects against crop damage. The incorporation of AI into this sector is widely accepted by farmers, with Digital for Agriculture (D4Ag) boasting over 33 million farmer registrations and is forecasted to reach 200 million by 2030. Food security in Africa is vital in a population that is forecasted to reach 2.4 billion by 2050. With the increased impact of climate change and the supply chain shock from the war in Ukraine, time is of the essence for ringfencing food security in Africa. While AI solutions can be costly, multiple options are affordable and effective – such as AI market price predictor apps, AI translators and data processors, which are all geared towards increasing food production in Africa. A great example is the Sowing App, which indicates the optimum time to plant each crop according to weather patterns.
In a joint report by Google and the International Finance Corporation (IFC), it has been estimated that Africa’s digital economy has the potential to contribute USD 180 billion to the broader economy by 2025. The ramifications of an AI Divide will be the continued marginalisation of continents in the Global South, reaffirming their position on the global periphery. Africa continues to build and develop infrastructure to enhance innovation and incorporate the furnishings of the fourth industrial revolution (4iR), including AI. Continued acknowledgement of the growth potential in Africa through funding is a vital component of ensuring that the North/South divide does not permeate the 4iR and beyond.