Understanding the Significance of the Digital Literacy in Shaping the Business Plans for African Startups

Andela coordinator Sayo Alagbe briefs developers in Lagos, Nigeria, Sept. 29, 2017. Tom Saater/NYT-REDUX-REA

Introduction:

A startup is usually a newly established business that consists of a small team with fewer resources and clearer visions as to what services it aims to provide. Even though a startup is a smaller form of business, they have proved to make a significant contribution to the global economy, with the global startup economy nearly at $3 trillion in value as of 2020. This is a figure on par with the GDP of a G7 economy (State of the Global Startup Economy). In 2022, African startups alone raised over $5 billion in funding (Abubakar).

With this rapid shift to the era of the internet, everything around us has shifted to our devices. Business is also one such component. Due to the ease it provides, most business people prefer to operate their businesses through the internet instead of face-to-face business. Platforms provide a global reach to every business in the world where one person sitting in one corner of the world can easily contact another professional or customer in the other corner and easily proceed with their business. Unfortunately the countries in Africa are not fully able to utilize this privilege. Through this article, we will understand the current standing of the country in digital literacy mostly in respect to startups and businesses, and what changes are expected in the near future. We will also examine the contribution of the African youth in such a digital era for the country.

Startups in Africa:

Africa has been trying to emerge as a big player in start-up practices. South Africa leads the race in number of startups followed by Mauritius, Kenya, and Nigeria, and Egypt respectively being recognized as the top five start-up hubs in the region. The current state of Africa in terms of startups shows a mixed image in terms of its position in the market. On the one hand, international investors are looking at Africa as a possible investment opportunity,

On the other hand, the funding of the continent has witnessed a significant drop of 32% from 2023 to 2024, wherein 2023 they were able to secure 2.8 billion, and in 2024 they secured only 2 billion. On a negative note, the continent also witnessed the closing of many major startups which were major players and representatives of the market.

Recently the African startup market has seen a significant drop. During the pandemic, the market saw a very significant boom, and in 2021 the prediction was that by 2025 the venture capital investment for African startups would be over $10 billion (Mc Carthy).

However, as of January 2025, we do not see that being a possibility. This is mainly due to the events that transpired in 2023-24. In 2023, African startups were only able to attract $4.5 billion which was a decline as compared to previous years (Obonyo). Further in 2024, venture capital funding in Africa witnessed a major downward trend with a decrease of $8383 million. This was a decrease from 1.4 billion. By the quarter of 2024, the country was only able to reach $1.2 billion which is significantly lower than its target of $10 billion.

Digital Literacy in Africa:

Digital literacy is the ability and knowledge of the use of digital platforms and technologies including devices like mobile devices or a computer. For a country to strengthen its digital literacy, the first and most important aspect is that it must have the means to digital access. As per records, only 40% of the African population has access to the internet whereas the global average is 66% for the same. The coninent itself has started producing jobs that require some level of digital literacy and it was predicted that by 2030, 625 million people will require such skills in order to be able to perform their jobs. It was also found that only 50% of African schools with a curriculum that include computer skills as a part of their course on the business front of the country (Kandri).

However, it was found that 87% of African business leaders find digital skills development as a priority. The continent has recently witnessed a comprehensive scheme that has been launched by the African Union called the “Digital Transformation Strategy for Africa” (2020-2030), which will revolutionize the continent’s digital landscape. The World Bank has launched the “All Africa Digital Economy Moonshot Initiative” which aims to align all individuals, businesses, and governments by 2030.

Graduate students attend a computer science class at Gaston Berger University in Saint Louis, Senegal. Photo: Sarah Farhat/World Bank.

Another factor to be considered is the role of women in such startups. As of 2021, 50.14% of the country’s population was women; 27% of sub-Saharan African women are said to be entrepreneurs. Uganda and Botswana have the highest number of women entrepreneurs on the whole, with 34.8% and 34.6% respectively. However, on deeper research, such startups are given very little opportunity. The number is also very disproportionate to the rest of Africa. It was reported in 2015 that most of these women-led businesses do not have employees, and therefore low growth expectations. This is something that must be considered. If the contitnent wants to move forward, it must move forward as a whole. Every aspect of the continent and every member must be given equal opportunity to move forward. (Toesland)


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Contribution of the Youth :

Africa has one of the biggest advantages of any continent in the world: over 60% of the coninent’s population consists of youth under the age of 25. (Benhanmouche and Schwidrowski)

The continent has recognized that its power lies with its youth, with over 1.4 billion inhabitants who have a median age of 20 years. This population can fuel the growth of the digital markets in Africa, a must in its current situation.

The African continent is supposed to have the highest rate of entrepreneurship in the entire world. Small and medium enterprises act as major contributors to the economy of the country as they provide for at least 80% of the jobs available in the country (Mpemba).

However, the continent seems to be facing the problem of “youth brain drains,” where the well-educated youth of the country decide to migrate to foreign countries in search of better opportunities instead of building those opportunities in their home country through SMEs and startups. To reverse this into “brain circulation” the continent must look into better practices, like offering visas for people interested in startups within the continent and making less strict regulations for anyone interested in doing business in the continent or indulging in a joint venture.

The youth of the continent however seem to be very optimistic when it comes to entrepreneurship. In a recent survey, it was found that the sub-Saharan African youth have the most spirit to undertake entrepreneurial tasks. More than 52% of the youth expressed an intention to start a business or be a founder of a startup, and 28% are already running their business.

Expected Changes:

The economy in terms of startups is expected to recover. The success for the sector has already begun with companies like Tymebank securing over 250 million in funding.

It is also believed that in the coming future, startups will slightly shift in terms of the sectors in which they focus and will be more inclined toward health, climate tech, and agricultural tech. It is expected that such startups will be the ones attracting investors as these start-ups will prove to be more helpful for the people and the continent as a whole (Ashiru).

Further, it is predicted that the young population will aid in the adoption of digital literacy which will create new opportunities for businesses. It is also expected that the African Continent Free Trade Area (AFCFTA) will facilitate business by promoting more collaborations in terms of cross-border mergers and market expansion especially for start-ups.

CONCLUSIONS:

The last year didn’t prove to be the best for the continent in terms of startups but the year 2025 has sure made its way to bring in some redemption for the country with more opportunities and new startups. Many startups were able to bounce back and many more will too. However, to achieve this goal, the countries need to depend on their youth power, trust them more with startup opportunities, and open doors for new areas for them. Moving forward in a more proportionate way should be adapted, one where the country equally moves forward in terms of businesses, growth and policies.

At the same time, Africa must focus on the digital literacy aspect and this can make or break their position in the market. Today, digital literacy acts as a huge advantage for any business. Startups are new businesses and the first thing they seek is exposure. With the right digital approach, this can easily be achieved.

REFERENCES:

  1. “Startup Genome.” Startup Genome, startupgenome.com/article/state-of-the-global-startup-economy.
  2. Abubakar, Bilkisu, PhD. Startups and SMEs: The Unsung Heroes of Economic Growth and Innovation in Africa. 20 Dec. 2024, www.linkedin.com/pulse/startups-smes-unsung-heroes-economic-growth-africa-abubakar-ph-d–qwwme.
  3. McCarthy, Niall “Funding for Africa’s Startups Is at a Record High – This Is Where It’s Going.” World Economic Forum, 28 May 2021, www.weforum.org/stories/2021/05/study-shows-virtual-capital-for-african-startups-is-steeply-increasing.
  4. Obonyo, Edwin. “How Africa Can Embrace Venture Capital.” INSEAD Knowledge, 4 July 2024, knowledge.insead.edu/entrepreneurship/how-africa-can-embrace-venture-capital.
  5. Kandri, Salah-Eddine. “Africa’s Future Is Bright—and Digital.” World Bank Blogs, 16 Mar. 2024, blogs.worldbank.org/en/digital-development/africas-future-bright-and-digital.
  6. Benhanmouche, Zoubir, and Zuzana Brixiova Schwidrowski. “Leveraging Innovativeness of Africa’s Youth Through Startups.” Brookings, 12 Sept. 2024, www.brookings.edu/articles/leveraging-innovativeness-of-africas-youth-through-startups/#:~:text=For%20a%20large%20number%20of,conference%20in%20Algiers%20December%202023.
  7. Mpemba. “More Than 60% of Africa’s Population Is Under 25. Here’s How It Will Drive Global Growth.” World Economic Forum, 16 Aug. 2023, www.weforum.org/stories/2023/08/africa-youth-global-growth-digital-economy.
  8. Staff, Gem. “Africa Youth Bulge: A Gold Mine or a Time Bomb?” GEM Global Entrepreneurship Monitor, gemconsortium.org/news/Africa%20youth%20bulge:%20a%20gold%20mine%20or%20a%20time%20bomb?
  9. Ashiru, Grace. “2025: African Start-Ups Poised for Resurgence Amid Global Challenges – Tech in Africa.” Tech in Africa, 10 Jan. 2025, www.techinafrica.com/2025-african-start-ups-poised-for-resurgence-amid-global-challenges.
  10. Toesland, Finbarr. “Women-led tech startups on the rise in Africa.” Africa Renewal, 18 Feb. 2019, www.un.org/africarenewal/magazine/august-november-2018/women-led-tech-startups-rise-africa.

gauri tyagi

Gauri Tyagi is a dedicated fourth-year BBA LLB student at Symbiosis Law School, Noida. With a strong passion for law and advocacy, She is committed to developing her skills in legal research and analysis, aiming to make a significant impact in the field of law. 

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