EdTech in Africa: A Landscape

Published by GSV Ventures

This article seeks to explain the macro and micro fundamentals of EdTech in Africa. It might be useful to entrepreneurs in early stages of their market research, to investors trying to understand the space or to anyone who’s curious about the next big emerging market.

TL;DR

(Citing sources in blog post’s body)

Why education matters

In low- and middle-income countries, a quality education is often the lottery ticket to a better life. In most African countries, a good education can lead to upward mobility, either through a formal job or through skills that allow for dignified self-employment. Education also empowers people to think for themselves, question the status quo and ultimately, have a voice.

African countries have made great progress in improving education outcomes over the past few decades. Today, primary school enrollment has reached 80%, and in most countries, primary schooling is free and guaranteed by the government. However, education access beyond primary education and learning outcomes are in dire need of improvement. Case in point: of the nearly 500 million African children who enroll in primary school, only 17 million go on to enroll in university. Public education in much of the continent has failed to produce quality outcomes, and private education is too expensive for most Africans. Beyond schooling, African education systems have not kept up with the pace of technological and job disruption, and do not produce enough quality talent in the most competitive industries today (e.g., software, data, design). In PwC’s annual CEO survey, 87% of African CEOs reported being “extremely concerned” about the availability of key skills among their workforce.

A thriving EdTech industry could prove crucial in closing the access, quality and affordability gap on the continent. At GSV Ventures, our mission is that all people have equal access to the future through scaled innovation in education. We are thus excited to support the African EdTech ecosystem, from preK to Gray, through our investments on the continent (we previously invested in Andela, and are currently proud investors in Valenture Institute), our ASU+GSV Summit (supporting African companies in our Elite200 and our GSV Cup Competition), and through our knowledge and insights work.

This blog post feeds into the latter, and is the product of research, interviews and market landscaping at GSV Ventures (see the last section for acknowledgments).

Africa today has most of the ingredients to support a nascent EdTech market

First, economies that will grow fast

Africa’s economic potential is large: the continent’s total economy will continue to grow at a fast rate over the next 5 years. Africa’s total GDP will reach $3.8T in 2026, growing at ~8% CAGR from 2020. By comparison, global GDP is forecasted to grow at 4% post-COVID (Source: IMF). While Africa is a large and diverse continent with 54 countries, Africa’s largest 10 economies today account for 70% of total GDP, and 16 countries on the continent will grow at more than 8% CAGR 2021–2026.

Economic disparities on the continent are wide: GDP per capita ranges from $300 in countries like Somalia and Burundi, around $3,000 in North African countries, and reaches as high as $10,000 in Mauritius and Seychelles (Source: World Bank).

However, the fastest growing African economies are also the largest: Nigeria will grow at 13% CAGR, while Egypt will grow at 9% CAGR and Kenya will grow at 7% CAGR. With South Africa, each of these countries can be considered regional launchpads for businesses looking for continental expansion.

Second, a young and fast-growing population

Africa’s population is large and young. Indeed, Africa’s population will double in the next 25 years, projected to reach 2.5 billion people in 2050. Moreover, it is the only region in the world where the working-age population is projected to continue expanding beyond 2035. By comparison, India’s population today is at 1.4 billions and will grow to 1.6 billions in 2050. The World Economic Forum estimates that the African workforce will grow by 15 to 20 million every year for the next two decades. Moreover, Africa’s population is extremely young, and will keep getting younger. Today, the average African is 19 years old, compared to 26 years old in India.

The continent will rapidly urbanize in the next 10 years, with half of Africa’s population expected to live in mega-cities. The urbanization trend will be accompanied by an expanding middle class (today at 30%), who will afford to spend more and more on technology products.

From an investment perspective, two African regions will reap the benefits of these favorable macroeconomic trends: West Africa will contain a large population (520 Million in 2026), the largest economy (Nigeria), an 11% GDP CAGR , and 10 of the 16 fastest growing economies in Africa. After West Africa, East Africa is the second most attractive region, with the largest projected population (570 Million in 2026) and four of the continent’s fastest growing economies.

Infrastructure issues are the biggest obstacle to the proliferation of EdTech in Africa

In Africa, there is a long way to go to achieve universal mobile internet coverage, and improving internet infrastructure will be crucial to ensuring higher adoption of tech products. Mobile and internet connectivity in sub-Saharan Africa is still low, at 26% as of 2019, up from 13% in 2014 (Source: GSMA Intelligence).

In addition to low coverage, hardware and data costs in Africa are among the highest in the world. In 2019, the cheapest internet mobile device accounted for 30% of monthly GDP per capita (equivalent to the share Americans pay on rent every month). Moreover, 1GB of internet costs 4.2% of monthly GDP per capita. To understand the proportion, imagine spending $226/month on 1GB of internet if you live in the US (For the record, 1GB of internet will allow you to watch one movie on Netflix). Thankfully, this cost has declined from 8% in 2015 for people in SSA.

Moving forward, it is clear that infrastructure will be a crucial piece of the tech puzzle in Africa. Expanding access and affordability is a prerequisite to a thriving tech market.

Africans spend a lot on education today

Currently, African governments spend, on average, 5% of GDP on education, which is the second highest of any region (Brookings), and on average, 16% of their national budgets. Moreover, households in low- and middle-income countries spent 43% on total education spending in 2018–19 (World Bank). If we do the math, it turns out that Africans (governments and individuals) spend $224B on education today, and will continue to spend more as GDPs grow, the middle class expands and spending on supplemental education increases.

I estimate education spending in Africa to grow 14% CAGR over the next 10 years, to reach a total of $729B in 2030.

Moreover, struggling public school systems and mounting inequality have increasingly pushed African households to spend on private education. Today, the World Bank estimates that 21% of African children are enrolled in private schools. By others’ accounts, if we consider low-cost education (schools that cost $50/year), that percentage can rise up to 40%. Moreover, African households are increasingly spending more and more on supplemental education. Indeed, in Africa’s largest economies (Nigeria, Egypt, South Africa), up to 70% of K-12 students enroll in after-school tutoring.

EdTech in Africa: The Opportunity

EdTech spending as a share of total education spending is still small, globally estimated at 4% today and expected to grow to 10% over the next 5–10 years (Source: HolonIQ). Extrapolating this share on our estimated EdTech spending in Africa, we arrive at $3B spend today on technology products in education, estimated to grow to $57B in 2030. This is a big number, reflecting an emerging market that will inevitably grow in the next 10 years, but will still be only a small fraction of global EdTech spend (~10%).

As EdTech spend in Africa grows, we expect the continent to witness its own version of the global trends we’ve identified at GSV Ventures:

The EdTech opportunity exists in select segments

The themes above are cross-cutting of the below EdTech sub-segments:

EdTech founders in Africa are innovative, resilient and resourceful

The heroes of this story are the African EdTech entrepreneurs who relentlessly pursue opportunities in the space. Indeed, doing EdTech in Africa today is still very hard, because of infrastructure issues, low spending power, lack of abundant venture capital, lack of widespread access to talent (chicken or egg problem?) and other structural issues (corruption, gatekeeping by governments, etc). To overcome these obstacles, African founders are extra creative. Borrowing some of the ideas presented in Alexandre Lazarow’s book “Out-innovate”, my research indicated that African EdTech entrepreneurs:

Below is a market map of the EdTech companies on the African continent

Venture Capital interest in African Edtech is still very small

VC deal value in Africa reached a record high $2B in 2019 (Source: Partech Africa), mostly in fintech (31%), cleantech (22$) and health (9%). Of these investors, 42% of investors are North America-based, 23% are Europe- based and 20% are Africa-based. Moreover, five countries accounted for 67% of deal value in 2020 (Nigeria, Kenya, Egypt, South Africa, Ghana). African tech has minted five unicorns, four of which are in fintech (Flutterwave, OPay, Chipper, Fawry) and one in e-commerce (Jumia). Notable investors include Tiger Global, Softbank, Sequoia Capital China, Bezos Expeditions, etc.

By contrast, EdTech VC funding in Africa reached $20M in 2020, around 1% of total VC deal value in the same year on the continent. This is unfortunately a minuscule portion of the total VC deal flow, especially if we consider how vital education is to economic growth and development.

A few EdTech African companies were able to attract significant rounds, outlined below.

A nascent ecosystem that is growing fast

The other heroes of this story are the investors, incubators, accelerators and foundations that are supporting the ecosystem. Below is a map representing the ecosystem players, and in this link you can find helpful resources on who does what in the space (most helpful to founders).

The way forward

Whether the African EdTech space will grow is inevitable: Governments and individuals today spend massively on education. A portion of this spend will inevitably go to EdTech. However, how fast the market will grow depends primarily on solving issues of infrastructure: mobile internet will need to be more widely available, and data costs a lot lower. Moreover, as economies grow, it is crucial for the growth to be evenly distributed, so that individuals’ willingness to pay on tech products also grows proportionately. Lastly, private capital needs to flow to the sector at a bigger volume and faster rate: African and global venture capital firms need to make early bets on African entrepreneurs addressing issues of education.

Acknowledgements

This blog post is the summary of a summer project at GSV Ventures, a global EdTech VC fund. Special thanks to fellow Associate Sophie Hoffman for her support and assistance in covering the continent. (If you are a founder based in Africa, Southeast Asia or Europe, feel free to reach out to Sophie).

Huge thanks to the seasoned Africa-based entrepreneurs & leaders who gave me their precious time: Fred Swaniker (ALU, The Room), Robert Paddock (Valenture Institute), Ryan Harrisson (SPARK Schools), Eric Pignot (ENKO Education), Ramakrishnan Hariharan (Generation).

Thank you to the ecosystem builders who took the time to talk to me: Krista Davidson and Kim Sanssoucie (Injini), Kat Pattillo (EdWell), Teresa Mbagaya (Imaginable Futures), Abdul Karim Mohamed (Acumen East Africa), Veda Sunassee (ALU), Jihad Hajjouji and Nolizwe Mhlaba (Anzisha), Catherine Young (Grindstone Accelerator), Victoria Basma (WISE — Qatar Foundation), Fatima-Zahra Bennani (212 Founders at CDG Capital), Salma Kabbaj (Africa Impact Lab), Maha Khannoussi (Flat6Labs), Ahmed Negm (ALA), Durthpreet Syan (SuperCharger Ventures), Kolapo Ogungbile (Vatebra Tech Hub), Hanson Johnson (Start Innovation Hub Nigeria), Mayssa Mrabet (Afkar), Dean Kline (World Bank — Education Practice)

And thank you to the Africa-based investors: Kenza Lahlou (Outlierz Ventures), Nivesh Pather (Newtown Ventures), Selma Ribica (Ventures 01), Maged Harby (NM EdVentures), Othman Chraibi (UM6P Ventures), Khalil Azzouzi (Azur Partners), Omar El Hayani (Maroc Numeric Fund).

Lastly, thank you to all the 50+ founders who passionately pitched their ideas and who are doing so much to build and grow their companies.

Curious. Passionate about storytelling through data. Interested in Work, Skills and EdTech. Twitter: @KenzaBouhaj