While global FDI has plummeted as a result of the Covid-19 pandemic, investment in software and IT services projects in Africa remains buoyant, reflecting the wider growth of the African technology sector, with powerhouses of the likes of Facebook increasing their footprint in the region.
According to data from fDi Markets, the FT’s greenfield investment monitor, there were 39 FDI projects in the African software and IT sector between January and July 2020, with capital expenditure reaching an estimated $831m.
While the number of projects is lower than the 48 registered in the same period last year, it is the second-highest ever, and the estimated amount invested has surpassed the $555m invested last year and $336m invested in 2018, fDi Markets figures show.
Globally, FDI into the software and IT sector recorded 1198 projects between January and July, which marks the lowest level of announced projects since 2012, fDi Markets figures show.
The resilience of investment in Africa’s technology sector mirrors the growth of the African technology sector as whole, with venture capital flowing in and big tech firms expanding their presence despite the pandemic.
In July, the African Private Equity and Venture Capital Association (AVCA) released figures showing that Africa attracted $1.4bn in venture capital investment in 2019, up from $400m in 2014 and breaking previous records.
Venture capital investment remains robust in 2020, with AVCA research manager Alexia Alexandropoulou telling fDi that “VC firms have raised capital to invest in VC opportunities in Africa in recent years and need to continue investing this capital even under these challenging times”.
According to fDi Markets, South Africa received the most projects in the software and IT sector between January and July, attracting 15 out of the 39 projects in Africa. Nigeria came second with seven projects, while Egypt and Kenya each attracted four.
The concentration of projects reinforces the status of Cape Town, Lagos, Cairo, and Nairobi as regional tech hubs, boasting accelerator ecosystems, homegrown unicorns and big tech offices.
In Cape Town, which hosts 60% of South Africa’s start-ups, investment firm Naspers has injected funds into local start-ups, and South Africa as a whole attracted 21% of VC investment in Africa in 2019.
At the same time, “Egypt is becoming a new VC hub on the continent and rising as a destination for VC investors”, Ms Alexendropoulou said, with fintech company Fawry becoming Egypt’s first unicorn last month.
Demand for African software engineers is also rising, particularly as the Covid-19 pandemic has driven a shift to remote working, says Wambui Kinya, a vice president at Andela, which recruits African software developers and pairs them with tech companies.
“[Companies] are more open because now they're realising, well, why wouldn't we have somebody in Lagos? Why wouldn't we have somebody in other parts of the world? I think that that's going to create greater demand for engineers in Africa,” she said.
On September 18, Facebook announced plans to open its second office in Africa, expected to open in Lagos in 2021. The company already operates an office in Johannesburg, and it opened a content review centre in Nairobi last year.
Facebook’s big tech peers are also expanding in Africa, with Google launching an accelerator in Lagos in January. Microsoft opened Africa Development Centres in Lagos and Nairobi last year, aiming to recruit 500 local software engineers by 2023.