Africa’s education and financial services sectors offer the best opportunities in the post-COVID-19 period, as the pandemic speeds up a shift into digital ways of living and working, two prominent investors said on Tuesday.
“Digital infrastructure businesses at this point in time are probably the ones that investors are most excited about,” Jihan Abass, founder and CEO of Lami, a Kenyan digital insurance platform, told the Reuters Next conference.
Her Nairobi-based firm, which sought to upend the staid insurance world of the East African nation by allowing consumers to buy motor insurance on their mobile phones through instalments, has seen increased demand since the pandemic started, she said.
Iyinoluwa Aboyeji, the general partner of the Nigeria-based Fund for Africa’s Future, an investment vehicle focused on African start-ups, said investment in education technologies will offer attractive returns as the sector bounces back.
“The hardest hit sector in the COVID was education because they were so unprepared for the tsunami,” Aboyeji told the conference, adding that technology solutions to support learning in all institutions is low-hanging fruit.
“They are so under-invested in terms of new technologies to assist them.”
But the exuberance about the opportunities in tech is being tempered by new regulatory hurdles, as governments look to generate revenue from the fast-growing digital services sector.
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Kenya, a key player in the sector due to innovations like mobile money platform M-Pesa, which is operated by Safaricom, introduced a new digital services tax this year.
Moves like those will discourage investments in the sector and curb technology’s potential role of encouraging exports of goods and services, which could be a better way for governments to boost their revenue, Aboyeji said.
“If you squeeze off your digital ecosystem with taxes on day one, you are going to end up with nothing because the talent is extremely mobile, they will just leave,” he said.
Governments on the continent should instead be offering incentives for tech start-ups, Abass said, due to their potential to drive up traditional businesses like insurance.
“These (incentives) are things that are still lacking,” she said, “If you look at Africa, only 3% of people have insurance so the regulators need to nurture the industry and help it grow.”