Why Africa Does not have Many Billionaires
Consider this: As of 2021 there were 18 billionaires in Africa. They had a combined net worth just shy of $74 billion. The richest man in the world, Elon Musk, is worth more than three times all of African billionaires’ net worth put together. The second and third richest men on earth as of writing, Jeff Bezos of Amazon and Bernard Arnault of LVMH, respectively, are both worth more than twice all of their net worth put together.
So how does the wealth of few men beat the wealth of a whole continent’s titans? There’s a common theme. If you look at the list of richest men on the planet, you realise that most of them made their money through tech. There are few men, like Bernard Arnault, who maintain the list even though their primary business is not tech. However, that is the exception, not the rule.
There are reasons why Africa does not have as much billionaires as other countries. In fact, sentiments aside, you could argue that most African billionaires have gotten extremely wealthy by riding on the back of huge government deals and lack of government oversight. Dangote, for example, smothers almost every competitor that tries to challenge him, and with the support from the Nigerian government, often succeeds. Dangote is now a huge monopolistic conglomerate, selling its cements for up to 45% profit margin.
Despite the support that businessmen get from the government, here are reasons why Africa does not have as much billionaires as rich as western billionaires, and why we are slow to produce even more billionaires.
Africa is poor, no doubt. Despite the fast growing economies like Nigeria and Kenya, most of Africa remains poor. Using GDP as a measure of a country’s wealth, Nigeria, despite her being touted as Africa’s largest economy, had GDP of only about $432 billion in 2020. If Elon Musk were a Nigerian, that would mean that he controls more than 50% of the country’s economy.
In fact, Apple, the world’s largest company, at more than 2 trillion dollars market capital, is worth more than 48 African countries combined. Countries like South Sudan have GDP less than $3.5 billion.
This poverty is the reason it is difficult to make billionaires from Africa. Even if entrepreneurs make innovative products, you need people who have money to spend on these products. Most people don’t have such money to spend, so it reduces corporate earnings, corporate reward, and ultimately entrepreneurial success.
How do you teach someone who cannot read how to order a shoe online? What if he can read but does not know how to use the Internet? Jumia, Africa’s Amazon, has not yet gotten over this problem. When a new product launches in most African countries, the goal is not always to start selling. It is to start changing the people’s mindset first, which slows down growth.
When Jumia came out, it had to convince people that it was okay to buy things online. Payment platforms still have issues convincing people that it is safe to put their details online. The list goes on.
This lack of education makes most tech products available to the educated elites. The mass market is not reached most times because the people who form the mass market can either not use the tech products or have no means of even learning about it. This limits how big any venture gets, focusing on just a small number of people.
Most African countries maintain a strong elitist community. The existing elites do not want the younger ones to come in, and the cycle propagates within families. Existing billionaires fund politicians, and politicians therefore make rules to favour existing billionaires, and the rules disfavour upcoming businesses and entrepreneurs — so the rich get richer and fund more politicians, which makes them richer, and the cycle continues.
A New Generation of African Billionaires
Truth is, the cycle cannot remain forever. Technology is the biggest leveler of wealth, and as more and more people get into technology, I predict that the new billionaires in Africa will come from techies and not oil magnates.
Already, big African tech corporations are rising. Nigeria’s largest tech startup, Flutterwave, has a $3 billion dollar valuation. Entrepreneurs who build these tech startups will be rewarded in future.