Africa’s Private EO and Geospatial Sector Is Growing Rapidly, New Report Says

The number of African private commercial Earth observation and geospatial companies is snowballing, with over 97 new companies founded in the last decade; says a recent study. The study, conducted by Kenya-based LocateIT on behalf of the African Union Commission, identified and surveyed 165 private companies involved in Earth observation, geospatial and allied technology business with operations primarily based in Africa. 

According to the findings of the study obtained by Space in Africa, only 18 African Earth observation and geospatial companies included in the survey, about 11% of the total number, existed before 2000. Forty-nine companies, about 30%, sprang up in the first decade of the 2000s. The last decade has seen a more rapid growth rate in the African EO and geospatial sector. 

The industry witnessed a growth rate of 156% between 2000 and 2010 and 96% after 2010, indicating about 10% annual growth in the past decade. The report projects that if the current growth trend persists, “the number of private EO and geospatial firms in Africa will be more than double its current count by 2030 and about 4 to 5 times more by 2040.” 

As for ownership and localization, the continent’s EO and geospatial companies are “overwhelmingly” under African ownership, the report says, as 91% of the surveyed companies have African owners, of which 73% are under exclusive African ownership. Interestingly, 72% of the owners are nationals of countries where the companies are registered.

Only 5% of the companies have owners from other African countries, and 1.2% have African owners exclusive of nationals; indicating that intra-African ownership is limited compared to 20% of the firms with some non-African owners and 72% comprising only citizens. In simple terms, African EO and geospatial companies are more likely to partner with non-African owners than ally with Africans from other African countries.

Also, non-Africans exclusively own about 6% of the firms, “indicating that private EO firms in Africa have more ownership linkages outside of the continent than within,” the report concludes.

In terms of sources of funding, most African private EO and geospatial companies are self-funded and bootstrapping as traditional sources of financing such as banks, government and venture capital have little interest in the sector. Over 75% of the companies said internal funds are essential to the success of their business with a rating of 3.85 out of 5. In contrast, the companies rated funding from banks at 1.94 out of 5 and funding from the government at 1.75.

Compared to other technology sectors in Africa, the EO and geospatial sphere are yet to see a mark of venture capital and private equity funding.. Other notable sources of funding include “grants and contributions” from international aid agencies at a trust score of 1.86 out of 5, international organizations such as UN and EU bodies, at 1.96; NGOs, 1.80; African multilateral organizations, 1.48; and networks of the centre of excellence, 1.43.

Due to limited access to external capital, African private EO and geospatial companies rely on “rapid revenue-generating” business models to survive; inhibiting their ability to experiment extensively and consequently, their ability to invent disruptive innovations. The research found out that this challenge may explain in part, why private companies in the sector mostly [solely] provide solutions to their customers and why the expansion of the activities is [primarily] demand-pulled.

The industry is primarily demand-driven as most companies focus on providing solutions to their clients’ requirements.  Most companies develop new products and add value to existing products and services; contrary to common assumptions that majority are resellers of existing products.

The sector’s clientele comprises small-large customers, ranging from government institutions to international development organizations and aid agencies, commercial entities, academic institutions and NGOs. Government agencies constitute the largest category of customers, with about 88% of the companies confirming delivery of products and services to the government. Non-governmental organizations follow closely at 77%; non-EO and private geospatial entities at 67%; EO and geospatial entities at 62%; academic and research institutions at 62%; international organizations, including the AU and UN bodies at 60%; and civil society organizations at 56%.

The companies “heavily rely on clients and suppliers for not only business opportunities such as tenders but also as sources of ideas for developing new products and processes,” the report says.

In terms of markets served, demand for EO-enabled solutions for land use planning and management dominate the market as 73% of the companies are offering products and services in that line of business. Services related to environment and natural resources follow at 71%, while about 67% of the companies offer solutions relevant to agriculture and food security. Other leading markets, according to the report, include land and engineering surveys with 60% of companies providing these services; information and communication technologies, 59%; water and sanitation, 57%; education and research, 55%; and mining, 53%. 

Contrary to widespread expectations, less than 35% of the companies offer solutions relevant to weather and climate change.

The report explains the contrast better in this context: “even though Africa is poised to suffer from climate and weather change, a business case is yet to be made to entice the private EO and geospatial sector to see in it a real business opportunity. The same holds for the health and hygiene sector, where only 32% of the companies operate.” 

Market segmentation by use cases has a significant influence on the type of technologies these companies develop or rely on for service delivery, as well as their market specializations. Hence, about 94% of the companies specialize in products and services that have land-based utilization as opposed to water/marine applications or atmospheric/meteorological/aviation applications. Only about 34% of the companies offer water/marine-based products and services; 22% atmospheric/meteorological/aviation and 21% for space/astronomy-based products and services.

The report confirms that GIS/spatial analytics is the dominant technology application used by the African private EO and geospatial sector, with 91% utilization rate. EO/remote sensing follows with 84% utilisation rate; Global navigation satellite systems (GNSS) comes third at 56% usage, and Scanning (LiDAR, laser; point cloud) at 32%.

In terms of geographical scope, more than 69% of African private EO and geospatial companies cater to their national markets while 46% have regional reach. About 30% of the companies have expanded to a continental level, whereas 20% are operating beyond the continent. Of these, only 9% have a physical bureau outside of Africa. Compared to 79% in-country physical presence, 19% are across the region of origin, and 17% beyond the region but within the continent.

Geographical coverage of African private EO and geospatial companies
Geographical coverage of African private EO and geospatial companies

The report asserts that while exploiting in-country opportunities seems to be a standard business strategy among private African EO and geospatial companies, exploring opportunities beyond national frontiers is also a popular business strategy.

In conclusion, Africa’s private EO and the geospatial sector is seeing an all-round growth in terms of expansion of clientele base, ecosystem support such as communities of practice, and proliferation of private firms. However, the report warns that stakeholders, including governments and the industry, need to take deliberate actions to “nurture” the sector which is said to still be in its”infancy”.

The African Space Industry Report, 2020 Edition is now available for download.