By Angel Jones – CEO, Homecoming Revolution Group
The recently concluded fourth edition of Africa Tech Summit held in Nairobi was a major eye-opener, given the rich menu of presentations and networking opportunities it offered. The summit, held under three tracks—the Africa Money and Decentralised Finance (DeFi) Summit, Africa Startup Summit and Africa Mobile Summit—brought together stakeholders in the tech space across the continent to explore opportunities and challenges within the ecosystem, while showcasing investment opportunities. As a summit participant, five focus areas were my key take-outs: regulatory systems, B2B market ecosystem, scalability, collaboration and talent acquisition.
A report by the Tony Blair Institute for Global Change titled, Supercharging Africa’s Startups: The Continent’s Path to Tech Excellence, aptly captures Africa’s startup ecosystem and the regulatory environment. According to the report, the digital economy will contribute an estimated $300 billion to African GDP by 2025, providing much-needed employment on a continent where three to four times more people enter the job market than actual roles are created. In Nigeria, the technology sector contributed more to the country’s GDP than the oil and gas sector between 2010 and 2019. Meanwhile, Kenya’s information and communications technology (ICT) sector was on course to contribute up to 8 per cent of the country’s GDP through IT-enabled services, also generating up to 250,000 jobs by the end of 2021.
While Africa is punching below its weight in the international race to develop technology, the continent has the potential to become a startup superpower in the tech sector. Home to an exploding fintech scene and more than half the world’s mobile-money users, Africa is a pioneering space for commercial innovation and the most entrepreneurial continent. Pre-pandemic, 22% of the working-age population had set up their own businesses.
However, cumbersome regulations, the digital-skills gap, limited funding and fragmented markets mean that Africa accounts for 0.2% of the value of global startups.
African governments therefore need to rapidly build and deploy a digital economic policy that will open up and connect economies while creating opportunities for its growing youth and transforming Africa into a startup superpower by securing investments of $90 billion for tech startups by 2030. This, however, poses a challenge as it will require new investment tools, both local and foreign, to de-risk tech startup investment, with governments and donors partnering with the private sector to achieve this.
Improving the business environment is the second challenge. The cost of unclear and bureaucratic regulatory compliance across 54 countries is high for tech startups that want to scale. Leaders need to develop a harmonised common framework that promotes easy access to the regional markets. Finally, there is a need to strengthen support networks. More connected ecosystems are stronger and grow faster. African leaders should support ecosystem players and launch a pan-African tech startup network to strengthen and support tech startups.
To navigate through the complex regulatory environments, it is imperative that investors partner with seasoned experts. A sure bet would be partnering with Insights by Experts, that offers a rich repository of African experts curated by Homecoming Revolution, which has been in operation since 2003. This on-demand platform offers hundreds of senior and experienced African experts who can share up -to -date, on the-ground insights, advice and mentoring.
The need for collaboration cannot be overemphasized. The power of collaboration can inject your startup with new ideas, improve your efficiency with tighter teamwork, and provide you with new resources and connections to leverage in the future. However, collaboration should extend beyond the internal team.
According to a study by Mckinsey &Company titled Collaborations between corporates and start-ups, start-ups can benefit from corporate funding, resources, and customer access, while corporations need to innovate to stay ahead of competitors and disruption, and also access new technology. Between 2013 and 2019, there was 32% year-on-year growth in corporate venture capital (CVC) investments, and three-quarters of Fortune 100 companies had active venture units. But the growth in digitization over the past year has driven the need to innovate, putting even more spotlight on getting these partnerships right.
That probably explains why many startups are adopting a B2B model as opposed to a B2C one. For one, consumers are habitual and are reluctant to test new products, opting instead to stick with their old brand. B2B, on the other hand, lowers the risk and allows scale up and focus on core strengths of building robust platforms.
Talent Acquisition remains a key challenge for tech startups. In fact, 90% of tech startups have trouble finding the right talent, with the main reason being competition from major companies like Google, Microsoft, Amazon, and Apple, who are constantly hiring new tech talent and offering hefty remuneration and other perks. Startups must not just offer upside incentives in order to retain talent; they should also consider pairing freelance technology mentors with their fresh interns.
With a supportive business environment, sufficient funding flows and strong connections, Africa can become a tech superpower. To fully benefit from the tech revolution as the Blair Institute states, African nations must be creators, not just users of tech. Vibrant tech ecosystems will put the continent on the path to digital sovereignty: this means creating the technology and setting the rules that will shape the continent’s future, while proactively driving the fourth industrial revolution.