The building of a technology ecosystem in Africa must have an underlying purpose and, particularly given the macro-environmental fundamentals prevalent in Africa, that purpose must be to create an enabling environment that drives inclusive growth – Boko Inyundo.
Last week saw the 3rd Africa Tech Summit London connect tech leaders, investors and innovators from across Africa with international players. Bosun Tijani, CEO of Co-creation Hub Nigeria moderated a panel featuring Chi Onwurah (UK Member of Parliament), Emem Rita Usanga (Tech London Advocates Africa) and Boko Inyundo – (Royal African Society / African Foundation for Development / De Charles). During this interactive roundtable forum, one involving African and international tech leaders and investors driving growth in Africa, the building of an inclusive technology ecosystem in Africa and the evolving role of legislators was the focus of the discussion.
In advance of this discussion Boko Inyundo invited leading Africa + Tech industry executives to share their insights on this topic and summarised the findings in this article which also formed the basis for the opening remarks he made at the event through which the roundtable discussion was framed. The event day discussion invited the investors, entrepreneurs, policy makers, corporate executives and others present to consider how, for Africa’s technology ecosystem to foster more equitable and sustainable economic development, a mix of stakeholders, including regulators, will need to focus attention on a variety of areas including:
Creating a macro-environment that empowers diverse businesses and communities – this requires public and private sector investment of capital in infrastructure across Africa’s road, rail, port, power and telecommunications networks as the ecosystem will naturally depend on this infrastructural layer in order to get the products it has built to market.
Chi Onwurah, both an MP and elected Chair of the All Party Parliamentary Group (APPG) for Africa, which the Royal African Society administers, as well as a Chartered Electrical Engineer with over twenty years’ experience introducing new technologies all over the world including in Africa, emphasises “the importance of legislating for inclusive digital economies and the role of government in providing infrastructure, skills and processes which protect intellectual property, workers, consumers while also enabling competition”.
The critical role sub-sea cables played over the past decade or more in Africa clearly played an instrumental role while recognising that the continent will need to make progress with the deployment of 4G and 5G in the coming years. It was acknowledged that operators such as MTN, Ericsson. Vodacom and Nokia are trialing 5G technology in Africa. However, although 5G is set to provide vastly improved speeds, more capacity and lower latency and will support advanced use cases like self-driving cars, it was noted that some market observers argue that Africa is not ready for the deployment of such use cases while others urge that Africa should grasp this opportunity to leapfrog to 5G because the continent is unencumbered by legacy systems.
Power too is key given an estimated 640 million Africans lack access to energy. In early 2017, the African Development Bank (ADB) helped mobilise $55m to support off-grid solar in East Africa, as well as Côte d’Ivoire, Ghana and Nigeria, part of the ADB’s plan to connect 29 million people on the continent with electricity by 2020. In March 2018 the European Investment Bank (EIB) announced plans to invest €25m in innovative solar systems to provide power to rural communities across Africa.
Greater regional cooperation and integration is an enabler to inclusive technology ecosystems given that technology itself is inherently borderless. Sheilah Birgen, the Entrepreneurs Engagement Lead at the Nairobi-based accelerator iHub currently manages the iHub and World Bank-led joint acceleration programme for East African start-ups called Traction Camp which is supported by the governments of Norway, Sweden, Finland, and Kenya.
Sheilah reflects on the growing opportunities presented to regional entrepreneurs by stating that “growing political and economic cooperation in East Africa is helping to create markets of scale by, for example, supporting the integration of cross-border payment systems, the management of risk and efforts to allocate capital and liquidity more effectively”. This perspective is further exampled by the generally positive narrative surrounding the recent signing of the African Continental Free Trade Agreement by several African Nation States.
That said, when building a technology ecosystem across Africa, it remains an imperative to develop one that is truly reflective of Africa’s diverse population and more receptive to its needs, if the continent is to fulfill its potential to become an even greater foreign direct investment attraction and to drive further volumes of inter-African trade. While regional integration presents exciting opportunities in terms of market access and lower cross-border transaction costs, it also places a perhaps even greater importance in enterprise recognising that Africa contains multiple linguistically and culturally diverse markets.
Collaboration across private and public sector networks
There is a critical role, for example, for mobile providers, banks, platforms and governments to work together in the delivery of services and to foster collaborations with developers to help them build, grow and monetize their apps and services. Chi Onwurah highlights the importance of involving ultimate customers in the innovation process when she states that “technology should be introduced in collaboration with those who use it, indeed they should be in the driving seat as technology only really succeeds when it empowers people to fulfil their potential”. Chi Onwurah emphasises that “successful technology-driven innovation that involves users often requires deep public and private sector collaboration to ensure the skills, infrastructure and processes required to support people are in place”.
We’ve seen several Africa-based start-ups thriving through forms of such collaborations including ones operating across a variety of sectors such as:
Bosun Tijani, CEO and co-Founder of Co-creation Hub highlights that “in Africa tech ecosystems that are empowering start-ups to liberate public data by making available information more engaging and accessible and thereby improving civic discussion and institutional reform are proving valuable” (e.g. Nigeria-based BudgIT conceptualised and developed in Co-Creation Hub).
At a fringe event that explored inclusive digital trade ecosystems which was hosted at the UK Government’s Houses of Parliament by the APPG for Africa and the Royal African Society in advance of Africa Tech Summit London, ‘Bosun emphasised that “it is critical for legislators and regulators to be informed about the impact and pace of technology-driven change and the important role policy frameworks play in protecting consumers and entrepreneurs, stimulating investment and mobilising wider participation in innovation”.
The provision of accessible and affordable financial services to more and more Africans is a prerequisite for driving inclusive growth as this increases access to other opportunities, hence fintech being central to Africa’s future Nigeria-based payments start-up Flutterwave last year successfully raising a Series A funding round of over US$10 million to allow it to expand its operations across Africa.
With a third of globe’s food insecure (304m) in Africa, and with a projected temperature increase of 3-4°C by 2020, some forecast a circa 15% decline in crop yields on the continent, so technology’s role in building capacity in this key economic arena is attracting much investment and profile including those:
Disseminating, via mobile, information to farmers directly impacting productivity and wealth-generation such as Kenya-based WeFarm, which connects over 660,000 small-scale farmers to vital agricultural information, securing, in March this year, $5 million in additional seed funding.
Focussing on giving people the opportunity to invest in agriculture by connecting farm sponsors with farmers such as Nigeria-based Farmcrowdy who raised $1 million from investors including Techstars, Cox Ventures and Social Capital).
There are other examples across multiple industries such as: healthcare diagnostics apps (e.g. South Africa-based Vula Mobile); mobile-first alternatives to urban transportation (e.g. Uganda-based SafeBoda); logistics in the context of delivery of blood via drones to Rwandan clinics (e.g. California-based Zipline); and digital education (e.g. Kenya-based Eneza).
The role of regulators and regulation in the promotion of competition and innovation
Developments relating to the Kenya Government setting up a Task Force to explore Blockchains for land and education has attracted media attention while we’ve recently seen the adoption of new interoperability regulation in Kenya allowing customers to transfer funds across mobile networks in real time, at lower cost and in a secure environment. While many cite Kenya as leading the way in digital innovation for financial inclusion, Africa may also learn from regulatory developments in other markets, particularly where these evolve specifically to enable competitive and innovation while also protecting consumers.
A recent example is the coming into force, in January this year, of new ‘Open Banking’ regulations, set up by the UK’s Competition and Markets Authority on behalf of the UK Government, alongside the second Payment Services Directive’ (PSD2) regulations. Together these new rules essentially mean all UK-regulated banks have, with your permission, obligations to share your financial data such as your spending habits, regular payments and companies you use with other banks or authorised providers offering app-based services.
Philip Rowan, Lead, International Engagement, at the Cambridge Centre for Alternative Finance, highlights that “the changes brought about by the new Open Banking regulations are intended to promote competition and innovation in financial services, resulting in more and better products to help consumers manage their money”. Open Banking is coming to Africa, notably with Open Banking Nigeria strongly advocating for open banking within Nigeria’s financial services arena, highlighting its benefits and the opportunity it brings for significant market expansion while also providing a free sandbox for Fintechs to test and develop in and obtain certification through.
The primacy of the micro, small and medium sized enterprises (MSME) segment
Emem Rita Usanga, Founder of Bnkability, a platform that helps SME’s become investor ready, says that “the establishment of incentives for investors to invest in local tech start-ups and scale-ups is a particularly key role policy makers must embrace in wider efforts to foster an inclusive technology ecosystem in Africa “. This reflects how the MSME strata of industry is key to job creation and inclusive growth in Africa with 80% of Africa’s enterprises said to be MSMEs and that they create well over half of Africa’s employment, fuelling demand for new goods and services.
Here lessons can be learned from the UK experience of the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) and similar programmes. 2015/16 saw £1.88bn flow into EIS-funded companies with 3,470 companies applying for Advance Assurance, suggesting that this has been a credible equity funding source. However, according to Enterprise Investment Scheme Association, disproportionally more companies from South-East have participated in comparison with other UK regions such as those in the North of the country where there is less economic activity. It would therefore be important, from the outset, for African governments to seek to influence the flow of funds towards where the social need is perhaps most pressing (e.g. regionally towards poorer countries, nationally towards rural communities or intra-city towards informal settlements).
The role of incubator spaces and accelerators
Philippe Greinacher, Director of Partnerships at MEST Africa, highlights that “the building of an inclusive technology ecosystem in Africa to date has relied heavily on the integral role that tech hubs have played in scouting for, selecting and coaching entrepreneurs, founders and management teams behind early stage companies operating in, and / or delivering products and services for consumers and customers in, the region”.
Notably the GSMA’s “Ecosystem Accelerator Africa: Tech Hubs Landscape 2018” report released in March this year emphasised that “tech hubs today are efficient vehicles not only to attract capital and expertise but to lead the very debate around technology and progress”. The report established that “since 2016, the number of active tech hubs across Africa has grown by over 50%: from 314 in 2016. 442 hubs are now active on the continent and a dozen are due to launch in early 2018”.
By way of example, the African Foundation for Development (AFFORD), an organisation that promotes Diaspora investment opportunities for jobs and wealth creation and supports entrepreneurs operating in Nigeria, Rwanda, Sierra Leone and Zimbabwe, recently launched its Africa Diaspora Finance (ADF) programme 2016 – 2018.
Most recently, AFFORD has been actively working with the Rwanda Government to launch a RemitPlus Diaspora Bond to fund affordable housing”. Notably the ADF has already provided circa £770,000 worth of investment to 31 diaspora enterprises that are solving pressing problems in 8 African countries (Ethiopia, Kenya, Nigeria, Rwanda, Sierra Leone, Somalia, Uganda, Zimbabwe) and it has provided circa £400,000 worth of investment in business support in Nigeria, Rwanda, Sierra Leone, Zimbabwe, with almost £200,000 in match-funds invested by diaspora entrepreneurs. The ADF has created 538 jobs while 500 people have received training in new skills across the continent with all the above effectively helping to further enhance Africa’s social economy.
The critical importance for Africa to build its own pool of skilled labour
Barbara Birungi, Co-founder & Director of the Uganda based innovation and incubation space Hive Colab and founder of Women in Technology Uganda, emphasises that “the education sector and the policies that support the technology ecosystem within African nation states are critical to successfully building an inclusive technology ecosystem on the continent, while sustaining any related gains will require emerging technologies to also empower women and youth if social inclusion is a primary goal”.
Existing educational institutions, from primary schools, secondary schools and universities to colleges and State-funded educational programmes, all have a part to play while the technology industry also has an increasingly key role. Examples include Gebeya from Ethiopia and Andela, start-ups that train developers in Africa and hires them out to global tech companies. Andela has raised $40 million in Series C funding in late 2017 .
Understanding urbanisation and how this societal transition presents complex conditions
With tech ecosystems in Africa having to consider the distinct needs of the populations rapidly growing in the continent’s cities as well as the large, and often neglected, rural communities which have a key role to play in certain sectors (e.g. agriculture) and a vital role as a welfare backdrop for the urban populations. It is therefore key for industry and the policy environment to prioritize inclusion in product design and distribution, as Kenya’s mobile operator Safaricom has done, as of late last year, when, in partnership with Huawei, the company installed its first RuralStar site, an innovative low-cost base station specifically designed to address telecommunications challenges in rural areas.
Also BIMA, the insurance tech provider that uses mobile technology to provide affordable insurance and mobile health services for low-income families, recognised the need to first educate much of the market about the concept of insurance before their products and services were purchased by consumers in Africa. And the Cameroon-based Ovamba, who provide MSME businesses in Africa with growth capital provided by international investors from the US, U.K. and Japan, is building an African dialect language recognition system to cater to the specific dialects of their customers.
For a variety of reasons, though perhaps notably given Africa’s prevalence of low incomes and high unemployment rates, governments, the financial services, telecommunications and technology industries and others besides, have a greater responsibility to invest their resources to stimulate inclusion rather than focus primarily on the delivery of profit and dividends for shareholders.
In encouraging citizens and companies to embrace technology-fuelled transformation, governments, at times through regulators, will need to ensure that any potential or actual risks and challenges are navigated expertly and that consumers are adequately protected and no communities marginalised. This calls for both a monitoring and enforcement role for regulators as well as the need for regulators and regulation to be flexible and agile as the macro-environment and industrial context evolves.
The challenges in Africa are significant, however, these are not insurmountable, not least because of the potential for technology and the entrepreneurial energy of the continent’s youth, its “demographic dividend”, to make positive, lasting and inclusive change happen.
Boko Inyundo is a Council Member at the Royal African Society as well as a member of the Board at the African Foundation for Development, a Non-Exec Advisor to the Africa + Tech-focused consultancy De Charles and a Senior Business Development professional aligned to the Technology Sector at the global law firm DLA Piper.