Translating Africa’s tech enthusiasm into an enterprise ecosystem

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Technology is disseminating across Africa and technology consumer markets have grown rapidly as a result. But so far, only a few local technology entrepreneurs have seized the economic opportunities that ensue. In contrast to consumer markets, entrepreneurship ecosystems may take more time and resources to grow than enthusiasts of Africa’s technology boom anticipated.

Various media stories regularly celebrate the surges in mobile phone penetration, the distribution of laptops in rural schools and the steadily growing base of internet users, particularly in sub-Saharan Africa. For example, 10 years ago, less than 20 per cent of Africans owned a mobile phone; today, roughly 80 per cent do. The initial hype around Africa’s rapidly emerging technology markets was significant. Development and economic experts alike predicted that technology would allow local people to solve local problems and therefore drive innovation: rural farmers might access market information through feature phones and individuals in remote places could benefit from mobile healthcare and virtual education services. With technology consumer figures in East Africa growing at double digit rates every year, it seemed likely that the next big technology start-up would come out of Africa.

Multinationals profiting from tech boom

But now, a few years in, patience is starting to wane. Although technology is helping address local problems, the major start-up boom that angel investors and venture capitalists hoped for has not yet happened. Instead, the big economic opportunities of Africa’s technology catch-up are largely being seized by traditional multinationals. For instance, Kenya’s mobile service provider Safaricom, owned by Britain’s Vodafone, offers the mobile money service MPESA, which is returning million dollar profits across seven African nations. South Korea’s Samsung has a 50 per cent share in Africa’s overall smartphone market.

The reason is that, just like anywhere in the world, suddenly owning a mobile phone does not automatically make people relentless tinkerers and innovators. Instead, skilled developers, graphic designers and other technology experts tend to prefer stable employment to the start-up world. Given that unemployment rates are as high as 40 per cent in some African nations, this is not surprising. Add to that the risks associated with starting a business. Globally, an average nine out of 10 technology start-ups fail. Locally, starting a business tends to be even riskier: in the absence of personal savings and alternative employment options to fall back on, entrepreneurial success often becomes a matter of livelihood.

Forging a technology entrepreneurship ecosystem

One example of how to encourage entrepreneurs to seize the opportunities of Africa’s technology boom is through business incubation and acceleration. Across Africa, roughly 40 such organisations provide co-working and networking spaces, intensive business development programmes and sometimes seed funding. Although the basic parameters of African business incubators and accelerators are similar to those of their counterparts in Silicon Valley or London, their role couldn’t be more different. Instead of selectively fostering individual start-ups, Africa’s innovation hubs are driving the much more fundamental emergence of a technology entrepreneurship ecosystem.

For instance, innovation hubs are helping build technology skills by offering a space for collaboration. Before their existence, technology enthusiasts met irregularly in coffee shops or at universities. Now, there are dedicated spaces brimming with developers, graphic designers, hackers and bloggers every day. Business accelerators and incubators are also legitimising technology entrepreneurship as a profession, particularly in the eyes of parent generations. “Now you can actually say, I’m going to the hub. Before, it was like: I’m at the coffee house. It looked kind of like idleness,” a young technology entrepreneur explained to me. Finally, hubs’ seed funding for technology start-ups significantly reduces the financial risks associated with business creation or makes starting a business possible in the first place.

The question of how many vastly successful technology start-ups have come out of Africa might therefore not yet be one to ask. Instead, entrepreneurship takes more than the availability of technology. Although technology entrepreneurship ecosystems are emerging across Africa, often with the support of business incubators and accelerators, they are one example of how not everything can be leapfrogged.

*Marlen de la Chaux [2013] is doing a PhD in Management Studies.

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