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Digital development in Africa: a case of innovation and agility

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START-UP LAUNCHING AND FUNDRAISING RECORDS, NEW TECHNOLOGIES EXCEEDING WESTERN STANDARDS, AFRICA HAS WIDE GROWTH POTENTIAL IN DIGITAL, PROVIDED YOU ARE BOLD AND RESOURCEFUL…

DISRUPTIVE TECHNOLOGIES THAT DO NOT FOLLOW THE WESTERN EXPERIENCE CURVE

314. This is the number of “tech hubs” on the African continent at the end of 2017. Whereas there were only 120 the previous year, the Cradle of Humankind has seen new ecosystems flourish to support the growth of its technological start-ups[1]. These African start-ups have indeed broken records in terms of fundraising in 2018, exceeding in just one quarter the total raised the previous year, about 167 million euros according to the African research firm WeeTracker[2].

With yet another 600 million Africans still not directly connected to national power grids, some countries stay ahead of the Western nations in their technological habits. In Kenya, over 70% of adults use M-Pesa, a mobile payment system through which about 40% of Kenya’s GDP flows. However, the number of people with bank accounts does not exceed 40%. Freeing itself from the conservatism of traditional European or North American markets, Africa has a projected internal market of 2.5 billion inhabitants by 2050 and is not afraid of disruptive technologies. Haweya Mohamed, Afrobytes Executive Director, explains that “we cannot talk about technologies in Africa without considering the Blockchain or crypto-currencies that affect all areas: e-commerce, services, energy, construction etc … “[3].

Another indicator prooving the African ecosystem evolution is the growing presence of technology giants on the continent. IBM has thus made “a cloud platform for entrepreneurs to enable them to develop applications under IBM platforms,” says the IBM Director for French-speaking Africa[4]. This is also the case for Orange, which invests 1 billion euros per year to build universities and incubators in French-speaking Africa.

Not only is much still to be done to democratize telecommunications throughout the continent, but the other tech giants are not yet well established, leaving more leverage to French companies. Moreover, they enjoy the proximity offered by Francophonie compared to their American and Asian competitors.

STRONG REGIONAL DISPARITIES DUE TO UNEQUAL DISTRIBUTION OF INVESTMENTS

However, as often, progress and technological development are spreading unevenly across regions. For instance, in 2017, Kenya, South Africa and Nigeria received 76% of the funds invested, mainly supported by large US companies who wish to keep an eye on this market evolution. Regarding support infrastructures, five countries (Kenya, Morocco, Nigeria, South Africa and Egypt) share half of the continent’s tech hubs, not allowing an equal spread of technological advances[5]. In terms of development, it has led to large regional disparities, with a West African growth rate not exceeding 0.4% while it is over 5% in East Africa[6].

LOCAL MARKET KNOWLEDGE AND INGENUITY: THE TWO WINNING CRITERIA FOR REACHING THE “BASE OF THE PYRAMID

Africa is also characterized by daring entrepreneurs who are not afraid of making the big leap into the entrepreneurial life. According to Les Echos “only 24% of them say that fear prevents them from launching their business”, as a comparison, this percentage reaches 58% in Italy and 61% in Greece. Similarly, the African context requires companies to be particularly innovative if they want to capture the largest share of the market, namely “the base of the pyramid”[7].

In a report released in 2017, the African Development Bank (AfDB) counted more than 500 million people living below the poverty line on the continent, that is living on less than $ 2.2 a day[8]. Faced with the challenges of lack of funding and difficult access to electricity or freshwater, local businesses must be doubly ingenious in their efforts to provide services that are worthy of Western majors.

To do so, entrepreneurs of the continent can draw inspiration from success stories such as Jumia, the #1 marketplace in more than twenty African countries, and nicknamed the “African Amazon” [9]. Another start-up in e-commerce, Afrimarket raised more than 10 million euros at the end of 2016 to develop its e-commerce platform and offer an efficient delivery service, including in the most remote regions. Fully understanding the local context and having access to the required partners on the continent, these start-ups are one step ahead of the Northern giants to capture the “base of the pyramid”, where the traditional GAFA business models cannot be duplicated identically[10].

Thus, while Africa is positioning itself as the most promising emerging market of the next decades, foreign private investments are pouring into African start-ups with increasing rounds of financing, and volumes setting new records each year. With a population free of many stages of development experienced by developed countries, Africa has the flexibility to set up and adopt new technologies that are not even implemented in North America nor in Europe. Moreover, the continent enjoys a “base of the pyramid” context allowing local companies to perform thanks to their market knowledge and the absence of international giants. However, the development of an African entrepreneurial ecosystem will only be sustainable if funding is monitored, and if future unicorns avoid a “2.0 colonization”[11] of Western decision-makers, while relying on new educational institutions to encourage talents to stay on the African continent.

[1] Missionnaire d’Afrique : « Le boom des hubs technologiques en Afrique » (24 août 2016)
[2] Stratégies : « Record des levées de fonds en Afrique » (6 juillet 2018)
[3] 1001 Startups : « #Africatech: Les startups vont-elles faire décoller l’Afrique ? » (24 mai 2018)
[4] IBM : « IBM lance le programme «Digital – Nation Africa» (8 février 2017)
[5] 1001 Startups : « #Africatech: Les startups vont-elles faire décoller l’Afrique ? » (24 mai 2018)
[6] Le Monde Afrique: « Oui le taux de pauvreté en Afrique recule, mais le nombre de pauvres augmente » (8 juin 2017
[7] Le Monde Afrique: « Oui le taux de pauvreté en Afrique recule, mais le nombre de pauvres augmente » (8 juin 2017)
[8] Les Echos : « La machine Afrique est lancée » (28 novembre 2016)
[9] Le Point Afrique : « Jumia, l’Amazon africain » (15 mai 2014)
[10] Frenchweb.fr : « Afrimarket lève 10 millions d’euros » (5 septembre 2016)
[11] 45S : « La Colonisation digitale, ça vous parle ? » (30 avril 2018)

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