Africa has embraced technology wholeheartedly, if the proliferation of Fintech start-ups and the ubiquity of mobile money transactions is anything to go by.
Indeed, billions and billions of dollars of mobile money transactions are done across Africa every day, so much so that Ghana’s sharp-eyed Finance Minister found it prudent to tap into the ubiquity of mobile money by taxing it to raise much-needed revenue for the state.
Even banks now feel threatened by the emergence of mobile money, and some analysts believe that it is actually the emergence of mobile money services in Africa that led the multinational Barclays Bank (which I was a customer and I still am) to leave its operations in sub-Saharan Africa and transfer all its operations into a clone called Absa.
In Ghana, Zeepay, as an indigenous Fintech, is not doing badly; with its founder and Chief Executive Officer Andrew Takyi-Appiah recently expanding the tentacles of the Fintech into the Caribbean after conquering the African market.
Zeepay is a soonicorn (a start-up that has the potential to reach a US$1billion valuation or more while a unicorn is a start-up with a US$1billion valuation or more) and could soon rival the already established US Fintechs, such as the Elon Musk’s PayPal, if the rate of its expansion is anything to go by.
But like most development indicators, Africa is lagging far behind the rest of the world in the start-up race; with Africa accounting for only 0.2 percent of the value of start-ups worldwide.
This is largely because foreign investors usually invest peanuts in African start-ups, making it extremely hard for them to pivot and scale. Doing business in Africa is far more difficult, risky and cumbersome than doing business in developed economies like the US; and these foreign venture capitalist know the risks associated with doing business in Africa so they demure from investing as much money as they would a European or American start-up.
In Ghana, the telcos are the ones bringing digitalisation to the doorstep of Ghanaians as companies like MTN make more money from mobile money transactions than the traditional functions of providing telecommunication services, and telcos are now fully digitalised as they no longer make recharge cards but now transfer credit electronically onto the phones of their customers.
MTN started this phenomenon in the mid 2000’s as it was more cost-effective to transfer credit or data electronically than to do so from recharge cards; and it also removed other bottlenecks, such as having to come up with new digits on new recharge cards.
It is also eco-friendly as there is longer paper to be used in making these recharge cards. This saves the forests of the world from the felling of trees to make paper. These forests, we know, are the lungs of the world as they provide life-giving oxygen which is the by-product of photosynthesis.
As the saying goes, when the last tree dies, the last man (not to be accused of male chauvinism by the staunch feminist rights movement, I must add that the women and children as well as the hundreds of billions of the world’s fauna) also dies.
There is growing optimism that Africa can leverage technology to drive its socio-economic transformation, and this article hopes to give a perfunctory glimpse of the African start-up ecosystem and how it is helping put Africa on the map as far as technology is concerned.
Fintech dominates the African start-up scene, with Ghana’s own soonicorn Zeepay tipped to become Ghana’s first unicorn following in the footsteps of Nigeria’s OPay and Flutterwave.
The vast number of African start-ups that have raised substantial funding are the products of incubators and accelerators; and in Ghana, the Meltwater Entrepreneurial School of Technology (MEST) and the UNICEF KOICA Start-up Lab are the most prominent ones.
This is because unlike developed start-up eco-systems like the US, African founders generally lack the know-how on how to nurture their idea into a viable product (a start-up). Accelerators and incubators create an enabling environment for start-ups to thrive; providing key benefits, such as ready access to venture capital firms for much-needed cash, to enable founders scale.
Looking at the African start-up scene, South Africa – being the most industrialised country on the continent – has the most developed star-tup ecosystem in Africa. It’s biggest city, Johannesburg, is a major Fintech hub. But Johannesburg is not the start-up capital of the country – Cape Town is. As at the end of 2021, Cape Town had 225 start-ups – accounting for 45.9 percent of all South African start-ups.
Johannesburg is closely behind with 204 start-ups over the same period, representing 41.6 percent of the total. As at the end of 2021, there were 490 start-ups operating in South Africa; and in the period between January 2015 and April 2022, they had raised a total of US$993,684,600, employing over 11,000 people.
Kenya follows South Africa as the country with the second most developed start-up ecosystem, with its capital – Nairobi – coming in 2nd in Africa in regard to cities with the most start-ups. It has the most start-ups in Africa that had been nurtured by an incubator or accelerator.
As at the end of 2021, there were 308 active start-ups operating in the east African economic powerhouse; with Nairobi being the dominant hub: over 97.4 percent operate out of the city. Kenyan start-ups employ a total of 11,462 people, an average of 37 per start-up.
Between January 2015 and November 2022, they raised a total of US$1,281,918,200.
A little over 30 percent of Kenyan tech start-ups operate in the Fintech space, almost three times more than nearest challengers – e-health and agri-tech.
Enter Nigeria, Africa’s most populous country and its biggest economy. Lagos is now the top start-up city in Africa, with no fewer than 425 – 88.4 percent – of Nigerian start-ups based out of the city as at the end of 2021. Abuja – the capital – comes a distant second with a paltry 23.
In Nigeria, 36 percent of start-ups are Fintech ventures, which is by far the most dominant. Nigeria holds the distinction as the most popular investment destination on the continent, with its start-ups raising a combined US$2,068,709,445 between 2015 and mid-August 2022. It also leads the way as far as the highest number of people working in start-ups is concerned, with a combined total of 19,334 people working in that space.
In north Africa, Egypt is the country with the most start-ups – with its capital boasting 562 as of late 2021; and its capital, Cairo, has the most start-ups with as much as 93.63 percent.
Egypt bucks the Fintech trend as one-fifth of the country’s tech start-ups are in
retail-tech, representing almost twice as much as e-commerce and retail-tech. 318 Egyptian start-ups raised US$791,072,500 between January 2015 and September 2021. They also employed 12,913 people.
So all in all, Africa is not doing badly. Africa can catch up with the rest of the world. But if this is to happen, the bottlenecks must be removed. This includes the unfavourable business climate and the reluctance of venture capitalists to invest in African start-ups.
The writer is Executive President at Africa Growth Foundation, a policy think-and-do, and also Founder and CEO of World Youth Virtual Parliament.
Email him: [email protected]
