Pondering Africa's Tech Investment Potential in 2012 and Beyond - Afrinnovator
[In 2012] New investor interest thanks to continuing coverage of Africa economic growth potential vs other markets- especially in the attractive mobile segment (700M subscribers barrier will definitely be crossed in 2012). – Mbwana Alliy
It is clear that Africa’s fate has been changing and will continue changing in the coming months and years. Perhaps one of the remarkable evidences of this is depicted in two Economist articles. In the year 2000, The Economist ran an article titled, “The hopeless continent“, the article went on to paint a rather dark, and indeed hopeless, picture for the future of the African continent, citing the negative effects of civil wars, poverty and disease on African states. Fast forward one decade into the new millenium and The Economist in 2011 runs another article postulating the exact opposite, “The hopeful continent“,
Over the past decade six of the world’s ten fastest-growing countries were African. In eight of the past ten years, Africa has grown faster than East Asia, including Japan. Even allowing for the knock-on effect of the northern hemisphere’s slowdown, the IMF expects Africa to grow by 6% this year and nearly 6% in 2012, about the same as Asia.
Africa is now considered by many to be the place to invest in for the future. This has also been supported by the kind of resilience that the continent has shown amidst the financial turbulence in the past few years that has gripped the west. According to this article by Charles W. Corey back in 2010:
African economies have shown resilience in the face of global financial adversities, have passed the stress test and can be expected to achieve economic growth this year, says Donald Kaberuka, president of the African Development Bank (AfDB).
Addressing African finance ministers April 26 in Washington, Kaberuka acknowledged that the global financial crisis has done some damage, but said African economies are expected to average 5 percent economic growth in 2010 and 6 percent growth in 2011, with some countries forecast to achieve an even higher rate.
In many African countries, he said, the crisis has “only been a setback.”
So it’s only logical that we are seeing more and more investor interest in Africa. In 2011, it became clear that one of the areas of particular interest as far as foreign investment goes is the area of technology and innovation. Of course there has been specific interest in very specific countries as far as this goes but the fact of the matter is that the stories of technological innovation from Africa that have gone global such as Ushahidi and MPESA (we need new examples to talk about) have drawn the eyes of potential investors in this direction. The number of foreign seed investors in technology (particularly from Europe, though we are yet to see how the eurozone situation will affect things in 2012) for example in Nairobi, Kenya has increased.
There are, however, a few pointers for both foreign investor and investees to consider if we’re going to reap the most out of the oppotunity
For the Foreign Investor
1. Learn the continent: Africa = Diversity
One of the most devastating mis-understandings among foreigners is that Africa is a single country, with one culture. This mindset can be devastating to potential investors. The fact of the matter is that the African continent is diverse and the diversity has far reaching implications on not only how to relate to people but also how people prefer to do business in different parts of Africa.
The business culture in some countries is really fast paced and aggressive whilst in other areas there’s a kind of laid back, easy going culture which does not necessarily indicate that there are less opportunities in such a culture. Foreign investors need to take time to study their chosen country for investment and understand what the people are like, what their culture is like, then adapt and approach investments with that understanding.
2. This is not America or Europe: Africa = Uniqueness
Still on the issue of culture, foreign investors also need to understand that Africa is a unique playing ground. Do not approach Africa with the idea that things will work here the same way they work elsewhere just because they work in those other places. In fact, going back to the issue of the rich diversity of the continent, one strategy may not even work for two different countries within Africa!
With the diversity of the continent comes the uniqueness of states and regions within the continent.
These two amazing qualities of the African continent are in part contributed to by the histories of the different states, whilst many African states got their independence from colonial masters around the same period in history, their experience of colonialism set them on vastly different tracks in some cases.
3. Shed the veil: Africa != Aid
There’s still much mis-information and resulting mis-conceptions regarding Africa out there. I remember once working on a project for a foreign client and the guys’s daughter once asked her father (my client) whether I lived in a hut and whether we had elephants walking about all over. It was kinda funny really, but also a bit sad.
Mention Africa to many foreigners and the ideas that float to the top of their mind generally revolve around, aid, AIDS, malaria, poverty, civil war and famine. Many others believe Africa is one big charity case. Many stick to only what they see on TV, never going beyond that. Sure these issues face many African states, but they are a) not a one size fits all description of all 50+ states on the continent, and b) not the only story to be told even in some of the areas plagued by some of these evils.
Africa is also a place of innovation and entrepreneurship, and many Africans are hardworking people, not to mention the physical beauty of the contient
Some notes for potential investees
1. Funding is not everything
I’m not against funding but as I mentioned in my ebook, getting funding for the sake of getting funding (or as an end goal) is dumb! I’m still amazed each time I see ‘funding’ being used as a measuring stick or as a major goal for a startup. I tweeted recently, “only fraudsters and scam artists see funding as an end in itself”. Genuine businesses or NGOs consider funding simply as a means to an end. Further, they would avoid external funding if they could. So why would entrepreneurs seek (or be encouraged to get) funding at the earliest opportunity, sometimes even before they have launched or tested their concept?
2. Don’t just copy
Sometimes you’ll here about someone building the ‘Kenyan Facebook’ or ‘Nigerian Twitter’ or something of the sort. While the aim may be to create a similar service that caters to the specific needs of that demography, many times it’s a matter of simply copying that service and hoping to sell it locally without adding anything unique or innovative to the offering.
Not only is this an un-innovative approach but also not very likely to succeed since the local population may already be using the other service heavily and so have literally no incentive to use your product, not only that but the entrepreneur may create for themselves a competitor whom they have neither the capacity or resources to compete with.
The challenge for the potential investee is to come up with something unique and as we have noted before, one thing would be to create something that solves a very real problem in the every day lives of local consumers.