Ousmane Diagana, the West and Central Africa vice-president of the World Bank explains the Bretton Woods institution's positioning and priorities ... on the continent. In this long interview, he pushes back against the familiar critique of rigidity and economic orthodoxy.
Groups of youngish Nigerians are sitting around a room arguing. Post-it notes colonise walls, connected by lines on whiteboards like an unorthodox police investigations unit. The colours are bright, the mood concentrated. We are at a hackathon in the Co-Creation Hub (CCHub), one of the famed tech hubs of Lagos, located in Yaba, which is considered Nigeria’s Silicon Valley.
“We’re structured as a social innovation centre, and from time to time we pick issues that are of critical social economic relevance and see how we can stimulate new solutions,” says Femi Longe, co-creator of CCHub. “What that typically entails is bringing people together from sectors that ordinarily don’t interact, with the intention that they can come up with new products or services that can solve a really clear, distinct problem.”
Entrepreneurs who tackle Africa’s thorniest problems may well emerge from the protean soup of ideas, support and stimulus that is a tech hub. Nigeria’s award-winning BudgIT non-governmental organisation for example – a start-up whose mission is to explain Nigeria’s budget to citizens and track politicians’ spending – was born in a CCHub hackathon.
African tech hubs are on the rise. A joint report by Briter Bridges and AfriLabs identifies 643 tech hubs on the continent.
The definition is broad: accelerators, incubators, university-linked start-up support labs, maker parks, even co-working spaces. And while some have deep pockets and big projects, around two-thirds have fewer than 10 members of staff. But their purposes are often clear: to help tech entrepreneurs take their first steps towards launching a viable company and to support a growing ecosystem.
Briter Bridges founder Dario Giuliani, a co-author of the report, tells The Africa Report: “I have always thought we have been gauging hubs’ work with the wrong scale. Hubs have been playing a catalyst role across Africa’s cities that transcends the mere act of supporting start-ups. Although several such organisations still offer only co-working facilities, an often understated role these hubs play is that of safe havens for the youth in otherwise poorly conducive environments, as well as forward-looking training centres promoting digital literacy.”
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Giuliani continues: “Our research and conversations with hub managers show that the majority of hubs rely on hybrid models that consist of consultancy services, equity in exchange for support and/or cash, donor funding for programmes […]. This shows that chasing a unique identity for hubs might result in a waste of time.”
The next big thing
For CCHub’s Longe, rather than company valuations, “the measure for us of success for our start-ups is their ability to build sustainable businesses that have been real concrete value in improving quality of life for people in Nigeria.” His hub also puts venture capital money into certain start-ups – including a blood-delivery service called LifeBank, whose founder, Temie Giwa-Tubosun, just won the inaugural Jack Ma entrepreneur award in November.
Nevertheless, the valuations of African start-ups have been rising. In the first half of 2019, the top 15 venture-capital funding rounds for African start-ups raised $286m, compared to $175m in the first half of 2018 – growth of more than 60%.
And in just the past few months, the pace has picked up: Visa pumped $200m into Nigeria’s payment fintech Interswitch, and Chinese investors put a combined $170m into another Nigerian fintech, OPay. And yet another African fintech, PalmPay, raised $40m from investors led by Chinese telecoms company Transsion. It, too, is targeting the Nigerian market.
There is no surprise, then, that many of these tech hubs are funded by big tech companies, which are always on the look out for the next big thing. Facebook, Google, Amazon, Microsoft and IBM are the largest sponsors of tech hubs.
But African companies are backing them too, including Liquid Telecom – the data infrastructure company owned by Zimbabwean billionaire Strive Masiyiwa – Standard Bank, Africa’s largest bank, and MTN, Africa’s largest telecoms company.
Nairobi, Johannesburg and Lagos are the top cities for African tech, attracting global giants – including those from Silicon Valley – and a host of start-up entrepreneurs.
Their countries have ecosystems favourable to start-up activities: large markets, widespread use of the internet on smartphones, as well as excellent network coverage, supported by groups such as MTN and Safaricom.
Moreover, this development of technological sectors is supported by both governments and major companies, which form partnerships with start-ups and take stakes in their firms.
Francophone markets are small but growing. Partech’s latest report, which tracks fundraising by start-ups, says that Senegal is the best-performing French-speaking country. It ranked seventh on the continent in 2018, ahead of Rwanda (8th), Tunisia (12th), Morocco (15th) and Côte d’Ivoire (18th).
But just like the incubator-swaddled start-ups themselves, tech hubs are fragile. Afrilab and Briter Bridges’ research “identifies over 110 hubs that have shut operations in the last few years due to bankruptcy, pivoting or the expiration of their mandate”.
One of the key roadblocks is capital: many hubs are unable to help companies reach investors to fund their growth. Another is a failure to provide the connections and advice to help companies evolve. “You can count the number of investment funds on the fingers of one hand, and the status of angel investor does not exist,” says Amel Saidane, co-founder of the association Tunisian Startups. She also says government should reserve more public contracts for local start-ups.
Raymond Mendy, the head of CTIC, a growing incubator in Senegal, points out some of the problems he and the wider ecosystem face. The education system does not offer practical skills and struggles to adapt to the evolution of technological tools. “Academic training does not prepare students for entrepreneurship,” he says, adding that incubators also lack expertise.
He also criticises the big events organised by major companies: “Brands want to have the image of being close to the digital pioneers, but it’s only an institutional positioning. Start-ups win competitions and small envelopes but do not focus on the essentials.”
As a result of these challenges, hubs are forming alliances to deepen networks, to catalyse the best advice from around the continent and to access new markets. Oumar Cissé is a 42-year-old entrepreneur in Senegal who enjoys the laboratory feel of Dakar: “If you have an idea, you can be sure five other people have had the same. If you can make it work, you can be sure that it can be exported to other markets.”
As in many secondary Francophone markets, all eyes turn to the opportunities of Abidjan. “There, there are fewer start-ups and the market is much bigger,” says Cissé, whose financial services company InTouch has now entered several West African markets. “We realised that we had done the same turnover in six months in Côte d’Ivoire as we do in two years in Senegal.” Like many of its competitors, Intouch provides businesses with the ability to access digital and other forms of payment.
Infrastructure is key. Abidjan has three undersea fibre-optic cables linking to the global web and also the presence of global tech giants. Orange and MTN, for example, both have incubators in and around Abidjan.
Morocco is another important Francophone tech pole. “Global giants like Atos, IBM, Oracle, Sage have chosen to set up in Casablanca and to make it a launch pad to Africa,” says Saloua Karkri-Belkeziz, president of the Fédération Marocaine des Technologies de l’Information, des Télécommunications et de l’Offshoring. In the wake of these large groups, the network of start-ups is gradually expanding, with around 2,000 companies. Casablanca is home to three-quarters of the incubators and support structures for start-ups.
With the impact of the jobs crisis filtering through to even the most hard-headed of legislators on the continent, the state is getting involved. Some governments give assistance in kind. The CCHub, for example, was given assistance by Lagos State, with provision of subsidised high-speed internet. Côte d’Ivoire has launched the Village des Technologies de l’Information et de la Biotechnologie in Grand Bassam, a free zone which cost the government $65m. It provides 624ha of office and factory space.
Revolution and innovation
Others prefer focusing on the legal frameworks first. Senegal has a start-up act working its way through the legislative pipeline that will give a six-year tax holiday to firms and finance tech hubs, among other things. Tunisia’s 2018 start-up act pays social charges for employers, lightens customs procedures and facilitates banking services.
The Tunisian revolution of 2011 played its role, which may point to a link between innovation and the openness of political institutions. Without the revolution, “it is inconceivable that the ICT minister at the time, Noomane Fehri, would have been able to get government officials and entrepreneurs together to dream up the start-up act,” says Nader Bhouri, an adviser at the ministry.
The ability of Ethiopian start-ups to survive despite regular internet blackouts also has to be applauded. They remain slim in number, which points to a wider problem; a start-up of whatever nature on the continent has big hurdles to clear in access to finance, infrastructure and the cost of logistics in a fragmented market.
Rwanda wants to solve the problem by clustering tech actors in one place. Today, the campus of the US university Carnegie Mellon appears a little lonely in Innovation City, in the north-east of Kigali. It was going to be joined by the famed African start-up Andela.
However, Andela prefers the neighbourhood of Nyarugenge. Reinforcements are arriving in Kigali. IT security firm Kaspersky Lab has said it will set up an office in 2020. Alibaba, the Chinese e-commerce giant, is already in Kigali to set up a platform to help increase African exports to China.
As Africa’s tech environment strengthens and grows in the years to come, there will be more upheavals as weaker firms shrink and stronger ones take over their rivals. There are already signs of this amongst the continent’s top tech hubs, which seek prime-mover advantages.
In 2019, Nigeria’s CCHub took over its Kenyan peer iHub. CCHub’s co-founder Bosun Tijani told TechCrunch: “It strengthens our ability to support innovation […]. It gives us a chance to attract greater resources and talent.”
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