At the Business Council for Africa’s annual debate in London last week, the most encouraging sessions covered the thriving tech space. Erik Hersman, the chief executive officer of Kenya-based BRCK, characterized investment in tech as the new gold rush in Kenya that did “more for less” and drew heavily on “old” first-world technology. His own company makes use of batteries and motors to create hardy “backup generators for the internet”. Its latest product is designed for the classroom.
Hersman added that M-pesa, the transformative mobile money system for transfers and lending in East Africa, was launched with technology governed by a 30-year old protocol.
East Africa, and Kenya in particular, have led the way because of the lightness of regulation.
Figures were quoted to the effect that a total of 77 start-ups in sub-Saharan Africa (SSA) raised US$336m in 2016. Panelists agreed that tech entrepreneurs had little difficulty in tapping venture capitalists for up to US$2m or accessing “angel money”. They could struggle to raise between US$2m and the minimum target of private equity firms. A good track record help, as always: BBOXX, a solar power provider in East Africa with mobile-only payment systems, was founded in 2010 and raised US$20m from its last funding round.
According to other data cited, an estimated 14% of household incomes in Kenya are devoted to the internet. The share is higher elsewhere in the region where the tariffs are higher, and averages just 2% to 3% in OECD countries.
The tech multinationals are present in SSA. They would say they are investing in local partnerships. Others might say they have set up regional sales offices.
Several other tech start-ups were represented or mentioned at the annual debate. These include: Sproxil, a US venture capital firm well known in Ghana for its app which enables users to determine whether a medicine is genuine; Strauss Energy, a Kenyan company which produces building materials to create solar power; Asoko Insight, which does the work digitally of a good chamber of commerce in four African markets; Pula Advisors, a data analytics provider which has supplied a leading Kenyan bank with the names of 300,000 potential agri-business clients; and Nigeria’s IROKOtv.
More than one speaker made the point that, alongside successful start-ups, robust growth requires large companies which make a sizeable contribution to non-oil tax revenues and job creation, such as the Dangote Group.