Following Rick Rowden’s article titled ‘Africa’s boom over’, Eric Osiakwan, a very active angel investor on the continent published a very insightful post to throw more light on the subject with a different pair of lenses. Though I agree with Eric on how Africa doesn’t necessarily need industrialization to develop (considering economies such as Singapore which have become a part of the Asian tiger brand just by boosting its service industry), I disagree with Eric’s bottom line – Africa’s boom is just starting and it’s a tech boom.
Before I share my thoughts on the subject, I believe it is important to indicate to the many sons and daughters of the continent who still believe that bringing to light the challenges the continent faces, is a sign of betrayal or a disposition of negativity that I do not share that view. I believe by critically X-raying how much muscle the tech industry has gathered in the past few years will present stakeholders with a better view of how much more effort is needed get the continent to compete even more aggressively. Without knowing where we are as a tech ecosystem, we won’t know the efforts required to surmount the challenges ahead of us.
Unfortunately, Rick Rowden is right, most of African economies are very much dependent on commodities. And tech is not close to taking over. Take a look at South Africa which has its currency depreciating because of China’s instability and the commodity slump in its mining sector. The Nigerian Naira is on a free fall because the country with 181 million citizens is so tied to the price of crude. I could go on and on about how many other African countries are yet to shift from commodities as a major exchange earner. We need to shift our focus to the service industry, that is one sure way of getting ourselves out of poverty, and this is where Eric makes a point a totally agree with. The next generation of Africa cannot depend on extractives to develop the continent.
With the above out of the way, I will reference the pillars Eric relied on to arrive at his conclusion
Telecoms, and the Mobile first and mobile only continent
It is indeed true that Africa holds this accolade dearly as it should. The introduction and advancement of GSM and 3G services in the past decade have made it easy for residents to own and use mobile devices. This phenomenon has led to an enviable mobile penetration figure. However this advantage, as it is in its current state, only glorifies telecoms, many of which are owned by foreign investors. The mobile phone by accessing the internet through a browser or an app, opens up doors for third parties besides the telecoms to also earn revenue whiles providing the user with a value added services (VAS). So it is important to examine the type of mobile devices in the hands of the user. Unfortunately, a majority of these mobile devices are not smart and/or internet enabled or the user is not digitally savvy enough to access the available apps to a point where the third parties can benefit from such users. Thus, the telecoms are usually the main and sometimes, the sole beneficiaries of the high mobile penetration in Africa. And in case you want to understand where the majority of the telecom profits are going, check out the top 10 telecoms and who the shareholders are. Most of these telecoms are either North African owned telecoms (including Morocco which technically doesn’t consider itself African), South African owned, or partially owned by a foreign player/investor. With this analogy;
- The local third parties are not economically gaining enough because most of these devices are not capable of running apps or the end-user is not savvy enough to access the full complement of the services on the devices they hold. Most of them are resigned to what I call the ”hello-hello” parts of the phone ie. just making and receiving calls.
- The telecoms making the majority of the big buck will end up repatriating their dividends outside the continent because most of the shareholders live outside the continent.
With this challenge, a boom/development through tech becomes more and more difficult. To make it easier for tech to lead the boom through telecoms and mobile, it is important for key stakeholders to invest heavily in educating its consumers. There is a correlation between literacy rate and one’s ability to use a smart device and by extension one’s income level. It is also believed that for every 10% increase in Internet penetration, there is a 1% rise in GDP. By empowering the African consumer digitally, doors are open to other local private parties besides the telecoms who can provide services through apps on mobile and boost the continent’s economic advantage through this model. Is that not the foundation on which successful models such as Silicon Valley ride on?
Unfortunately, as players in the tech ecosystem, we currently aren’t playing any active roles in lobbying our various governments to increase formal education and literacy rates. This leaves the governments to play in their own paradise.
Do not be deceived by the high mobile penetration rates. To understand its implication, one needs to look beyond just the mobile penetration rate (this rate is rather a count of number of sim cards rather than number of active subscribers). The actual metric we need to consider is how many of these phones can indeed access the internet, because, after all, that is how our innovation will be delivered to these consumers (unless you intend to go the short code and voice messaging way, which have proven not to be sustainable considering the unfair revenue share agreements telecoms present third parties nowadays).
I have taken the time to list some of the countries and indicated the difference between the mobile penetration and internet penetration rates. Only Morocco, Egypt, Senegal, Kenya and South Africa have Internet penetration rates higher than 50%. Instead of focusing so much on the high mobile penetration rate, why don’t we challenge ourselves to increase Internet penetration as well? That is the channel which will elevate chances.
The Funding Gap – we won’t get anywhere without closing it
To see the tech industry lead Africa’s boom, there needs to be a whole lot more than just grant funding, as Eric rightly pointed to initiatives such as Convergence (though it is a fairly new fund). There are other funds such as the Pan African fund managed by MEST and other partners.
The reason why certain regions have built a successful model on tech is because the wealthy class played an active role in cushioning such innovations through VC investment, private equity, loans and angel investments. It is nothing different from the pharmaceutical industry. The Pfizers of this world invested their top dollar into research and development and failed many times before they discovered cash cow drugs such as Viagra. Without investing in tech, Africa’s tech will not boom.
I am encouraged to see initiatives such as the Tony Olumelu Entrepreneurship Project (TEEP) which has invested some $100 million into entrepreneurship. In the past decade, hubs such as MEST and the iHub have also raised investments for their startups or invested in same. However, these are isolated cases, and a lot more needs to go into catapulting the efforts of these innovators if we indeed want tech to drag the continent further. Unfortunately, most of the successful businessmen on the continent prefer to invest in less risky traditional industries. Perhaps we need to present the opportunities in tech and ease them into understanding the possible returns.
mPesa is not African! Stop making it sound like it is!
One day, an African techie might be sued mercilessly for all the hype and glory we throw on ourselves for an invention which was not initiated by an African. For the record, the mPesa concept was conceived by Nick Hughes with his Vodafone UK team, funded by DFID and engineered by techies from Cambridge University. Africa just happened to be a testing ground which presented the innovation with the right environment for it to pivot and grow. That is disturbed when Eric, who knows this, references this in his list of African innovation. Not only am I worried that it is not ours, I am also worried that it’s been almost 9 years since its launch. Shouldn’t we be listing new entrants if we indeed have any?
For this reason, I feel we need to stop pointing to mPesa as an innovation to have erupted out of the continent. We need to work hard on our own New , and real innovations.
I will agree with the Vodafone Ghana CEO who on a panel at the Africa Tech summit together with other panelists admitted that the continent hadn’t seen much innovation and added that we needed to do a lot more to get to the point where the world would take us seriously.
To get to that point, there are problems we need to fix, and we all know what those problems are. We rather choose the easier route of hyping the part tech is playing on the continent. I don’t think we attract any interest.
When the Western Media hype our ‘innovation’, let’s not join them in the mediocre dance
We all know how some of these international media and top tech blogs operate – they are more than happy to balance their content by presenting their readership with some events from this side of the world. Some of the contributors, need to meet a certain quota to get paid. So they would write about anything and make it sound as if it were the best technology the world ever saw or experienced. When they give us all the titles, it is important to not let these mentions get into our heads. That will only help us to lose focus.
I applaud Erik Hersmann gesture of correcting CNN when it compared BRCKs efforts to those of Facebook’s. Erik was quick to point out that these two units were in no way in competition. I know of a writer who sat in his bedroom, surfed the web, had a few skype calls and came up with the 10 top tech companies to watch out for. Without even indicating why the companies in the list are worthy, the writer rather copies and pastes the companies’ profiles from their websites. Needless to say more than 70% of the companies he listed have either folded up or pivoted. In fact, I think we need to smoke out such lazy journalists.
It is therefore important to expect the ‘messengers’ who have a following and serve as the bridge between the ecosystem and the outside world, to do due diligence and put an end to the lazy journalism. A startup won’t just blow up into a unicorn just because you wrote about it. It will only get there if you help it with it’s stumbling blocks. In the tech world, it is revenue or traction (ie. users). PR and hype are but a means to an end, not an end.
Way forward?
It is important to acknowledge that despite the advancement attained on the continent, there is a lot more to do to make tech a relevant industry on the continent. I feel there is a lot of confusion about where we are as a tech ecosystem in Africa. Some claim we are doing so well, others feel there is a lot of work to be done. We first need to settle on where we are. And based on that assessment, we will have a fair idea of where we need to go and at what speed.
How do we increase internet penetration on the continent? How do we increase investments? How do we increase inter-community engagements? How do we increase the capacity of our local engineers? How do we improve access to power and electricity? These are but a few of the questions that need answers if we are serious about creating an enviable tech ecosystem.
From my perspective, I feel we have done a lot, but we are not even halfway through the pipeline yet.
To get to the end of the tunnel, we need to put in a lot more than we are currently. And to do that, we need to stop pampering ourselves for mediocre accolades. Let’s keep our eye on the target.