I once wrote an article about “why I stopped reading Techcrunch” as a guest blog on the now defunct Tech Africa blog. At that time I was all-engines fired into the startup world, very passionate and enthusiastic about building the future unlike today.
I used Techcrunch figuratively to highlight a glaring disconnect in models used to build startups on the African continent and in Silicon Valley.
My analysis was drawn from personal experience which exposes the cultural differences and mindsets towards entrepreneurship between Silicon Valley and Africa and how that affects how and who builds startups on the continent. I guess I did this as a way of doing some soul-searching and deep introspection on the journey I had set for myself.
However, things have changed. Oh yeah, even Mark Zuckerberg visited Nigeria and Kenya during 2016.
Optimism in startups
Several years later, there are more startups across the African continent. Disrupt-Africa previously reported that African technology startups raised funding in excess of $129 million in 2016 alone which is 16,8% compared to2015.
There’s more optimism among young Africans about the future of the continent as Quartz Africa writes. New exciting industries along with high-growth startups are emerging particularly in the areas of FintTech, e-Commerce, and off-grid energy. This is great because the end game of all these industries is a new interconnected continent where more people can come online and consequentially friction-less movement of money and trade.
I am still very passionate about startups for several reasons; there’s vast untapped opportunities on the continent which makes it fertile ground for building interesting things. A growing middle class. Most parts of the continent are still offline. Many still don’t have access to clean energy or even running water. In Uganda, only about 20% of the country is wired to the national grid. Yet, with an ever-growing population, reliance on energy is inevitable.
Investing in infrastructure and energy
Japan has pledged $30 billion to fund African infrastructure projects over the next three years according to Fortune. East Africa Railway is expected to cost $13 billion and the overall value of East African transportation infrastructure project as of 2015 was valued at $29,4 billion according to Asoko Insights. This is good news because movement of goods and people easily across the continent will have great economic boasts.
Governments are beginning to invest heavily on power projects to connect more people to the grid. There’s talk about creating an East Africa power pool. This pool will allow member countries to sell off excess capacity to those that need more power. Currently Kenya has installed capacity of 1,600 MW majorly from Geo Thermo well as Uganda has roughly 862MW mainly from Hydro.
In Uganda, two new hydro power plants — Karuma and Insimba — are expected to come online in less than 12 month. But even with those expects, it’ll take years before every single village is wired to the grid. Which makes off-grind energy ever more interesting.
Off-grid energy and financial inclusion
Fenix International, along with M-Kopa with their innovative prepaid solar energy solutions are also connecting more people to clean energy. Fenix now has at least 100,000 customer base in Uganda alone which is great. The company also hopes to bundle interesting financial solutions along with its energy products for rural dwellers — micro loans, insurance and saving schemes might be some of the off-short products coming.
When more people can charge their phones with off-grid energy, it means they can use a lot of services that are accessible through their mobile devices. It means a trader in Kampala city can easily communicate and pay their supplier hundreds of miles away in Kumi Ongino digitally circumventing the cumbersome issue of physical cash.
A number of people now communicate and make transactions through messaging Apps like Whatsapp. It also means more people might be able to afford micro loans as low as Ugx 20,000 (~$5) via initiatives like MTN Mokash to buy farm supplies or school fees for their kids.
Car assembly and manufacturing on the horizon
Kenya is already in full gear to start car assembly as of last year. Car manufacturer Volkswagen started a plant in Thika which will built the Polo Vivo, the first passenger car built in the country. The plant expects to churn out at least 1000 vehicles per year. French car maker Peugeot too according to Business Daily Africa is set to start an assembly plant in the country this year.
In Rwanda, Volkswagen signed an agreement with Government of Rwanda to explore the setting up a local assembly plant in Rwanda according to the Newtimes Rwanda.
Uganda meanwhile with its iconic Kiira EV is set to start manufacturing in 2018. Kiira Motors Cooperation, the part-government owned automobile company last year launched a prototype solar-powered passenger bus. Now every middle class family in Africa at least either already owns a Japaneses car or at least aspires to buy one. In Uganda, we even had a hit single arguing people not to die without buying a car :). So there’s a huge demand for cars this side of the globe despite poor road networks.
Internet balloons, fibre and drones
This is probably my most disappointing piece of the puzzle about the new digital Africa. Despite how critical it is, there’s only been hype and buzz around bridging the digital divide through affordable access to internet. And maybe that’s because we have put our hopes on Silicon Valley big shots to make it happen.
Facebook and Google have all simply raised dust without anything substantial on the ground. Facebook’s “internet.org” project renamed “internet basics” came under heavy criticism by Net neutrality advocates. The rational was simple; Facebook had ulterior motives that would make it the sole gatekeeper or chief custodians of the digital experience of most users in Africa.
Google on the other hand has equally made noise without results. Google’s project link launched in Uganda and Ghana — a novel idea which advocates for sharing of back-haul internet infrastructure which would be leased to Internet Service Providers at a less fee than if they built it themselves. There was a lot of excitement in Kampala for instance and we thought Roketelecom’s metropolitan Google-Fibre backed City Wi-Fi network was going to be a game changer.
Three years down the road, neither Facebook’s much hyped internet drones nor Google’s Fibre network has had an effect on internet costs in Uganda. There’s even talk of Elon Musk’s Space X-backed internet satellites, but I have no reason whatsoever to be particularly enthusiastic about them.
Regional mobile telecoms such as MTN group, Etisalat, Safaricom still reign as kings of mobile internet. Quite frankly, am content with their efforts in bringing more people online. At least there’s 80% 2G/EDGE penetration in most countries in continent, which even though it means slow internet, we can at least be sure there’s some form of connectivity.
FinTech and e-Commerce
Internet growth across the continent is making e-Commerce and Fintech more than a reality. Big bulls in the Kraal; Konga, Jumia under AIG, Kilimall are investing heavily to increase their share of the e-commerce pie on the continent. According to Asoko Insights, Konga, Nigeria’s biggest online retail mall has an estimated revenue of about $164 million while its competitor Jumia Group has $140 million.
Konga Online Shopping Limited: $164 million
Jumia Group Limited: $140 million
Kilimall International Limited: $5 million
Yudala Limited: $2 million
Rupu Kenya: $1 million
Source: Asoko Insights
What’s not included in these statistics are several small e-commerce transactions happening on social media platforms like Whatsapp and Facebook. There are even e-commerce chatbots now where you can order goods and and services without having to installing extra apps.
Meanwhile Fintech is the darling of VCs in Africa. There are tens if not hundreds of Fintech startups across the continent. We even have a conference and even an accelerator program based in South Africa specifically for FinTech startups and it’s easy to see why; Africa is leading the world in mobile financial transactions. Banks are super slow and can’t scale. And there’s a huge among of people that are beginning to use financial and payment services for the very first time.
The infographic below by Irrational Innovations says it all about the Fintech landscape in Nigeria although some the players are also operational in other major markets across the continent.
Hubs and VCs
From Lagos Nigeria, to Nairobi Kenya to Cape Town South Africa or Kampala Uganda, Startups are emerging to take on new opportunities. There are currently more than 100 Innovation or Incubation hubs across the continent. These are spaces to build synergies among startups, create networks and leverage on shared infrastructure like broadband internet and co-working space.
Meanwhile funding has been long taunted as one of the limitations of building startups in the continent. However, a few VC firms are emerging despite being very scanty. In Nigeria for instance, there could be about 12 VC including Lagos Angel Network, Spark, Kernel Fund, Venture Kinetics. In Uganda, I know of none. So that’s still a challenge. You can read more about the growing interest of VCs in Africa on this Venturebeat article.
Scaling across Africa
Building a startup that scales across the continent is still a big challenge. As they say “Africa isn’t country”. In most cases Startups that make it usually do so in their home countries. Those that do outside have very deep pockets such as the likes of Africa Internet Holdings (AIG) or Uber or M-Kopa. Those startups that don’t require too much offline transactions or physical assets on the ground have it slightly easier when scaling.
The fact is Africa is unique — very unique. Each market is unique to its own geography. Some markets are fast, some are slow. Some are heavily regulated others are not. Some there’s conflict and in others there’s peace. There are more than 2,000 languages on the continent. It’s huge, it’s different it’s awesome.Share this article via: