African Tech Start-ups: The Gateway to Leapfrogging African Developmental Challenges

September 05 2022 Jonathan Sumbobo

Africa

African Tech Start-ups: The Gateway to Leapfrogging African Developmental Challenges

Historically, Africa has lagged in the technology space. However, in recent years, a new wave of tech startups emerging across Africa is promising to change the narrative. These start-ups are not only more innovative than those seen in the past, but they are also led by founders who have the ambition to solve some of the hardest problems that have plagued the continent.

The expansion of mobile connectivity in Africa has facilitated the adoption of digital solutions and fueled innovation. Start-ups are emerging in a variety of tech sub-sectors such as Fintech, Healthtech, Edtech, and Insurtech, aiming to solve the continent’s challenges with innovative technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), machine learning, and blockchain.

Focus on innovation and technology

The informal sector is a significant source of employment and a major contributor to economic activity in Africa. Africa’s tech startups have recently started to seize this opportunity to build scalable businesses that aim to address this market.

According to Khaled Ben Jilani, a senior partner at Africinvest, a Pan-African private equity and venture capital firm, “the potential impact of innovation in the African start-up space is large and imminent due to the size of its gaps and the set of converging positive factors, or innovation drivers.”

Cracking Africa’s long-standing developmental problems will increasingly become a commercial tech opportunity for entrepreneurs. The opportunities are uncountable, especially as Africa’s broadband and smartphone penetration rates continue to increase.

Africa’s growing start-up ecosystem

Over the last few years, Africa’s startup ecosystem has grown exponentially. According to Briter Bridges and GSMA, the number of active innovation hubs in Africa reached 643 in Q4 2019, up from 314 in 2016, 442 in 2018, and 618 in Q2 2019.

Even though Africa has more than six hundred innovation hubs, nearly half of these hubs are concentrated in only four countries, or what was identified as the “innovation quadrangle”: Nigeria (90 hubs), South Africa (78 hubs), Egypt (56 hubs), and Kenya (50 hubs).

Support from Venture Capital (VC) firms is key to the growth of African start-ups

Funding has long been a challenge for African start-ups, but the tide has started to turn in the last few years. VC firms have in the past been skeptical about investing in African start-ups, as they believed the continent is characterized by higher risk. However, African venture capital investment inflows have been steadily increasing over the last five years.

VC firms have been increasingly more open to investing in African start-ups. Increasing funding rounds and a larger number of deals are being recorded every year. According to the Partech Africa Tech VC report, VC funding raised by African tech startups in 2019 amounted to US$2.02 billion, compared to US$1.16 billion in 2018, representing 74% growth year on year.

Examples of African start-ups that are making waves on the continent

Across Africa, technological innovation is starting to have an impact on multiple sectors, including energy, agriculture, banking, healthcare, entertainment, transport, education, and many more. Many tech startups are emerging to help the continent overcome its developmental challenges. Examples of such start-ups include the following:

Logistics:

Kobo360 (Nigeria): A freight logistics platform that assists cargo owners, truck drivers, and cargo recipients in achieving an effective supply chain. Kobo360’s goal is to facilitate the transportation of goods.

Agritech:

Twiga (Kenya): A mobile-based, cashless business-to-business (B2B) supply platform that connects farmers to millions of small and medium-sized vendors in African cities. Twiga connects farmers and vendors to trusted, modern markets.

Healthtech

DabaDoc (Morocco): DabaDoc has developed a technology that allows for instant doctor appointment bookings. DabaDoc connects millions of patients with thousands of doctors across Africa and significantly improves the doctor discovery process.

Fintech

Yoco (South Africa): A technology company that builds tools and services that facilitate payments, with the aim of unlocking economic opportunities for small businesses.

Although it’s unlikely that tech start-ups will be able to address all of Africa’s development challenges overnight, they can potentially be the driving force behind Africa’s growth. Therefore, African countries should do more to support them, such as through entrepreneurial ecosystems and appropriate skill development programmes, regulations that streamline business procedures, a stable political and economic climate, incubators and accelerators, subsidized infrastructure such as office space, and so on. Only then will Africa reap the full benefits of tech start-ups.