Igniting Africa’s Tech Revolution

October 27, 2012
Uganda Entrepreneur Receives Financing To Expand His Business Through USAID

The recent growth of tech start-ups in sub-Saharan Africa is starting to create a buzz.

And what's not to be excited about? Tech companies created in Africa, by Africans, to address local and global problems have untold potential to change the world. After judging a recent Global Innovations in Science and Technology boot camp in West Africa, venture capitalist Scott Hartley said, "Providing guidance for the top one percent of innovators likely improves the lives of the 99 percent."

Personal computer usage in Africa is exceptionally low at two percent and Internet penetration is only about 14 percent. However, with indications that tech start-ups, tech hubs, and Internet usage across the continentare rapidly growing, the prospect for growth in the technology sector is significant.

Nonetheless, the hype may be overtaking the growth.

One central challenge for start-up tech companies in Africa is the simple fact that great ideas and viable business plans don't mean much without access to financing. And financing for start-ups in Africa, especially in the tech sector, is difficult to come by.

Gaps in the market make it challenging for the tech ecosystem to develop. Across much of sub-Saharan Africa, people struggle to access the technological conveniences -- broadband Internet, reliable power supply, Internet availability. In many African countries, governments are still working to reform regulations and policies to make it easier for investors to reach entrepreneurs.

Additionally, the tech sector in Africa is considered high risk. Everyone speaks of the same example of success (read: M-Pesa), but investors are hungry for additional examples of risk paying off.

To top that off, the tech space is, by its very nature, less tangible to investors compared with brick and mortar businesses that sell traditional goods and services. While a risk-taking culture has long developed in tech hot spots such as Silicon Valley, investors in sub-Saharan Africa tend to be more conservative and risk-adverse.

To close the gap between investors who are ready to invest but can't identify start-ups with viable businesses and the entrepreneurs who are ready to scale up but can't access financing, USAID partnered with Microsoft, Nokia, DEMO, and the State Department to launch the first-ever DEMO Africa. DEMO Africa, held in Nairobi on October 24-26, featured 40 of the most innovative entrepreneurs from across Africa who launched their products to a group of world-class investors, businesses, and media.

Through DEMO Africa, USAID is attracting, rather than replacing, private sector financing for economic development in low-income countries. Entrepreneurs creating tech start-ups don't need access to traditional aid, they need access to financing to grow. And to free up financing, we need to sensitize investors -- venture capital funds, banks, and nontraditional financial institutions -- to the tech sector. We need to create an appetite for investors to start investing.

Turning a great idea into a viable and profitable business model is difficult, but DEMO Africa is helping move Africa's start-up tech sector closer to ignition.

Comments

Comments

Robert A.
|
United States
October 29, 2012

Robert A. in the U.S.A. writes:

Thank you! Precious, friends....Former U. N. Ambassado.

RAA

Ruben C.
|
North Carolina, USA
October 29, 2012

Ruben C. in North Carolina writes:

Two very significant issues also impede development in Africa: corruption and illicit activities, and tenuous political and security situations. Without addressing these issues at the forefront of conversation with potential investors many will be caught off-guard and unprepared for this type of risk. I'm not saying these risks aren't unsurmountable, but there sure are added levels of scrutiny not readily addressed in this article.

Judith P.
October 31, 2012

Judith P. writes:

Stephanie, this post brings to light some very important issues pertaining to the growth of sub-Saharan Africa and the low rates of financial inclusion in the region. One of the ways OPIC has supported expanded financial inclusion in Sub-Saharan Africa is by providing finance and political risk insurance for investments made by the Access Africa Fund, which has invested in some of the smaller microfinance institutions in countries like Benin, Cameroon, Ghana, Kenya, Tanzania, Zambia and Uganda, enabling these institutions to reach more small entrepreneurs. MicroVest Capital Management, which manages Access Africa, recently spoke about the need for expanded financial inclusion in Sub-Saharan Africa and the ways it it is making a difference. I think you’d really enjoy the post. opic.gov/blog/opic-in-action/expanding-access-to-banking-and-credit-in-sub-saharan-africa

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