“Huge potential”

African tech hubs are emerging and developing so fast that no one really knows exact numbers. Why are the hubs so popular?

Tech hubs are often launched to meet the needs of local tech communities. In Kenya for instance, the founders of Ushahidi, an open source software for interactive mapping, often met in coffee shops to work. This experience highlighted the need for Nairobi techies to have a physical meeting place. That’s why they founded iHub. Techies in other countries have similar needs. Accordingly, some of the hubs jointly founded AfriLabs, a pan-African platform for collaboration and knowledge sharing, in 2011.

What is the aim of AfriLabs?

The primary goal of AfriLabs is to foster knowledge sharing and collaboration between tech hubs.

One huge challenge for many start-ups is to get appropriate funding.

Financing is a significant problem for most entrepreneurs in Africa. Especially seed funding – funding for companies during the early stages of idea development and testing – is difficult to come by. In other world regions, so called "family, friends and fools" funding is accessible. But in most African countries, such sources of funding are often unavailable. However, new platforms such as VC4Africa (Venture Capital for Africa) are emerging to connect tech start-ups with interested investors.

Why are investors turning to Africa?

Their priority is to find good financial opportunities. GDP growth rates in Europe and the US are low compared with growth rates in several countries in Africa. The African middle class is growing and their purchasing power is rising. There are risks, of course, but there is also a good amount of potential.

What is the potential impact of the African IT industry on GDP – do you have any figures?

A recent study by McKinsey, the multi­national consultancy, estimates that the internet could contribute up to 10 % to African GDP by 2025. This would amount to $ 300 billion – compared with $ 18  bil- lion today.

How successful is Africa’s IT industry? Ushahidi has indeed attracted a lot of attention, and mobile banking has become huge.

Yes, but we’re still waiting for more big breakthroughs. The "Facebook of Africa" is still to come.

What obstacles do developers face?

Well, there are many different obstacles, and every start-up anywhere in the world must face its own specific challenges. At the moment, many African start-ups develop business-to-customer solutions – B2C for short. Nevertheless, I sometimes wonder if an opportunity to create more business-to-business applications – B2B for short – which would serve small and medium-sized enterprises is being missed.

M-Pesa is probably one of the most successful African tech innovations. What is the secret of its success?

M-Pesa met a real need. In the US, for instance, mobile payment isn’t prevalent because it simply isn’t needed. But M-Pesa offers financial services to those who previously didn’t have access to them.

Why do many programmers develop apps for mobile phones rather than computers or even smartphones?

Most Africans access the Internet via mobile phones. Nonetheless, many don’t own smartphones; only about five percent of mobile phones in Africa are smartphones.

What could be the role of development cooperation in supporting young entrepreneurs – or should development agencies rather leave them alone?

Development agencies could have a role to play. What entrepreneurs need most are strategic investments, as it is very difficult to get seed funding for the test or pilot phase. It is also difficult to find the right mentors and networks. Development agencies could assume some risk and provide low-cost capital. However, many are critical of the role of "cheap money" in the start-up ecosystem. In any case, "investing for development" might require a change in mindset and approach. Traditional development assistance can be quite top-down, and investments are often output-oriented: for instance, an agency spends money on a school building. Entrepreneurs, however, need risk capital for projects with an uncertain future. This means accepting that an entrepreneurial project may fail.

Questions by Eva-Maria Verfürth.

Tayo Akinyemi is the director of AfriLabs, a pan-African network of tech hubs.
tayo@afrilabs.com