In its recent report on global trends in Internet connectivity, the World Economic Forum found countries in Africa are still lagging many of their peers in other areas of the developing world.
“Sub-Saharan Africa slowly continues to develop its information and communication technology infrastructure,” the report noted. “Severe weaknesses persist in the region’s business and innovation ecosystems,” the report warned, adding that addressing those weaknesses would be crucial to ensuring the benefits of digital innovation reach the broader population.
Undeterred by the sluggish development of Internet access across the region, technology hubs are sprouting across sub-Saharan Africa, attracting sizable investments and growing attention. Communities such as Kenya’s iHub, ActiveSpaces in Cameroon, RLabs in South Africa and CTIC in Senegal are aiming to provide the kind of environment that will enable home-grown technology start-ups to thrive.
Technology-focused investment vehicles are emerging, too. Savannah Fund, a roughly $10 million fund focused on incubating technology firms in Africa, has recently invested in three new companies as part of its accelerator program, Erik Hersman, a partner in the fund, told WSJ Frontiers. The companies will receive $25,000 each and will have three months to prove themselves. BiGxGh.com, a music website in Ghana; UniSmart, a student loyalty platform in Nigeria; and Zevan Limited, a startup in Kenya, will all receive mentoring and coaching through their process.
Savannah has seen 10 companies through its program so far and it is looking to invest its funds over a five-to-six-year period, Hersman said. The fund invests mainly in early-stage, high-risk companies but is also open to taking positions in more-established players. “We’ll be making another two to three investments in the coming months that are outside of the accelerator, at larger amounts,” Hersman said.
The fund, which was set up in 2012, recognizes it is facing more challenges than just the relatively low levels of Internet penetration in Africa: “The biggest problem is that companies are spread in a much larger geographic region than the Bay Area,” says Hersman, who grew up in Kenya and is also the founder of Kenya’s tech innovation space iHub. “We are pulling in companies from Ghana and Nigeria as well as Kenya and Uganda. We also have to do some real due diligence.”
Startups in Africa, Hersman added, also operate in a much less evolved capital market. “The ability to sell your company or to have an IPO and make a lot of money and have dividends are things that are still very new,” he said.
Still, the growing number of technology clusters across Africa is an indication of the potential growth of new companies in the years to come. Started in 2010 as a network for entrepreneurs to interact and learn from each other, the iHub in Nairobi, Kenya, was a pioneer in the incubator space in Africa. Now, it is one of many technology hubs across the continent.
While iHub has connectivity among startups as one of its main objectives, other clusters have developed followed their own path. Bosun Tijani is co-founder and CEO of CcHUBNigeria, a innovation center launched in 2011 in Lagos that focuses on solving social issues. “From the beginning, we focused on social innovation and how you use technology to solve social problems,” explains Tijani. “The Internet has been the major driver of technology in Africa because it has removed the barriers for people to learn. The education system in Nigeria is still weak so most people learn by downloading resources from the Internet.”
Tijani believes the opportunities for technology investors and firms in Nigeria are huge – particularly in the wake of the rebasing of the country’s economy, which saw its GDP jump by 89%.
However, young companies operating in Africa also see challenges ahead. Sim Shagaya is the founder and CEO of Konga.com, Nigeria’s largest e-commerce platform, which was set up close to two years ago. “There is quite a bit of energy and some of it is justified but some of it is unwarranted,” he says. “The potential market is quite large but growth is constrained by the penetration of the Internet and broadband.”
There are human resources constraints too. “The quality of our educational sector is not very good,” Shagaya asserts. “This means we need to convince many Africans who left the country who have the skills we need to return and we need to be willing to train our people.”