Innovative startups in Sub-Saharan Africa are transforming the region with technological advances that have increased people’s access to education, healthcare, and financial resources, generating millions of jobs in the process. Entrepreneurs have been helped along through initiatives such as the World Bank-funded XL Africa and the £32 million ($39 million) tech acceleration program from Britain’s Department for International Development (DFID). Despite those and other support programs, Sub-Saharan African tech sectors are still struggling to overcome structural challenges.
The problem? The majority of funds are directed towards individual startups, while too little is going toward the ecosystem as a whole. Impact finance, which directs capital towards social and environmental ends, has the potential to help address these issues, but is making the mistake of mimicking the investment strategies of mainstream venture capitalists: Impact investors overwhelmingly put their money toward new and “sexy” tech solutions, while ignoring the foundation-building work done by ecosystem intermediaries like universities, tech hubs, and research and development institutions.
Albert Opoku, the co-founder of an innovation hub in Kumasi, Ghana, has experienced the problem firsthand. When he and his team couldn’t get support for their own startup, they thought others might be encountering similar struggles. So they decided to start HapaSpace, which helps a growing pool of young local entrepreneurs with incubation, acceleration, networking, and training. Hundreds of hubs like HapaSpace are at the heart of Sub-Saharan Africa’s rapidly growing tech markets, but “no one is investing” in them, Opoku said.
Our organization, the Africa Technology Business Network (ATBN) is a social enterprise working to support African technology innovators by connecting them to global networks and resources. In 2018, we examined the challenges faced by Sub-Saharan African tech sectors. We conducted 35 one-on-one interviews and obtained 75 survey responses from leaders across sectors of the Kenyan and Ghanaian tech ecosystems. We subsequently held three roundtables with 120 participants in Accra, Nairobi, and London.
Valleys of the Investment Landscape
- Individual-focused investment patterns create a culture of competition between ecosystem players, placing the burden on them to compensate for the structural gaps within the ecosystem. Lacking the public funding and support that ecosystem players in developing economies enjoy, hubs must compete for the few ecosystem-focused grants that exist. In order to find additional revenue, they are renting out office space and offering consultancy services. As a result, they don’t collaborate or share knowledge. This competitiveness hinders their ability to wage successful joint-advocacy campaigns for infrastructure investment and for innovation-friendly policies from local governments.