1 December 2016

Africa: Attracting Skills, Start-Ups and Investment - Building an African Start-Up Nation or Start-Up City

opinion

It is important for African countries to understand that there is a competitive global process for attracting skills, start-ups and investment. It's no good complaining that Silicon Valley is not paying you enough attention if you have not got the basics in place. Russell Southwood looks at the current state of things in key African Start-Up Nations.

During the week of the big telecoms and broadcast talk fest AfricaCom in Cape Town, I was a panel speaker at an event held by UK Trade and Industry (with South African tech innovation accelerator SW7) to attract South African entrepreneurs to base themselves in London. About 30-40 entrepreneurs listened and then discussed in detail the advantages being pitched to them.

There were practical concerns like the difficulty of opening a bank account (answer: we can help), where do put your IP (answer: outside the country of origin to get investment value) and the cost of living in London (answer: live outside and commute in). But overall there was a level of interest and enthusiasm that will probably translate into several start-ups moving their main base to London.

I've written previously about one of these migrant start-ups, Devin de Vries' WhereIsMyTransport. When I spoke to him he told me:"In order to raise investment, capital has to be within the investment mandate region. There are also risks with the Rand. A lot of funding is hard to access if you're outside these domiciles (USA and Europe). We needed a fair valuation of the company and there are hidden costs to the South African base." (See: http://www.smartmonkeytv.com/channel/newsletters/start_up_whereismytransports_devin_de_vries_making_african_city_transport_s)

So if at some level it's a global competition for skills and resources, how are the countries of Sub-Saharan Africa faring? In truth, there are probably really only five or so countries in the competition at this level. They are (in descending order): South Africa, Nigeria, Kenya, Ghana and Senegal. Also whilst it's natural to talk about countries in this competition, the reality is that it is cities that are the basis for start-up ecosystems. So the list is really the following: Cape Town (and to a lesser extent Johannesburg); Lagos; Nairobi; Accra and Dakar for francophone Africa.

You mat protest that it' unfair that these places compete with each other but that's what's already happening in the start-ups field and has been a part of trade almost since the very beginning. For example, the Techstars' Fintech accelerator programme took place at the beginning of the year in Cape Town. It could have gone to many different places but chose South Africa. So African countries need to be more aware globally of these kinds of opportunities and be pitching for them.

Whilst global entrepreneurs like a challenge, most will make comparisons between these cities in terms of the reliability of power, the cost of operating a business there and the state of the traffic to take some of the things mentioned to me.

Nairobi seems noticeably easier for people to come from outside Kenya to arrive and set up start-ups. A significant number of the interesting start-ups in Nairobi are not run by Kenyans but do employ Kenyans. Nairobi, Lagos and Cape Town have been successful in convincing investors to pay attention to their start-up ecosystem.

Lagos' most high profile entrepreneur, Jason Njoku spent most of his life in the UK before returning to Lagos. (The welcome mat was not a big part of his experience.) Dakar is full of returning diaspora entrepreneurs who bring back their skills and knowledge. Sliide's Corbyn Munnik was born in Botswana and went to London to found and fund his start-up before going to Nigeria to live in order to launch it. Next year it will open in another large African country.

But somehow it seems easier for the host country to welcome back returning nationals than trying to attract talent from other countries. You don't have to spend too long around say the Nairobi ecosystem to hear dark mutterings about how the Muzungus get all the best opportunities.

But whilst the skills and talent pool in Nairobi is undoubtedly a whole lot better than it was five years ago, there are still gaps in knowledge and experience that can't just be filled from within the country. Indeed whilst there has been an influx of international developers, there are now more Kenyan developers than there have ever been. Organisations like Nest that bring international standard skills must surely be an asset.

And the reality is that what were comforting, small-scale ecosystems are now exploding and changing. The biggest competitors now are not fellow start-up competitors but international companies from around the globe. Two examples are illustrative. I spoke recently to Uber who have already rolled out with some significant degree of success (See: http://www.balancingact-africa.com/news/telecoms-en/39137/uber-s-sub-saharan-operation-is-coming-up-to-an-estimated-million-rides-a-week-no-revenue-share-no-carrier-billing). And in Johannesburg I spoke to Indian restaurant recommendation site Zomato that has got 0.75 million users.

International competition is a double-edged sword. In some instances it will elbow out of the way less well prepared local start-ups. But at the same time, it will provide a stream of employees leaving who will understand some part of what it is these companies do to succeed.

Thus far both countries and cities have been largely passive in the process of attracting skills, start-ups and investment. When Kenya's President Uhuru Kenyatta met Facebook's Mark Zuckerberg this was not part of some organized strategic campaign. It fell out of work people in the ecosystem had been doing for years.

So what is desperately needed is an organized strategy by either national Government or by City administrations to put out the welcome mat to people and organisations who bring their skills, their start-ups and their investment. They should be able to offer incentive packages that make this happen actively.

Both national Governments and city adminstrations need to work more closely with international organisations to make links with the global ecosystem. Instead of it being a source of great rejoicing and amazement that a local start-ups gets into Y Combinator, it should be something that's as natural as the idea that you might go to University. African countries and cities need to be more ambitious globally if they are to compete with their peers. So who's going to be first to step up to the plate?

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