31 May 2017

Tunisia: New Frontier for African Startups

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Tunisia is emerging as the next eHealth hub and may just give Kenya and South Africa a run for its mone

It’s the age of the startup and the business savvy are identifying local solutions to global problems. The next big thing may be lurking in a small Kenyan back office or a Tunisian coffee shop – ready to join Africa’s extensive startup ecosystem with a healthy investment.

Western solutions have long been used for African problems but with vastly different infrastructure and diverse populations, these approaches haven’t been successful. Startups in African countries are creating health technologies tailored for their specific needs.

Long gone are the days when startups were centered in Silicon Valley. Over 300 hubs have emerged in the African tech startup ecosystem – 54 in South Africa, 23 in Nigeria, 27 in Kenya and 15 in Tunisia. The growth potential is huge and investors are catching on. Last year, African startups raised around $366.8 million in investment – $109 million in Nigeria, $96.8 million in SA, $92.7 million in Kenya and $800,000 in Tunisia.

In contrast, the US raised around $58.6 billion for a total of 4520 start-ups in 2016. It’s a huge number but it’s a 20% drop from 2015. There’s a sense that the excitement is starting to brew outside the US.

Not only is the start-up ecosystem growing, according to a recent report in 2016, by Research and Markets entitled ‘Enabling eHealth Technology in South Africa, Kenya, and Ghana’, Africa is becoming a hub for eHealth with telecom and other start-ups from South Africa, Kenya and Ghana tapping into the health sector. In the long run, eHealth will “[minimize] investment towards hospital bed-strength as more patients receive care within, or close to, their homes” without hospital admission.

Disrupt Africa, an African start-up portal, estimates that solar start ups pulled in 32.9% of investment while Fintech accounted for 29.6%. EHealth was the third most popular category for the number of new startups and the fourth for total funding at 5.85%.

Healthcare systems in Africa need between $25-30 billion in investment, according to the World Bank. This is to fund 600,000 hospital beds; personnel including 90,000 physicians, 500,000 nurses and 300,000 community health workers as well as retail and distribution networks of supplies and services.

There’s a huge gap in the market for mobile health services. Last year, WeAreSocial reported that 7 of 10 of the world’s fastest growing internet populations are in Africa while internet penetration is just 29% throughout Africa – that’s 362 million internet users out of 1.2 billion people on the continent. 995 million are mobile users and by 2025, 360 million smart phone owners are expected on the continent.

Despite an environment in dire need of tech start-ups with African solutions, there are substantial challenges. The most glaring is limited access to financing – one that multinationals are starting to solve. Weak infrastructure, policy uncertainty, competition against established brands and finding the right talent follow closely.

Since the Arab Spring in 2011, Tunisia has had sluggish economic growth – 15% of Tunisians are unemployed and one-third of university graduates are jobless. Inequality dominates as a critical concern while inflation deters investors.

The economic slump has inspired many Tunisians to launch their own startup companies. The startup scene has expanded with faster and freer internet access and technological advancements. Yet the World Bank identified that Tunisia is still failing to attract investment.

It’s apparent, however, that with the right support, Africa is a strong contender for Silicon Valley. In Tunisia for example, startup incubators have greatly contributed to the success of young companies through early seed capital and training.  Startup incubators like the Founder Institute and Boost offer funding and mentorship programs for startups.

Pharmaceutical giant Merck, which created a successful incubator in Kenya, will launch a start-up incubator in Tunisia by 2019, to collaborate with innovative digital health start-ups. It is in this context that Merck kicked an eHealth Meetup in Tunis on 23 May 2017 where startups from Algeria, Tunisia, Kenya and South Africa gathered to discuss the potential of eHealth entrepreneurship in Africa. Among the speakers and invitees were Peter Vesterbacka, Founder of Rovio Entertainment, Mika Lackman, Chairman of Viope Solutions, Kim Wetzl, CEO of ABC International, Dr Karim Bendhaou GM at Merck NWA, Ghazi Ben Ahmed, Director at MDI, and more.

Peter Vesterbacka moderated the sessions during which startups were given 5 minutes to pitch. The iconic mobile game developer behind “Angry Birds” also shared his experience as a startup guru and gave valuable lessons on presentation skills.

The event ended with the announcement of the winning pitch that was granted to Matibatu, a Kenyan-based startup specialized in non-invasive malaria diagnosis kits.

Tunisia has its own unique challenges. There are extensive barriers that deter start-ups from launching based on market restrictions, outdated business regulations and a poorly functioning financial system. But the rise of incubators and accelerators and a healthy dose of investment may just help Tunisia out of the economic doldrums.

With successful tech hubs in South Africa, Kenya and Nigeria – Tunisia may be Africa’s next big break.

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