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Executive Summary Global SMEDominance
Drivers and challenges of international expansion COVID-19effect on attitudes towards scalability Awareness andeffectiveness of government support Africa’sHomegrownHeroes - LaStartup Factory HubPerspectives: East Africa a
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HubPerspectives:West Africa Potential sectorswith thehighest scaling opportunities Africa’sHomegrownHeroes - Okuafo Foundation Barriers to international expansion Scalability and the roleof theAfCFTA (AfricanFreeTradeContinental Area) HubPerspective: NorthAfrica The roleof innovationhubs in scaling start-ups beyondborders ricanContine tal FreeTradeArea (AfCFTA
StrengtheningPolicyDevelopment toEncourageR&Dand Innovation
Levelling upR&D inAfrica
Africa’sHomegrownHeroes - HonorisMedical SimulationCentre Investing inR&Dtobuild innovation resilience Inno vating tofight C OVID-19 TheAfrican spirit of innovation– fromhandwashing to robot doctors
Africa’sHomegrownHeroes - RADIFY : anAI solutionby Envisionit DeepAI
Building economic resilience througheducation, innovation andpolicy
Driving Innovation Inclusivity–Women, Youth, and InformalMarkets
Africa’swomenentrepreneurs in the ageof COVID-19 Gender responsivebudgeting Policy co-creation Hubs Perspective: SouthernAfrica A topdownbottomup approach HubPerspective: Central Africa
Internet data is a human right
Africa’sHomegrownHeroes -MyDigital Skills by SoronkoAcademy
Thepath to inclusive education inAfrica
After years of steady economic development and the emergence of an exciting, dynamic, and transformative innovation ecosystem across the continent, Africa’s job creating entrepreneurs have beendealt a blowby the sudden emergence of a global pandemic. Having spent manyyearsworkingwithAfrican innovators, entrepreneurs, and enablers, it is clear to me that all four corners of the continent have been transformed. FromKenya toNigeria, Morocco to SouthAfrica, amix of good public policy, third-sector initiatives, education reforms and improved public and private sector financing, has enabled the continent’s growing body of innovators to come to the fore as game-changers. From fintech to agri-tech, African innovators have developed African solutions to African challenges that deliver social impact, jobs, and value chain creation. Africa has taken its place as a competitor on the world stage. Then, in 2020 everything changed. The extraordinary nature of the pandemic has brought hardship across many parts of the world, destroying entire supply chains, and plunging many sectors into an irreversible decline. Millions of SMEs within the informal sector are out of the reach of state interventions thatmany in the developed economies enjoy – furlough schemes, grants, tax holidays and more. The pandemic has hindered short-term growth prospects for innovators and entrepreneurs just getting started. As an Africa-focused communications consultancy that profoundly appreciates and values the continent’s entrepreneurs for their innovation spirit, Djembe Consultants aims to shed light on how COVID-19 is impacting them right now and on the ground. This report, in partnership with the continent’s largest network of African innovation hubs, tell a story of extraordinary resilience that has given rise to new ideas and solutions to entrenched African challenges and to COVID-19 itself. It is a narrative of fierce resistance to the forces of uncertainty brought about by the pandemic. Entrepreneurs are at the heart of every free economy in the world. They are the single most important contributor to job creation, invention, taxes, ideas, and the social mobility that every community wishes to see bestowed upon the next generation. Seen through the lenses of Africa’s young entrepreneurs aswell as some of the continent’s foremost experts, this report offers powerful and inspiring insights on the unique opportunities inherent inAfrica’s journey through one of theworld’s most challenging and complex moments in history.
Mitchell Prather CEO - Djembe Consultants
The year 2020 has been an interesting one globally. World economies were practicallybrought to a standstill due to the sudden and unexpected COVID-19 pandemic. Globally, the backbones of economies, the micro and small-to-mediumenterprises, were hardest hit. InAfrica, this ismainly the informal sector, which represents up to 90% of some African economies. Amidst the bleak outlook however comes hope and positivity, driven largely by the continent’s survival DNA, always resilient to internal and external shocks of all shapes and forms. Behind this resilience is the continent’s youthful demographic, one that is constantly creating, innovating, and looking ahead. Despite the turmoil, many African innovators have risen to the challenge to become part of the continent’s COVID-19 solution. Many innovators and entrepreneurs have rapidly evolved their business models towards greater online sales, diverse delivery methods, digital alternatives and solutions to help fight the virus and its impact. We have also seen policymakers and governments step up to varying degrees across the continent, with a vast range of emergency measures and solutions, from soft loans to lowering of interest rates. There is however much more to be done in terms of driving innovation inclusivity on the continent. From securing access to data, to reimagining education, investing in R&D, and scaling African entrepreneurs beyond borders, Africamust stay focused. Nowmore than ever, engagingAfricans to speak with one voice on building a resilient and innovative Africa is paramount in the quest to realize both the UN Sustainable Development Goals (SDGs) and the African Union Agenda 2063, while embracing the impending single market that the African Continental Free Trade Area (AfCFTA) will give rise to. This Insights Report, ‘Building a Resilient Innovative Africa,’ in collaboration with Djembe Consultants, is a tribute to the continent’s innovation spirit and youthful ingenuity. It offers a collection of rich perspectives from leading African-focused development institutions, innovations hubs, private sector enablers, role models and more who speak with one voice in support of Africa’s youth, entrepreneurs, and innovators. It offers workable actions that African leaders can adopt to steer the continent on the path to transformation. AfriLabs takes this opportunity to recognize the hardship that many Africans have faced in recent times, but we also invite Africans of all creeds to keep looking forward and be a part of the journey to a resilient, innovative Africa.
Anna Ekeledo Executive Director, AfriLabs
As an African-focused communications consultancy with deep connections and ties to African innovation and start-ups ecosystems, Djembe Consultants has been keeping a closewatch on how the COVID-19 pandemic is impacting African innovators and entrepreneurs. We have partnered withAfriLabs, the leading pan-African network of 225 innovation hubs across 47African countries to develop this report with the objective of understanding what is really happening within these ecosystems across the continent during a time of unprecedented international crisis. We spoke to 1,000 entrepreneurs, innovators, and start-ups from across Africa to gauge their sentiments on how they were being affected by COVID-19 and what matters to them most at present. This report gives insights to the realities on the ground, fromhowthe pandemic is affecting sources of funding and opportunities to scale, to how lockdowns and containment measures are impacting informal sector entrepreneurs who are so vital toAfrican economies, and how the public and private sectors can step up to safeguardAfrican innovation resilience through inclusive policies and measures. This report also brings together the expert perspectives of some of the continent’s most informed individuals who are at the helm of developments that impact the African innovation and start-ups ecosystems across education, inclusivity, investment, policy, technology, research and more. Their points of viewprovide deep insights into the challenges and opportunities that the continent faces as it grapples with the realities of the 'newnormal'. It brings together rich perspectives from scaling innovations and entrepreneurship, to transforming education towards a skills-based model of collaborative learning and powerful calls for policy enhancements to help women and youth in the informal sectors. Framed within the context of important milestones for the continent, including the impending AfCFTA, UN SDGs, and the African Union Agenda 2063, this report provides a unique and timely grassroots look at how the continent’s public and private sectors can step up to support theworld’s fastest growing and youngest population who continue to rise above challenges and remain steadfast on the path to a resilient, innovative Africa.
ScalingHomegrown InnovationsBeyondBorders Scaling a growing business across borders in Africa is difficult at the best of times with well-known constraints ranging from weak cross-border logistics and transport infrastructure, to high tariffs, multiple language barriers and limited access to investment capital. These familiar challenges are even harder for women to overcome and harder still for those in Africa’s vast informal sector. The experts that have taken part in the development of this study explain how all these factors have become magnified since COVID-19 closed borders and crushed investment. Government initiatives to alleviate some of the burden on entrepreneurs appear to be only delivering limited relief and require more tailored approaches to meet the needs of entrepreneurs, both in the formal and informal economies. There is optimism that the AfCFTA when it formally launches will serve to ease some of the structural and practical hurdles that existed before and during COVID-19, provided decision makers address key challenges pertaining to how the free trade area will support informal markets. StrengtheningPolicyDevelopment toEncourageR&Dand Innovation There is significant room for improvement in R&D funding and strategy across the entire African continent. The country-level adoption of the African Union’s Digital Transformation Strategy (DTS) has been slow since it launched in February 2020 owing to the current crisis. However, findings indicate that COVID-19 will accelerate progress in the digital economy, with technology getting ready to play a much larger role in key growth sectors such as agriculture, education, healthcare, and ICT. As such, stronger and more transparent structures, policies, and funding for innovation-focused R&D is required on the continent to build innovation resilience. The role of R&D in education innovation has special focus, particularly in the wake of COVID-19. Appropriate platforms, frameworks, programs, and policies must work concurrently and cohesively to address this challenge. Innovative financing options are required so that education and training is accessible to all Africans. Driving Innovation Inclusivity–Women, Youth, and InformalMarkets The standout concern for the continent’s innovation future rests in the ability of African countries to prioritize inclusivity ranging from gender gaps in terms of entrepreneurship funding, to widespread access to internet, data and digital learning in both urban and rural Africa. Even before COVID-19, women and youthwere largely disenfranchised. It is even harder for those within the informal sector who form 90% of African economies, and who remain invisible during times of economic crisis. Experts engaged in authoring this report say that keymeasures to drive innovation inclusivitymust take into account variables ranging from co-creation of policies with key innovation stakeholders such as hubs, to gender responsive budgeting, universal data access and connectivity, and reframing education to adapt towards a skills-based model with a focus on preparing youth for the 21st centuryworld of work.
The Innovators Of the 1,000 African innovators and entrepreneurs who responded to our survey, the majority (47%) are aged 23-30, which is unsurprising given the young demographic of the continent and the natural inclination of this age group towards innovation and entrepreneurship.
36-40 19-22 16-18
Fig. Age breakdown of survey respondents
The majority of the respondents are male, an outcome that could potentially corroborate some of the findings and insights in this study that point towards a systemic bias and lack of inclusivity within the African innovation and entrepreneurship ecosystems.
Prefer not to say (0.5%)
Fig. Gender breakdown of survey respondents
InnovationHotspots Mirroring the innovation hotspots on the continent, the majority of respondents are from Kenya, followed by Nigeria, Ghana, and Uganda. This further corresponds to research carried out by the African Union in its African Innovation Outlook 2019 report, which shows that Kenya and Uganda have the highest proportion of innovation entrepreneurs. This word cloud also further reflects observations in this report that some of these countries have higher levels of innovation activity in terms of policies relating to R&D and enactment of start-up laws.
EducationandSkills Most respondents (54%) are educated at bachelor's level. However, less than 10% ofAfricans go to university after secondary school. Increased focus is needed to equip young Africans at all levels of education with the necessary skills for future job markets.
Fig. Breakdown of 1,000 respondents by education
BusinessDevelopment Stages When askedwhat stage of development their businesseswere at, themajority (29%) state that they are at Commercialization Stage, followed by Idea Generation and Mobilization, and Diffusion and Implementation. This provides for an interesting variety of perspectives, with some entrepreneurs finding themselves effectively ready to launch when COVID-19 hit, presenting them with very specific challenges.
Idea Generation and Mobilization
Advocacy and Screening
Diffusion and Implementation
Fig. Breakdown of 1,000 respondents by development stage
Of the 1,000 respondents to our survey, 46% had already established their businesses – a high proportion considering that only 29% (see above) are at Commercialization Stage. This means that 170 of the entrepreneurs who responded had already established their businesses before even being able to trade.
Fig. Percentage of establishedbusinesses
Global SME Dominance
SMEs represent the job creators, taxpayers, innovators, and value chain drivers of the world’s economies. They are approximately 90% 1 of all the world’s businesses. They create over half of all jobs and in the United States, 99.9% of all businesses are SMEs – 30.2 million small businesses that employ 58.9 million people. 2 In the emerging economies SMEs contribute up to 40% of national GDP. That figure rises considerably when informal SMEs are included. On a global level, SMEs create seven out of every ten jobs – yet in all markets access to finance is a constraint to growth. The SME funding gap in the developing world is in the region of $5.2 trillion 3 – 1.4 times the current level of global MSME lending and in the emerging markets we need nearly 3.3 million new jobs every month by 2030 to absorb the growing workforce. With such a clear linear relationship between SME success, job creation and economic growth, it is astonishing that such a vast SME funding gap exists within the global economy. In the context of COVID-19, the stakes have never been higher. SMEs are fundamentally critical to the sustenance of the world economy. They are the single most important enabler of innovation in industries such as medicines, digital technologies, agriculture and financial services, amongst others. Not since the first industrial revolution has there ever been such an urgent need to nurture home grown innovation for the development of a thriving SME sector. InAfrica, SMEs operate in a two-tiered economy, a formal one and an informal one. Like the global economy, SMEs are important drivers of growth in countries across sub-SaharanAfrica, accounting for up to 90% of all businesses in these markets. These factors lay bare a stark reality alongside important opportunties. Through collaboration between stakeholders from across the innovation ecosystem, and good policy from national governments, there is a significant opportunity to dramatically increase economic activity. Bynurturing the scalabilityof businesseswithin the informal sector, stakeholders can achieve inclusive economic growth, where hundreds of millions of informal workers and millions of informal SMEs reap the rewards of operating within the formal economy.
¹ WorldBank, Understanding Poverty, SME Finance: www.worldbank.org/en/topic/smefinance ² US Small Business AdministrationOffice of Advocacy, 2018Small Business Profile ³International FinanceCorporation, MSME FinanceGap: Assessment of the Shortfalls andOpportunities in Financing Micro, Small andMediumEnterprises in EmergingMarkets.ch
Scaling Homegrown Innovations Beyond Borders
International expansion remains comparatively elusive to many of the respondents to this survey, with only 22% having accessed markets outside of their home countries. Of this number, 74% say they are currently exploring the possibility of entering other markets. The hurdles to cross-border growth are, however, significant according to our panel of experts. These include tariffs, weak travel connections, language barriers and bureaucratic hurdles when opening business bank accounts in foreign countries.
Fig. Currently operating internationally
Fig. Exploring international expansion
Pauline Koelbl, Founder & CEO, AfriProspect & ShEquity explains how individually, most African countries offer small markets. Therefore, further collaboration between African countries is required to enable the scaling of homegrown solutions. This requires harmonized trade policies across borders, which give preference to African-made solutions and allows them to remain competitive in comparison with imported solutions. Without such support, African innovators will continue to struggle to scale because they must compete with bigger and well-funded foreign companies.
“From an investment perspective, those innovators and entrepreneurs who start their ventures with a growth mindset and clear plan to scale have more chances of raising capital. Investors want to see traction and scale opportunity. They need to be convinced that there is enough demand in other markets for the proposed solution. If the solution is needed at a pan-African level and there is a clear plan to make it happen, investors will be more interested because having a billion potential customers means greater return on investment.”
Pauline Koelbl Founder & CEO, AfriProspect & ShEquity
Drivers and challenges of international expansion With the AfCFTA looming close, we sought to understand the key drivers for young start-ups seeking to expand to other markets. The majority (38%) say that market research indicates growth potential in these foreign markets, while an almost equal but lesser number say theywish to enter new markets because they believe their business is easily scalable with only incremental costs associated.
Personal experience in newmarket(s)
Market research demonstrates growth potential
My innovation / business is easily scalable with only incremental costs to be incurred
Fig. Drivers andmotivations formarket expansion
Of the 26% of entrepreneurs and start-ups not currently exploring scaling across borders, the majority (44%) say funding challenges as the key reason, while a significant number say they are focusing on good opportunities in their home markets instead of looking abroad. A small percentage say they feel they are held back by a lack of management experience.
Good opportunities to explore in my home country
Not enough current management bandwidth / experience
My innovation / business is specific to my home country market dynamics
Fig. Reasonswhy some entrepreneurs are not seeking cross border expansion
TheCOVID-19effect onattitudes towards scalability Across the continent, the pandemic has given rise to an explosion of new innovations with young start-ups and SMEs eager to support their countrywith solutions ranging fromagritech to e-health, e-commerce, fintech and more. Most of the start-ups and entrepreneurs surveyed say they are likely to need or be able to scale their business in the wake of COVID-19.
Fig. Number of innovators likely to need to scale their businesses in thewake of COVID-19
Across the world, government support in the wake of COVID-19 has been fundamental to the survival of millions of businesses. In Africa, policymakers and governments have stepped up to varying degreeswith a range of emergencymeasures and solutions, from soft loans to the lowering of interest rates, and furlough schemes. However, sentiments from our study as indicated below suggest that thesemeasuresmaynot be effectively reaching ormeeting the needs of youngAfrican entrepreneurs in these challenging times.
Awareness andeffectiveness of government support While the majority of the entrepreneurs surveyed (51%) indicate that they are aware of state support, they have not found them to be adequate inmeeting their current needs. Almost a quarter of them are unaware of any support whatsoever being available to them.
Yes, and they are proving effective (12%)
I am not aware of any government support or strategies for specific industry sectors (22%)
Fig. Awareness and effectiveness of current government support
No there are none or not effective enough (15%)
Yes, there are but not sufficient or effective enough (51%)
The experts who have contributed to this report have echoed these findings, stating that despite the immediate reassignment of funding for COVID-19, governments must look to do more to support SMEs in the short-term because they are critically important for economic development, job creation and value creation along supply chains. Dr. Anino Emuwa, Founder, Avandis Consulting, says that governments are fully aware that they need to intervene by providing incentives such as tax relief and capacity building support amongst others to accelerate innovation. She points to an example of a government initiative in Nigeria, Survivalfund.ng , which is aiding SMEs during COVID-19 with schemes to help meet critical payroll obligations, provide formalization support to register new businesses, and provide grants for SMEs to navigate during the pandemic. However, more of these initiatives are needed across the continent to address an immediate need among SMEs.
“African governments are reacting to the crisis, but they must do more to ensure funding and support are going to the businesses that really need it. COVID-19 has also createdopportunities for innovationandexpedited the adoptionof digital and virtual technologies – especially for fintech in payment services and in e-commerce. This is a time for close collaboration to achieve mutually beneficial goals. Policymakers must move into action to create enabling environments for homegrown innovations to thrive including the availability and cost of funding.”
Dr. Anino Emuwa Founder, Avandis Consulting
AFRICA’S HOMEGROWN HEROES LaStartup Factory One of the biggest groups to be impacted by COVID-19 is start-ups. In Morocco, LaStartup Factory teamed up with StartupSquare to study the impact of the pandemic on the country’s start-ups ecosystem. It found that the resilience of many start-ups has allowed them to adapt and mobilize to contribute to national efforts to curb the crisis. However, it found that only one in 10 entrepreneurs received support and that one in three believed they risked bankruptcy if the situation continues. In response, LaStartup Factory teamed up on several regional initiatives to identify and support start-ups that can provide viable COVID-19 solutions and align them to potential investment opportunities. In collaboration with Maghreb Start-up Network, IncubMe (Algeria) and EY Tunisia, LaStartup Factory held the first regional virtual open innovation COVID-19 Maghreb Bootcamp.
Through the COVID-19 Maghreb Bootcamp, 20 start-up projects were identified across the solidarity, security, health, and crisis economy spectrums from Algeria, Libya, Morocco, and Tunisia. Examples include a tool by AIOX Labs for predictive identification of socio-economic events based on a comprehensive web scan, a digital platform by Speetar to connect patients and doctors in remote areas, an application by Makelti to reduce food waste through advance meal booking, and a chatbot by Icompass that intelligently breaks language barriers, especially in dialects. In tandem, LaStartup Factory collaborated with the Ministry of Economy and Finance to launch the Match and Invest program , which focuses on investing in projects that provide concrete COVID-19 solutions. 25 start-ups from the 600 that applied to the programwere selected to be connected tomore than 40 angel investors such as Angels4Africa, MOBAN, and Kluster CFCIM, with guaranteed expanded financing opportunities. Another initiative, HackCovid, which is led by the Moroccan Federation of Information Technologies, Telecommunications and Offshoring (Apebi) and supported by leading organizations such as OCP, Bank-Al-Maghrib, theWorld Bank, cnDP, INWI, IBM, and Microsoft, played a role in centralizing and showcasing the most promising technological initiatives that the Government can adopt in its fight against COVID-19. These initiatives by innovation hubs demonstrate the ability of African start-ups in delivering real solutions and the importance of supporting them to scale their innovations.
LaStartupFactory isanetworkof innovationenablers inMoroccoandAfrica that accelerates collaborationbetweenstart-upsand corporates.Witha presence inover 10African countries, its network comprises 10,000young talent, 2000 start-ups, 50experts, 30partners, andmore than25 investors.
Hub Perspectives East Africa
Earlier this year, hubs outside of Nairobi city collaborated with Konza Technopolis, a key flagship initiative under Kenya's Vision 2030 development plan, alongside other key partners, to host a challenge to respond to COVID-19 issues outlined by government authorities, with scalable solutions that can be co-created and adopted for use, matched by policy and financial incentives. The success of this event highlighted the need to intentionally support innovators in small towns and cities across Africa and that viable solutions can come from just about anywhere on the continent. African innovation hubs are pipelines for local innovations that governments and large businesses should invest in. We need to identify and map the strengths and unique selling points of African hubs against the communities they serve. Hubs can also play a stronger role in identifying viable business models to make local communities a part of the homegrown solution building process. This will help local innovations to attract the right kind of support from external stakeholders such as the private sector who typically view hubs as not-for-profit entities that receive funding from other quarters. On a policy level, Africa needs to regulate entrepreneurship programs to raise the standards of capacity building and skills transfer in accordance with global best practice. There should be a greater push to link incubators with the academia and research centers to enable collaboration, to test ideas at the national level, and to encourage the promotion of local innovations. This is the only way to build the capacity of grassroots innovators. In Kenya and other parts of Africa, start-up laws and acts are helping to create the kind of enabling environment for local innovators, but a much bigger continent-wide push is needed, especially now in view of COVID-19. Going a step further, if African innovators are to be able to scale beyond borders, policy must remove barriers to trade. The AfCFTA will help with this but only if there are goodwill agreements between African governments to willingly open their markets to all Africans. This will require alignment across the entire trading spectrum ranging from market intelligence, to access to business information, and financing opportunities amongst others.
David Ogiga Executive Director, Sote Hub Voi, Kenya
Sote Hub provides an open space for young innovators and start-ups to design market solutions to local challenges.
The roleof innovationhubs in scaling start-ups beyondborders African governments, in close alignment with the private sector and other key stakeholders, must accelerate their response to minimize the socioeconomic impact of the pandemic and to secure continued growth across important sectors such as health, food security and education. According to a recent report 1 from AfriLabs and the research firm Briter Bridges, the continent now has an estimated 643 technology hubs, with half consisting of non-profit or donor-funded organizations. Additional research 2 from GSMA points to a 40% surge in the number of technology hubs inAfrica in just one year - from442 in 2018 to 618 in 2019. These ecosystems should be tapped into for harnessing homegrown solutions that even now can support governments to manage the impact of COVID-19. African innovation hubs, in addition to bringing cost-cutting, problem-solving, and locally relevant answers, house tremendous knowledge and capabilities. More importantly they offer a steady pipeline of potentially workable local innovations that the public and private sector can invest in, nurture and scale. Our study shows that the majority of entrepreneurs and start-ups (42%) see hubs as potential platforms to access funding, followed by networking opportunities, capacity building and R&D.
Provide increased access to more funding to conduct market research Increase networking opportunities beyond my home country Offer increased capacity building platforms e.g. market entry services, training courses etc.
Increase focus on R&D
Fig. Support needed fromHubs for innovators looking to expand
Insights from several regional hubs inAfrica point towards the need for stronger synergies between themselves and the public and private sectors to support the scaling of homegrown innovation. Insights also include the need to support hubs that cater for local innovations that can play a role in lessening the impact of COVID-19, to embracing open innovation, and prioritizing innovations that are intricately linked to national development agendas and community needs. What is highly evident is that COVID-19 has given rise to opportunities for some homegrown innovations to emerge. It is up to African governments and the private sector to be more strategic in tapping into this readily available innovation pipeline by working closely with hubs and making them a part of the continent’s long-term, socioeconomic development masterplan.
1 AfriLabs andBriter Bridges, building aConducive Setting for Innovators to Thrive, October 2019. 2 GSMA, ‘618active tech hubs: The backbone of Africa’s tech ecosystem, 10th July 2019.
Hub Perspectives West Africa
Innovation hubs in Africa, by nature of how we work and why we exist, provide avenues for inclusive innovation. There is great innovation happening across different spaces including education, agriculture, transportation and networking. However, ensuring that Africa’s marginalized groups are supported to scale their innovations into profitable and sustainable homegrown enterprises that address the needs of local communities requires stronger policy intervention. These policy frameworks must encourage or perhaps evenmandate partnerships with public and private sector organizations to narrow the gap between homegrown innovations and access to enabling factors such as capacity development, skill transfer, knowhow, and seed funding amongst others. They can support these vulnerable groups directly or help the hubs that house them. For example, one of the key challenges that grassroot innovators face is the proliferation of cybercrimes. More work needs to be done to teach all SMEs how to optimize the use of technology in a safe manner. Unfortunately, with COVID-19, hub operations have come to a near halt. Poor connectivity has made it challenging to work from home. Higher transport costs have added another barrier to the ability of innovators to connect with opportunities. The pandemic has stifled economies, yet we have seen little to no support for hubs that cater towards local innovations that can play a role in flattening the curve. Policymakers, such as the African Union for example, have provided the framework for continent-wide innovation to grow, however country-level adoption is required for local innovators to fully benefit, especially during these challenging times.
Cyriac Gbogou Executive Director, Ovillage, Abidjan, Côte d’Ivoire
OVillage offers a space for youth who want to learn about technology or who have an idea and need help to develop it. OVillage produces social innovation projects based on open source software.
Potential sectorswith thehighest scalingopportunities The highest number of respondents to our study are entrepreneurs from the agriculture sector. This is not surprising given that it is the continent’s largest industryemployer. The sector offers enormous potential for value chain enhancement through high quality food production, innovative farming technologies, higher quality crop output and improved access to markets for millions of Africans working in agriculture, predominantlywithin the informal sector.
Infrastructure Construction (1%) Tourism & Transport (2%)
Retail (2%) Transportation (2%)
Natural Resources (2%)
Real Estate / Construction (2%)
Fintech & Finance / Banking (2%) Manufacturing (3%)
Agriculture & Agrobusiness (23%)
Goods & Services (6%)
Technology / Telecommunications (15%)
Fig. Breakdown of respondents’ current sector
While the continent offers numerous opportunities for young start-ups to scale beyond borders, the African agriculture sector is where some of the most inspiring innovations can be seen. According to Business Insider , venture capitals’ interest inAfrican agritech start-ups has spiked since as far back as 2016 with over US$20million raised in investment from 80+ start-ups focusing on supply chains and optimizing output for farmers 3 . COVID-19 is further giving rise to a spike in innovative agritech solutions on the continent with Kenya, Nigeria and Ghana dominating the market at present. Through Djembe Consultant’s own network of innovators and start-ups, we are witnessing an explosion of agritech solutions and artificial intelligence to help farmers better manage potential risks and disasters such as droughts, pests and diseases with the aim of improving sustainability, efficiency and profitability. For example, Hello Tractor’s award- winning software helps equipment owners manage their entire operations, from monitoring their assets, scheduling jobs and managing their crews, to route optimization and fuel management. Meanwhile, Sanku is supporting communities vulnerable to malnutrition by equipping and incentivising small-scale, local millers to fortify their flour via technology-led methods, as well as adding micronutrients that are scientifically proven to improve health and vitality in foods commonly consumed by Africans. Besides playing a role in transforming the future of African agriculture, these types of agritech innovations are particularly important in helping governments ensure food security during the COVID-19 crisis. African public and private sector investors should therefore consider targeted programs to help scale African agritech entrepreneurs.
3 Business Insider Africa – InnovativeAfrican agritech start-upsworth investing in
AFRICA’S HOMEGROWN HEROES Okuafo Foundation With a focus on sustainable agriculture technologies for farmers, Okuafo Foundation has been bridging the gap between rural farmers and access to reliable information and real-time support. At scale, their solutions will help prevent a disaster like the fall armyworm outbreak that occurred in Ghana in 2017, impacting the agriculture industry with a loss of approximately $64million . Okuafo Foundation’s community intervention projects are also aimed at helping rural farmers process their harvests using renewable energy powered machines, reducing their reliance on more traditional energy sources such as diesel and kerosene. They also enable smallholder farmers in disadvantaged communities to increase efficiency and productivity, to ensure families have access to nutritious food all year round.
A recipient of the 2020 Zayed Sustainability Prize, the UAE’s pioneering global award in sustainability, the Okuafo Foundation was awarded $600,000 in prize funds to enhance their existing solution and develop other sustainability projects that serve thousands of farmers across Africa, starting in Ghana. The funds are being invested towards building a near real-timemap of GreenHouse Gas (GHG) emissions fromagricultural activities to gather useful data that will help governments and policymakers in designing climate change policies to ensure that the major players in GHG emissions are targeted for support. Now more than ever, the threats presented by COVID-19 on vulnerable communities call for improved digital measures with greater accuracy and access, which includes translating content into multiple languages to be accessed by different countries in Africa. In addressing this need, Okuafo Foundation is focusing on research and development of low-cost technologies for sustainable agriculture as well as training field agents who can train small scale farmers to use their technology to improve farming yieldwhile staying safe during these uncertain times.
Okuafo Foundation’s solutions enable rural farmers, without the need for internet connectivity, gain insights into what is happening on their farms and detect pest infestations early on. Its mission is to contribute to the United Nations’ Sustainable Development Goal 2, which seeks to End Hunger, Achieve Food Security and Improved Nutrition and Promote Sustainable Agriculture.
Barriers toentrepreneurship Much research has been conducted on the barriers to growth inAfrica. Many obstacles stand in theway of entrepreneurs on the continent. According to the African Union’s Africa’s Development Dynamics: Achieving Productive Transformation 4 , they include a lag in innovation and technology, weak regional integration and insufficient logistics infrastructures, an unattractive business climate, and financing difficulties. The majority of respondents to our survey (61%) say that the biggest barrier to becoming an innovator or entrepreneur is access to capital, followed by government policies and bureaucracy, corruption and lack of business transparency.
No access to capital / financial system
Government policies / bureaucracy
Corruption / lack of business transparency Inadequate education system / Insufficient skills State of our economy / lack of diversification Lack of understanding of the importance of innovation Lack of business / technology infrastructure
Risk-taking is not valued
No role models / no networking opportunities
Society does not value entrepreneurs
Lack of business know-how or tradition
Fig. Respondents’ barriers to becoming an innovator or entrepreneur
Prudence Nonkululeko Ngwenya, Head of the Division of Human Resource and Youth Development at theAfrican Union Commission (AUC) shares that the fundamental gap of matching theAfrican resilience and innovation aptitude with funding, capacity development and knowhow requires stronger collaboration between the governments and the private sector. She says thatwhile theAU iswell-placed to sense these gaps and connect stakeholders, it is the public and private sector entities in Africa that must take greater strides to create the enabling environments to incubate, accelerate, scale and fund homegrown innovations. Meanwhile, OdyAkhanoba, Manager of Strategy and Innovation, Afreximbank, says that COVID-19 has accelerated and intensified the need for development finance to step up their proposition to enable Africa’s vast youth populations to leverage technology and scale homegrown innovations. He adds that they have a role to play in making risk capital more readily available and to be able to deploy risk equity into innovation in a fast-changing world. In this regard, the commencement of the AfCFTA, which was due to launch officially in July 2020, but is now set to launch in January 2021, creates expanded opportunities for scaling African innovation and start-ups. The extent to which it will support cross-border African enterprise, however, hinges on many variables.
4 AfricanUnion, Africa’sDevelopment Dynamics: Achieving Productive Transformation, 2019, page 200.
Scalability and the roleof theAfCFTA
The AfCFTA is set to create a single market with a cumulative GDP of $1.5 trillion, which together forms amongst the eight largest economies in the world. For businesses of all shapes and sizes, it provides a new continent-wide easing of trade restrictions that range from the harmonization of standards to relaxations on travelling across borders. Akhanoba says that the AfCFTA is a step in the right direction as the large corporates will now be able to grow their own intra-African markets, and value chains will increase in volume and quality. According to him, researchers have indicated that the Services industry, for example, loses $80 billion every year from importing services from abroad when they are readily available in a neighboring African county. The AfCFTA is therefore an opportunity to educate entrepreneurs about the new single market and what goods and services are available for cross-border enterprise. However, experts we spoke to includingAkhanoba have also pointed out that because theAfCFTA is designed to cater towards the formal sector, the vast majority of African SMEs who run small businesses in the informal sector are likely to be left out initially - until measures are taken to specifically address the needs of the many millions working in the informal sector. Potential measures range from incentivizing informal SMEs to make it attractive for them to formalize to harmonizing fiscal policies particularly in sales and corporation taxes as well as import duties, creating regulations and guidelines to simplify business registration processes, including language barriers, and minimizing bureaucracy. These measures would truly help SMEs operating in the informal sector.
“With only around 7% of SMEs in Africa operating formally, the vast majority are not poised to benefit from the AfCFTA. Therefore, policymakers must first identify viable means to move the 93% of SMEs towards formalization by developing a value proposition with incentives in place to make formalization appealing. An obvious one would be leveraging technology to build technical platforms for these SMEs to access finance and information on how to expand their markets as SMEs in the informal sector would find this attractive.”
Ody Akhanoba Manager of Strategy and Innovation, Afreximbank
“Banks and financial institutions are currently not integrated across borders in Africa, making it challenging for smaller businesses to open even a simple bank account in a foreign country, in addition to challenges on currencies, interest rates and taxes. African port systems, with their bureaucracy and tariffs imposedon imports and exports, pose further challenges for cross border trade. Official documents should be made available in the commonly spoken languages on the continent, such as English, French, and Portuguese. As it matures, the AfCFTA must therefore aim to create regulations and guidelines to simplify these processes andminimize bureaucracy across all touch points.”
Dr. Anino Emuwa Founder, Avandis Consulting
“Creating a regional home-grown innovation framework is important, which is what the new AfCFTA intends to provide to enable African businesses to scale beyond borders. Having a pan-African framework for intellectual property (IP) rights is also important to ensure that African innovations are protected through standardized policies. Right now, we have two systems, one in west Africa (OAPI) and another one in southern African countries (ARIPO). The AfCFTA could create a unified, legally backed IP system at a pan-African level to ensure that African innovators can protect their inventions.”
Pauline Koelbl Founder & CEO, AfriProspect & ShEquity
Hub Perspectives North Africa
The COVID-19 pandemic has presented opportunities for marginalized businesses to grow. Local start-ups and SMEs demonstrated their capacity to rise to the challenges posed by the pandemic and find ways to continue to serve their communities. They should be given more opportunities to create homegrown solutions that meet local needs. For African governments, this is a clear message that they do not necessarily always need to import solutions. African innovation hubs understand well the local context and have invested a lot of time working to strengthen local innovation ecosystems. In doing so, they have earned the trust of their communities but more support is needed from other public and private sector stakeholders to catalyze the work that is already being done or to fill in the gaps in areas where more expertise is required. Policymakers and other innovation enablers should favor homegrown innovation and provide the means for start-ups to scale. SME-friendly policies are needed to encourage informal markets businesses to formalize. The current policy environment in Africa unfortunately discourages informal business from formalizing their operations. As countries prepare to implement the AfCFTA, they should ensure that the needs of African SMEs and innovators are not overlooked otherwise the arrangement will have no impact for this all-important growth sector. SMEs and informal businesses must not be left behind. This may mean the review of procurement policies and regulations that incentivize formalization, including access to financing and market expansion. In short, the free trade area must find a way to ensure that SMEs and the informal markets are not merely consumers of the agreement but that they are active participants in terms of trade and enterprise.
Thiziri Boukhalfa Content Manager, Sylabs, Algiers, Algeria
Sylabs works for the inclusion of entrepreneurial initiatives, especially young people, in the Algerian economic landscape.
LevellingupR&D inAfrica Research-led innovation in a continent as young as Africa, and one that is driven by a natural aptitude to create, is key to value chain creation, economic growth, and job creation. Experts that were interviewed all agree that innovative solutions based on relevant, African-focused research have the power to transform the continent and unlock its innovation potential across the keys areas of ICT, energy, pharmaceuticals, agribusiness andmanymore sectors. Yet, the level of research and development (R&D) in African countries remains low. There remains a mismatch between innovation and research. According to Kevin Chika Urama, Senior Director, African Development Institute, African Development Bank Group, the regionalization ofmarkets andvalue chains has become a priority forAfrican governments, andwe can expect to see competition from foreign firms reduce over time. Africa is a large market with tremendous opportunities. He reiterates that to fully leverage these new opportunities there is a need to enhance national innovation ecosystems, which in manyAfrican countries are not robust enough yet. Urama explains how on average, Africa invests around 0.42 percent of its GDP on science and R&D, whilst developing countries invest between two to four percent. There is therefore an immediate need for policy to step up and influence investments in R&D, without which the continent will continue to produce low patent levels. Presently, the fewpatents for innovations developed on the continent are typically (and swiftly) bought by foreign firms with the capital to do so. This needs to change in order for Africa to benefit from its own R&D. The AUC’s Ngwenya explains how policy is critical to unleashing the continent’s innovation potential. As part of its work towards creating an enabling environment, in February 2020 the African Union adopted the Digital Transformation Strategy (DTS) to help ensure that the continent is poised to benefit from a digital revolution for socio-economic development. Ngwenya also suggests that so far, the DTS framework that has been set and agreed upon bymember states has not seen the level of adoption required, owing largely to the redirection of resources resulting from COVID-19. As a next step, as Africa grapples with the fallout from the pandemic, the AU will continue to identify new pathways to support member states in their adoption of these digital policies at the country level. Strengthening Policy Development to Encourage R&D and Innovation
Prudence Nonkululeko Ngwenya Head of the Division of Human Resource and Youth Development at the African Union Commission (AUC) “In the past decade, Africa haswitnessed an increase in innovation andR&D. A fewAfrican countries have made innovation a national priority, which has led to an increase in investment across the continent. South Africa, Kenya, Nigeria, and more recently Rwanda and Botswana have made significant strides in driving innovation and R&D and serve as roadmaps to follow. As a result, these countries are beginning to rate highly in global innovation rankings. Although other African member states recognize the importance of innovation, investment constraints have posed challenges to their innovation agenda.”
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