While local interest in entrepreneurship is on the rise, support from venture capital funders has been slow to follow, hindered by an outdated vision of life and ingenuity in Africa. Here are three of the top myths I regularly encounter when discussing the future of entrepreneurship across the African continent.
Myth #1: World-class innovation only comes from developed economies.
I’ve heard it said time and again that African countries lack great ideas and great minds – while nothing could be more untrue. Fact is, we have strong entrepreneurial minds solving real-world issues here in Africa. With increasing support through accelerators and incubators, savvy investment and greater connectivity, the successes coming out of African countries are only going to grow.
Such statements also miss the many highly successful apps, technologies and innovations that simply never spread to Europe or North America. Two great examples are Mxit, a popular mobile messaging app that replaced text messages years before the advent of WhatsApp, and M-PESA, a mobile payment solution that allows people to send and receive payments from their cell phones without a bank account.
While African companies aren’t trumpeted in international headlines, there is nonetheless a strong and growing culture of technology-driven entrepreneurialism, especially in South Africa, Nigeria and Kenya. As cellular and internet connectivity spreads across the continent, the entrepreneurial spirit is coming alive as local inventors look to solve local problems.
Myth #2: As Africa is an underdeveloped region, it will be years before we see ideas worth supporting.
The African continent is a tale of two halves. On the one hand, there’s the perception of African countries held by many in the developed world: impoverished and underdeveloped, with remote communities and harsh landscapes. However, as mobile and internet connectivity spread, barriers to prosperity and innovation are being broken down. Connectivity is transforming access to information and education and providing communities with the resources to transform their lives. As cheap smartphones become more widely available, the process is only going to accelerate. This is highly disruptive in the best possible way.
On the other hand, standards in countries like South Africa have long rivaled those in much of the developed world. These are the areas where we’re going to quickly be seeing entrepreneurial success stories, especially as interest and investment in local companies heats up along with a supportive ecosystem such as technology incubator hubs being backed by large local and global corporate players.
Tech and innovation hubs are developing in Nairobi, Kenya; Lagos, Nigeria; and Cape Town, South Africa, as well as right here in Johannesburg. There is phenomenal potential in these areas, especially when it comes to tech ideas. While many foreign venture capital funders have yet to discover the untapped potential in these markets, my prediction is that we’re going to see rapidly increasing international interest in future years.
Myth #3: A digital solution that works in the United States or Europe will work in Africa.
We’ve seen businesses of all shapes and sizes attempt to expand to Africa, bringing tech solutions that have been successful in other markets – to disastrous results. This isn’t a sign that African countries aren’t “ready” for innovation. Rather, it’s a reflection of the uniqueness of this market.
For example, many individuals fail to realize that the majority of people in African countries don’t have – and will never get – a bank account. The retail market, too, is entirely different than that of western nations. Most areas still have a “local store” approach, with small business owners providing necessities to sprawling communities. American retail solutions make little sense in this environment, while an app that helps the local store manage inventory or track buying patterns has a wide potential consumer base.
The other side of this coin is that the kinds of solutions that are developing in Africa are tailored to meet the problems of our nations and peoples and aren’t necessarily tech that one could drop into a developed economy and see thrive. Yet that doesn’t mean that our entrepreneurs aren’t creating ideas with the potential for worldwide impact – only that it will take a savvy investor with a bit of foresight to see the opportunities local inventions will create.
There’s a wealth of untapped potential in Africa’s entrepreneurs and it’s time the rest of the world took note. Look for the rise of this market in years to come.
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This blog has been co-authored by Frank Rizzo (Partner & Technology Sector Leader for Africa at KPMG in South Africa) and Mayank Naik (Innovative Startups Lead for KPMG Enterprise and Manager in Technology Advisory at KPMG in South Africa). Their combined experience spans more than 25 years working with large and listed companies, with a focus in the technology sector. As the technology environment continues to quickly evolve globally, Frank and Mayank provide key strategic advice to numerous entrepreneurs and startups, helping them to grow and prepare for the future of technology.
Quarterly global report on VC trends published jointly by KPMG International and CB Insights.