The Blossoming Of African Innovation

All human progress is based on the degree of inventiveness that societies possess and their ability to apply new solutions to age-old problems and needs. The world’s most powerful countries have become so mainly through their inventions and global business today is dominated by the application of innovation. Apple’s legendary leader, the late Steve Jobs put it succinctly: “Innovation distinguishes between a leader and a follower”.

For Africa, the story so far has mostly been one of trying to catch up with innovations that have been taken for granted in other, more developed parts of the world. But as Japan first, then China, India and Korea have demonstrated, late comers to the innovation stakes can move fairly rapidly from being emulators to cutting-edge innovators themselves.

Can Africa join this band? There has been a splurge of inventiveness all across the continent over the past decade although it has been uneven and generally very poorly supported by governments. But the trend is changing.

Although there has been a dramatic shift in the way African business is discussed, the continent’s potential as a trendsetter and innovator in the business world is not yet widely recognised or fully understood. Yet, it is clear that if African economies are going to make crucial breakthroughs, innovation will be key.

The importance of innovation is something which African governments are slowly waking up to: they are showing a greater willingness to explore concrete policies and strategies to stimulate innovation in a range of areas, particularly the ICT industry but also in other sectors like biotechnology and agriculture.

“There are a number of African governments that are making significant strides in terms of progress,” says Gerard Brandjes, General Manager of Nokia, South Africa Middle East and Africa.

Kenya, in many ways, is the trendsetter on the continent in this regard. The Kenyan government’s commitment to boosting innovation through investing in the ICT sector in particular is striking.

In 2007, it set up the ICT Board of Kenya to help realise its goal of constructing an information-focused society as the driver of socio-economic development. And by prioritising e-government as one of the cornerstones of its Kenya Vision 2030, the government has sought to set an example and reinforce the country’s overall image as a trendsetter in the ICT field. Ambitions are high – Kenya’s politicians say they want their country to become one of the world’s major ICT hubs, contributing to 25% of GDP.

Greater investment in innovation has come part and parcel with intensified concentration on the ICT sector, through supporting the setting up of incubation hubs to link Kenyan tech start-ups with venture capitalists. Nairobi is now home to at least seven start-up hubs, from iHub, to mLab, with the latest, GrowthHub, being opened at the end of May. And although focus is overwhelmingly on ICT, there is growing excitement about how information technology can be used to accelerate innovations in other areas like renewable energy and agriculture.

“You’ll battle to find a more real-life example than what you’ll find in Kenya,” says Mr Brandjes.

“You’ve got someone like the Permanent Secretary within the Ministry for ICT, Dr Bitange Ndemo, who really believes in what he is saying. He is not afraid to make some really big bold decisions and rally the political support around him and actually move forward in terms of implementation”.

Other governments are also focusing on boosting innovation by similar means. For example, Nigeria’s Ministry of Communication Technology recently signed a Memorandum of Understanding with Nokia to expand the ICT sector. It has expressed its keenness to concentrate on incubation centres and nurture meaningful partnerships with the private sector to support innovative activity.

South African officials have shown no less enthusiasm for innovation, highlighting their readiness to reinforce public-private partnerships and lure more entrepreneurs and investors with various carrots. The partnerships that it has struck up with Microsoft, SAP and Nokia over the last year and a half is a signal that it is making steady progress towards this goal.

It has also backed up its words with money – science and technology has been granted 1% of the national budget for 2012 and 2013, a sum worth approximately $1bn. With research spanning not only the ICT sector but also other areas like biotechnology and fluro chemicals, South Africa’s innovation portfolio undoubtedly looks set to be the continent’s most diversified.

There are also less obvious countries carving out their own space in the innovation stakes. Take Rwanda: the ICT sector exploded there after the ICT-led Socio-Economic Development Policy and Plan for Rwanda was launched by the government in 2000.

In April, the government started up the Rwanda Innovation Endowment Fund to finance promising research and development projects in sectors including ICT and the biotech industry.

Moves to stimulate technology-led innovation is gathering pace in Ghana as well and promising news trickles out of the West African country at a steady pace . For example, World Wide Web Foundation announced in April that it would launch a mobile tech entrepreneur laboratory in Ghana to boost mobile entrepreneurship innovation, offering a superior quality incubation centre for start-ups.

Life after M-Pesa: Start-ups continue to thrive

The consistent emergence of high-quality start-ups across the continent is fruitful evidence of the huge potential of Africa’s innovators. Although M-Pesa, the mobile money transfer service that transformed the industry in Kenya, is still frequently cited as the ultimate example of an African innovation that has changed lives and invigorated the economy at the same time, many more promising, fresh ideas have emerged from the region since then, all seeking to provide unique solutions to everyday problems that ordinary Africans face.

Take the Kenyan start-up MyOrder, an online portal that connects customers with local businesses such as restaurants and cafes, allowing the users to make online orders. Although the concept is simple, the business model is specifically tailored to the exigencies and opportunities within the Kenyan market. For example, businesses can easily launch their own online shops through the portal using sms rather than having to do so online, a clear attempt by MyOrder to ensure that it reaches out to as wide a range of small businesses as possible.

“It’s about being able to do things on your mobile phone and the proposition for business owners is having a mobile shop that takes just a few minutes to set up and then start handling transactions,” says Sam Kitonyi of MyOrder.

“One, a lot of businesses in Nairobi already deliver food to businesses at lunch time but it is very difficult to keep track of the different orders. Two, it is very difficult to tell people that you exist. What they’re doing right now is printing a lot of flyers and trying to carpet bomb the entire area with them. It would be much better if people could go on their mobile phones and look at the options. This is what we’re giving to them.”

Keen to turn a market constraint into a potential opportunity, MyOrder is also eager to help the businesses that use their service but have a limited capacity to meet their orders by offering their own delivery men for hire.

MyOrder’s strategy of profiting by helping small businesses is also integral to the approach of many other African tech start-ups. A further example is Uha$ibu, a Kenyan online accounting package for small and medium-sized companies tailored to the needs of Kenyan SMEs.

“We decided to develop a very simple system where all the people in the organisation can redistribute their workload,” explains Angela Nzioki, the firm’s managing director.

“Instead of a secretary filling out the petty cash forms manually then an accountant coming in at a later dating and putting that information into the system, we came out with a digital petty cash form.”

Other start-ups are following very different avenues – for example, by seeking inspiration from the excitement surrounding the potential of local content in Africa. One company of this kind is Umuntu Media, founded by Namibian entrepreneur and new media specialist, Johan Nel. The company, which hosts local content through its online platforms, has enjoyed dramatic success, and now runs nine local content portals across the continent with journalists on the ground in every country.

“We’re the largest website in Namibia and Botswana. We saw a huge gap in terms of what content really is,” said Nel.

Umuntu has also started a new online noticeboard portal called Mimiboard, currently being used in South Africa, Kenya and Namibia, where locals are able to advertise, discuss issues and connect with each other.

“It came to me that the best hyperlocal community environment is a notice board. You found it outside a church, a community hall. So we started Mimiboard. Anyone in the world can create one. Your communities can start adding notices via sms etc. You can print out your own newspaper. You can embed that into any website or Facebook,” says Mr Nel.

Sticking points

However, despite the vibrant range of start-ups popping up in all corners of the continent, Africa’s innovators face a number of challenges. Entrepreneurs, governments, multinationals and innovation experts assert that African countries must overcome numerous stumbling blocks.

Financing remains a major sticking point. The revelation comes as little surprise: SMEs in the developing world traditionally struggle to access the finance they need, at least partly because of infrastructural shortcomings in the financial market and underdeveloped legal and regulatory frameworks.

There is also growing awareness amongst stakeholders of the fact that while there has been a lot of concentration on ensuring that very small-scale entrepreneurs get access to micro-credit worth between $10 and $10,000 and seed financing is made available for larger companies requiring sums in the millions, firms in the middle, who require capital of between $50,000 and $1,000,000 have not been given adequate support. The problem is all the more serious for innovation companies such as tech start-ups because of their lack of concrete assets to offer up as loan collateral, say experts.

Another quandary that many African technology-focused start-ups face is that their ideas often require high levels of initial investment and can take a long time to become profitable. One firm facing this problem is EGG Energy, a company based in Tanzania that aims to enable low-income consumers to access energy using portable, rechargeable batteries.

“It is not profitable as it depends very much on scale. The margins in energy aren’t quite as big as in other areas and we’re not predicting profitability for four years,” says the company’s CEO Jamie Yang.

“Our industry is very operationally intensive. We need to have very good human resource systems, etc. And Tanzania’s infrastructure systems for things like that is quite weak.”

Although knowledge of how to deal with financing issues is still maturing, analysts have prescribed a mixture of remedies.

One is to try and ensure that the financial options available to African entrepreneurs are as diverse as possible with sources including not only government financing but also private sector funds from corporates and venture capitalists who supply early-stage financing for promising but high risk start-ups. Another source of capital is from ‘angel investors’, who put their own capital into projects in exchange for equity or convertible debt.

A further solution, which has become increasingly popular in the developed world, which African stakeholders are more and more interested in exploring, is ‘crowd funding’, whereby investors pool their capital to fund companies and projects. The online model for crowd funding is growing in popularity, with tools such as social media and online payment enhancing the functionality and appeal of the approach. The strong community networks within certain African countries could enhance the feasability of such a method.

“The one thing that is a bit different in Africa in comparison to other places is that the whole community feel,” says Brandjes of Nokia. “If you look at some of the innovation that has come out of Kenya, there is a sense of community and you will find that a lot of the ideas and a lot of the financing comes from within the community.”

Another part-solution is improving the framework in which potential investors are linked to African start-ups and entrepreneurs through regular events, competitions and building networks.

The possibility of launching local and regional investor readiness programmes to coach start-ups should be explored further. In this way entrepreneurs could then present their businesses impressively at the critical juncture when they are introduced to potential investors and only have a short window of opportunity to sell their idea and impress.

But finance is not the only problem for innovators. Skills and training shortcomings are also holding African entrepreneurs back. Basic education indicators, even for rising innovation centres like Kenya, betray the fact that many potential business innovators will never gain the basic literacy, numeracy and critical thinking skills that they would need to launch their own businesses. In Kenya, for example, less than 2% of the population go to university and less than a quarter attend secondary school. And in Nigeria, around 65% of people of secondary school age are not in the education system.

Industry experts have also place emphasis on the importance of leadership skills. It is widely held that Africa will need to have its very own versions of innovative visionaries like Steve Jobs and Bill Gates in order to really make breakthroughs in key areas, they argue. The ability to lead diverse teams, adapt to problems and changes, and transfer knowledge are skills that the continent’s leaders must work on.

But in the same breath, Africa’s rich leadership heritage is a powerful advantage which it can draw from. Its history of world-famous leaders, from Nelson Mandela to Kwame Nkrumah, as well as vibrant contribution to leadership philosophy is well documented. The latter is perhaps most famously in the form of Ubuntu, based on principles of interdependency, which can provide a framework for solving conflict, navigating disagreements and building trust in the workplace. Others emphasise that African innovation will depend on the ability of entrepreneurs and employees to collaborate and cooperate with each other and break down feelings mistrust, which remain a massive barrier to the development of business ideas.

Africa’s knowledge contribution

With Africa currently on the cusp of the economic breakthroughs that transformed the countries that now power the global system, discussion of what Africa can learn from other countries and regions in terms of innovation is inevitable.

Interestingly, African countries, although drastically different to European ones, can still draw example from particular success stories, like Finland says Finland’s Ambassador to Kenya, Sofie From-Emmesberger.

“Nokia, Lenux, Angry Bird are examples of global ICT brands that we’ve created. I think it’s useful to recall that only three generations ago, Finland was a really poor and agrarian country so the development has been really huge and fast,” says Ms From-Emmesberger.

“But in order to facilitate this development, a number of factors came together. Trade and innovation were essential parts of the equation. There was a culture of development that was created. The inclusion of different actors is key. You need to have women and young people involved and to create fresh ICT programs, services and solutions that are attractive to all groups in society.”

However, perhaps most interestingly, Africa’s innovation path could also shape a different role in the future as a trendsetter, rather than purely an emulator of others, according to some.

“Almost everything to do with health will happen digitally in Africa. A lot of education will happen on the mobile phone. Financial services will be big in Africa on the mobile phone,” predicts Shiv Shivakumar, Nokia’s Senior Vice President of India, Middle East and Africa.

To go back to Steve Jobs – if innovation does indeed, as he says, distinguish “between a leader and a follower”, then perhaps Africa’s progress in this area could, more than any other, transform its acumen in the business world – as not merely catching up but also helping to set the pace.