At a France-Africa summit in October, French President Emmanuel Macron committed an additional €130m to Digital Africa, an initiative to support 500 startups on the continent.
Its executive director, Stéphan Eloïse Gras, talked to African Business about the unexplored potential of Francophone tech and the barriers that entrepreneurs must overcome.
African Business: Digital Africa has a new structure and financing in place – where do you fit into the African tech ecosystem?
Stéphan Eloïse Gras: Digital Africa is an initiative that was launched by President Macron in 2018. We’ve run some programmes over the last couple of years and we’ve learned some things, and so we are now re-designing and renewing our commitment with €130m to support tech entrepreneurs in their capabilities to design and scale digital innovation for the real economy, from initial idea to Series B.
What is a sweet spot for Digital Africa is that we are a one-stop shop backed by a DFI, with the capacity to deliver and execute both financial and non-financial programmes in support of startups.
The ecosystem is reaching some very concrete, tangible and remarkable milestones. Lots of money has been put on the table for the African tech and startup ecosystem. DFIs don’t necessarily have the capacity, so that money is coming from DFIs and public development money but also private venture capitalist or private investors.
We need the public money and the private sector money and that is what Digital Africa is aiming at doing. Public development money is very good at funding huge projects with massive impact, but not necessarily very small projects in very risky areas such as the early stage.
By putting together a public capital startup, a for-profit organisation funded by public capital and being part of a DFI, we really want to remain agile and efficient on the ground.
This means using the methods of the startups and the methods coming from the digital industry and the digital economy to mobilise all key players of an ecosystem, meaning not only specific representatives such as incubators or public policymakers and public development, but really putting together all those key players, investors, entrepreneurs, research in science ecosystems and incubator support systems, and public policy makers.
The French president himself has shown personal interest in the initiative. What does €130m allow you to do?
We need a more integrated approach when it comes to all these different programmes that can be run on the VC level in supportive of incubators. And we want to have a more programme-based approach that follows the journey of a tech entrepreneur, which requires specific skills, specific investment, some specific support.
What are we going to do with this new €130m commitment? We are looking at putting together some funds that will remain reimbursable loans at 0%, starting with initial idea and prototype. We will select some entrepreneurs, give them a grant from €10k to €50k, and if he or she reimburses, that would automatically give them access to another threshold of 50k to 200k.
This is a kind of financial support that we will now be able to deliver by being able to manage a portfolio. The idea is to really create a continuity between what you can give in terms of grant and public support and what you can give that turns later on into equity.
Other stuff will also follow at a nonfinancial level that is also highly important when you start a venture. Finding talent is extremely important. So we have launched a programme called Talent4Startups. We’re identifying high-demand skills and jobs in the startup sector. We are leading a whole study with some specialists inside the ecosystem based on the ground. And on that basis, we will offer 250 training scholarships.
So let’s say you need a good product manager, you need a good digital marketing manager, a good Java developer. We will train that talent and then place them in the startups of the Digital Africa network.
How has Covid-19 shaken up the African tech sector?
Covid has been both a huge challenge, because lots of ventures lost all their revenues, but also an amazing opportunity. Recent exits such as Wave, Andela and Flutterwave – all these stories tell something about the acceleration of the digital transformation of the pan-African market.
So it’s also a great opportunity for tech entrepreneurship. We have three focus areas to support and unlock the issues that tech entrepreneurs can face on the continent:
- The challenges of being able to find quality support and support that meets operational needs. We need relevent skills and training, meaning professional and job-ready skills.
- We need more funding for the early stage, because there’s still a huge inequality between countries and regions of Africa. We’ll be looking at Francophone Africa because 80% of the money still goes to major ecosystems like Lagos, Cape Town, Johannesburg, Cairo and Nairobi. What happens in Senegal, in Côte d’Ivoire, in Rwanda, in Tunisia, those are also some of the issues that we want to fight with local ecosystem players.
- And last but not least, we must advocate for investment in at-risk ecosystems in Africa, meaning supporting public policies in favour of startups that are pro-tech, pro-innovation, pro-investment and research. And we must open the dialogue to allow the adoption of permissive frameworks to adapt to African realities.
What we did during Covid was interesting – we put together a bridge fund because we noticed in France that because of the contraction of the investment market, lots of startups were not reaching their investor’s expectations and there was a contraction of the investment capacity.
So we created in France a bridge fund for startups. And we did the same for African startups with a budget of €5m. We designed it in only a couple of weeks. We sourced a project by using digital tools.
And by using an algorithm eligibility platform online, we managed to reduce the investment cycle with Proparco to only a few months and already 10 startups have had access to some bridge funding. That allowed them to go through the crisis until they could finally get back on track with the numbers and figures and finalise their fundings.
Why do you think that Francophone Africa has to some extent been overlooked by investors?
That’s a huge question. The whole startup system in Senegal raised for a Series A what one startup in Lagos can raise for a Series A. We are facing huge inequality here in terms of access to funding and capacity.
Is that because the projects are not so relevant, not so competitive – does the Anglophone world create better tech or services? I’m not sure. What I think is that there’s complexity when it come to the Francophone area and markets and there is also a demographic issue here.
But we should also look at what’s going on in DRC, in Kinshasa, for example, because I think that’s probably where the next unicorn is coming from. You can’t ask an ecosystem in Côte d’Ivoire, in Senegal, to catch up with 10 years of training, of incubating, of investment in Lagos or in South Africa overnight.
But considering the future African unicorn must have a pan-African footprint and outreach, the whole ecosystem, including in the Francophone areas, will also grow and benefit from that.
I think it’s very probable that over the next five years, the Francophone ecosystem will be catching up with what the Anglophone regions put together. A lot of political leaders are looking at that and startup acts are being passed in the Francophone countries. If you look at the first startup act that happened in Africa, it was in Tunisia.
There’s a debate around the extent to which many of Africa’s tech unicorns are truly African. Many have founders from the developed world. How much do you think it matters that African tech firms are led by Africans?
Let’s be pragmatic. At Digital Africa, we are striving for “Made in Africa” tech. It’s not the old model of bringing tech from Europe or another region and then extracting the value.
We must have a partnership approach with African entrepreneurs and an ecosystem because the extractive approach won’t benefit the whole world and won’t be sustainable. Value has to be kept in Africa and benefit the local citizens.
How do we make it happen? We can’t be too rigid and say, OK, we isolate the African ecosystem from the rest of the world. The point is precisely to scale up tech and to do that you need an international approach. You need access to international markets. You need world-class talent and skills and capital.
So we will have a number of criteria. So yes, co-founders must be at least a mixed team. The jobs should be at least 80% on the continent. This is a very important thing because what we want is local jobs.
We want the local economy to grow. This is our approach to it. We won’t criticise Wave for being Senegalese and US-based – as long as it can generate more success stories that’s a great thing. And as long as the tech is made in Africa, it employs some local developers, it employs some local marketing teams, it generates value locally, then it works.
Is Digital Africa just the latest French attempt to gain economic advantage from the continent?
Digital Africa fits into a kind of modern vision of the relations between France and Africa and into what the president’s really trying to do. I think there’s an old narrative and there’s a new narrative. And that new narrative is very much what Digital Africa is looking at and representing – it’s partnership-based.
As I said earlier, that will benefit local ecosystems in Africa, but also will benefit the European continent. This is like collective responsibility and that’s why I think European governments are completely changing their mindset and trying to adapt to this sort of new deal.
There’s a potential for creating value locally, that will benefit and generate more partnership between some French companies, European companies and local companies with a strong local ecosystem, meaning jobs, creativity, innovation systems support and autonomy.
Listen to the whole interview on our African Business podcast.