If you are African, you must have heard of ‘tech bro’ or ‘tech sis’. This trend is a result of the growth of African tech hubs over the past two decades. These are people who work in the technology field, and sometimes, their income is mindboggling. This encourages even more people to go into tech. With this movement into tech, the African tech industry keeps growing. As many Africans would say, “There is money in tech.” However, we have to look beyond that. We have to look at their growth, their contribution to the world, and the challenges they face.
The Growth Of African Tech Hubs
It is no news that tech in Africa has grown in leaps and bounds. From 2019 to 2022, African tech hubs increased rapidly. Africa was lagging in technology; however, as the need for new technologies has increased worldwide, so needs for tech inventions to meet the continent’s technology gap and do business with the rest of the world, as well as improve living and business standards. Most tech hubs are business ventures with no government funding. They finance operations by getting a stake from seed money and investments for the startups in their hubs.
In 2023, African tech hubs raised 1.4 billion dollars in equity funding in the first nine months collectively, slightly lower than in 2022, when they raised a combined sum of about 5 billion dollars. About 186 startups emerged from Africa in 2023. In 2019, tech hubs raised 2.02 billion dollars in equity funding, 74 per cent up from the previous year. Ultimately, this brought attention to the African tech space.
When COVID-19 happened in 2020, the budding African tech hubs took a huge hit. Funding was down to 1.43 billion dollars, but still more than anyone could expect. After surviving the storm, 2021 brought about a huge increase in funding. African startups were able to secure over 800 deals and amassed 4.3 billion dollars in funding, more than double that of the previous year. Fintech companies such as TymeBank and Flutterwave emerged from this. The rise continued through 2022, with African tech hubs securing 5 billion dollars in funding.
Interestingly, African “startup capitals” played a huge role in this rise. Cities such as Lagos, Nairobi, Cairo, Cape Town, and Johannesburg have hosted these startups and Africa’s success stories. We take a look at some of these places, their inspiring rises, and the challenges they face.
Nairobi, Kenya, The Silicon Savannah
Silicon Savannah is one of the leaders in tech in Africa. Many view Kenya as a pioneer in the tech startup industry in Africa. Like most African countries, fintech startups are the driving force behind this new system. These new startups have enabled the easy flow of funds. They have made businesses easier. From digital lending platforms to mobile payment solutions, these companies have solved business problems. However, other startups have joined the trend. These companies focus on energy, climate, health, education, and other fields.
That said, some of the top fintech companies in Kenya are M-Kopa Solar, BitPesa, Apollo Agriculture, Sokowatch, FarmDrive, and a host of others. This community has led to even more growth. For new startups, this is an ideal place to begin. Year after year, more startups are springing up, taking advantage of this trend to provide solutions to real problems.
African Tech Hub in Lagos, Nigeria
You can not talk about African tech hubs without mentioning Lagos and Nigeria as a whole. Important startups like Piggyvest, Cowriewise, Kuda, and Opay are all important players in the tech scene. Tech companies make businesses easier as people move away from traditional banking. Piggyvest alone has nearly 5 million customers. It has paid over 1 trillion naira to its users.
One thing the tech space in Nigeria has going for it is Nigeria’s population. There are over 200 million people in Nigeria, most of whom are youth. The youthful population means a big and growing market in the foreseeable future.
Capetown and Johannesburg, South Africa
People often think of Capetown as Africa’s startup capital, with Johannesburg right behind it. From securing 50 million dollars in funding in 2015, startups grew to secure 350 million dollars in 2021. Though this funding is less than that secured in Kenya and Nigeria, South African companies have been more successful—the secret lies in strategies that build companies beyond the African market. An example of this is a venture like Knife Capital.
Challenges Faced By African Tech Hubs
Before we get too happy about the growth of African tech hubs, it is important to look at the challenges they face. These challenges are both specific to the African market and general industry, i.e., experienced by tech companies all over the world.
Little Funding From the Government
One of the greatest challenges faced by budding startups is the need for more government funding. Local governments are in the best position to analyse risk and market adoption of potential businesses. However, emphasis is placed on other areas of governance and development that are tested rather than potential riskier ventures. This means tech hubs, though they can drive development, are neglected. As a result, African tech startups have to seek funding elsewhere.
In 2023, funding dried up. From 5 billion dollars the previous year, it went down to 3.4 billion dollars. Many things could have caused this reduction in funding. Some of them are the tech stock decline and big layoffs, political tension all over the world, and interest rate hikes.
Resistance To Technologies That Can Not Be Controlled
In Nigeria, the government banned crypto activities at some point. Even now, the citizens are still determining exactly where they stand. Most African governments have continued to be aggressive toward technological advancement because they lack control over it. Rather than educate themselves, they ban these developments. Some startups have crashed as a result of hostile policies.
To succeed with hostile policies that may not determine whether a business is legal or illegal requires significant funding to ensure the business is legally protected as it expands. Worldwide, it is difficult for most startups, and those that survive have only been able to do that with significant funding that stops the government from interfering in their operation as it goes through the adaptation phase in the market.
The Way Forward for African Tech Hubs
Despite the challenges faced by African tech startups, their contribution cannot be ignored. Similar startups in the past are now global leaders whose strategies are studied in universities across the globe.
African entrepreneurs need to understand that the challenges they face are not unique to them. Understanding what solutions have worked in similar situations and doing proper research is key to the success of any venture. Taking responsibility to make one’s venture work helps entrepreneurs worldwide circumvent hostile environments.
