Cellphone tech sparks innovation in Africa

THE cellphone is to sub-Saharan Africa what the steam train was to 19th-century Europe: the mechanical workhorse driving social and economic transformation.

Seizing the opportunity provided by the first near universally available infrastructure, hundreds of technology start-ups have sprung up across the region to plough new trade routes and seek breakthrough innovations.

There is mounting competition between global technology companies — IBM, Google, Facebook, China’s Tencent — for a slice of what are some of the world’s fastest-growing information technology (IT) markets.

The ethos pervading this new ecosystem — centred in Nairobi, Lagos and Johannesburg, but with offshoots across Africa — was encapsulated recently by Mark Essien, creator of one of the first hotel-booking websites in Nigeria.

Far from being a handicap, the deficit in physical infrastructure, such as land lines and railways, provided Africans with a unique chance to step ahead, he argued at a recent Lagos conference.

“The future of technology for Africa is not in playing catch-up. But in looking at the things we lack and using each of those gaps as an opportunity for us to invent something we can use to leapfrog the rest of the world,” Essien said.

The first big leap came with the adoption of cellphones. The next wave of technological advances is occurring as high-speed internet and smartphone handsets become more accessible.

By 2025, half of sub-Saharan Africa’s billion-strong population will have internet access, 360-million via smartphones, according to McKinsey. Two years, ago its research identified this growing connectivity as providing huge opportunities for IT businesses in healthcare, education, finance, agriculture, retail and servicing governments.

Already there is an app for almost everything: herding cattle in Kenya (i-Cow), private security in Ghana (Hei Julor!), remotely monitoring patients in Zimbabwe (Econet) and in Uganda, an Uber-like service (Yoza) connecting dirty laundry to mobile washerwomen.

Married to this explosion of innovation are the region’s demographics — more than 70% of the rapidly urbanising population is under 30. “The first thing they want is a phone and the next is information,” says Aly-Khan Satchu, a Nairobi-based investment analyst.

Armed with both, Africa’s youth are hooking up to networks far beyond their immediate communities, creating new outlets for music, TV, fashion and social comment. Nor can the politicians afford to ignore the ramifications.

The social media campaign unleashed when Boko Haram terrorists kidnapped more than 200 schoolgirls rebounded to help deprive Goodluck Jonathan of a second term as Nigeria’s president.

“What the Great Western Railway was to Victorian England, the mobile networks are to Africa,” says Africa investor, Miles Morland.

For all the excitement, however, there is a caveat: the easy fortunes were made in the past decade. Then, private equity investors such as Morland made five or 10 times their money. They did so by backing African entrepreneurs who recognised the scale of pent-up demand and jumped in to build telecoms companies while their global counterparts hesitated, convinced most Africans were too poor to afford handsets or airtime.

PRICE wars and slowing growth in near-saturated urban areas have since thinned margins. So, some of the latest innovation is being driven by commercial necessity. Products such as M-Pesa, the mobile money system pioneered by Kenya’s telecoms operator Safaricom, raise fresh revenues and help the company retain subscribers.

More broadly, the start-up terrain is treacherous and fragmented, and only a few companies have yet proved an ability to scale up regionally and become commercially viable. So far, the companies that have been most successful in attracting investment have tended to be those replicating western models, such as the online retailers in Nigeria — Jumia and Konga.

Many technology groups developing consumer apps lack the finances to market their products and are obliged to work with the phone operators.

Ayisi Makatiani, the Kenyan who created pan-African media aggregator Africaonline and now runs his own private equity fund, says the first wave of venture capitalists who backed innovative start-ups were mostly burnt. However, experienced players are arriving, he says, helping to marry international expertise with local knowledge. “I haven’t seen so many Americans arriving in 20, 30 years.”

In more advanced markets, the spread of mobile money systems and developments in logistics are combining with increased smartphone use to allow groups to sell everything from insurance to fresh fruit online.

“The question is how do you now use the current digital platforms to disrupt the traditional businesses and offer services in a much more efficient way?” Makatiani asks.

It has taken longer for most companies to find the answer than early enthusiasts anticipated. The constraints presented by data costs, regulation, and financing, have proved a drag.

“We are in an evolutionary phase,” says Aly-Khan. “We have not yet found the ways of creating the kind of commercial value US companies have been so brilliant at doing. But we are moving in the right direction.”

Tunde Kehinde, co-founder and joint MD of Africa Courier Express, co-founded Jumia in 2012 with a $1m investment from Rocket Internet, the German start-up incubator. Today, it has grown to become one of Nigeria’s top e-commerce websites, with more than 100-million visits last year.

ENCOURAGED by Jumia’s success and capitalising on the boom in online shopping in Nigeria, Kehinde, 32, left Jumia to set up another technology business in 2014 with his Ghanaian partner, Raphael Afaedor. Africa Courier Express aims to streamline the logistics of delivery for e-commerce companies, tracking and pay-on-delivery services for Nigerian businesses.

Kehinde, who has a degree from Harvard Business School, has ambitions to take the business to the rest of the continent. “We think that tech is going to really transform how Africans receive products, and we want to be at the forefront of getting those products to them — whether it’s their bank card or an insurance product or a lunch or their favourite pair of jeans.”

In 2004, with just $3,000, a credit card and a business plan drafted on the back of a napkin, Kenyan Ken Njoroge co-founded Cellulant, the mobile payment system that connects consumers to merchants, banks and mobile operators.

From its origins in Kenya and Nigeria, the business operates in 11 African countries, connecting 34 mobile operators, 45 banks and 63 blue-chip companies, including Kenya Airways and Standard Chartered.

The Nigerian government also turned to the company last year, giving it a four-year, $8.9m contract to run a registration and validation system for subsidised fertiliser.

Njoroge, who describes himself as a “mobile commerce evangelist” on his LinkedIn profile, set up his first business in 1998 — 3Mice Interactive Media, an independent interactive agency that specialises in developing digital brand experiences.

Two years later, Africa Online, then the largest pan-African internet service provider, which was owned by London-listed African Lakes Corporation, snapped up the business.

Michael Macharia was very much at the vanguard of Kenya’s tech revolution, founding SevenSeas Technologies in 1999 when he was just 25 and internet connections were rudimentary at best.

The 40-year-old chartered accountant has developed the provider of integrated business solutions into one of Kenya’s largest private technology companies.

SevenSeas is active in 10 African countries and has established a toehold in Europe by developing operations in Portugal.

When not working on his day job, Macharia is active in mentoring young tech entrepreneurs through SevenSeas’ Knowledge for Life programme. In the longer term, he hopes to build an African venture capital fund aimed at financing technology start-up companies.

© Financial Times Limited 2016



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