In an age when innovation, including AI, is transforming business models everywhere, many African cities have become hubs for nurturing entrepreneurs and developers as they coax homegrown tech giants into existence.
Away from the glare of publicity that surrounds Silicon Valley, conurbations from Lagos to Nairobi and Cape Town to Zanzibar have spent the past decade or more nurturing their own ‘unicorns’ and concentrating activity into a cluster of high-energy centres.
‘It’s a very interesting time right now and it’s very dynamic,’ says Satyajit Turumella, a director with Grant Thornton’s IT advisory practice in Nairobi.
‘You need to have a diverse talent pipeline’
Analysts Counterpoint recently produced a study on African efforts to adapt to AI, ranking Cape Town and Johannesburg top, followed closely by Lagos, Nairobi, Accra and a slew of centres across North Africa.
South Africa can boast tech unicorns (tech companies valued at more than US$1bn) including Tyme Group, a digital bank, while Lagos has produced companies such as Interswitch and Moniepoint. Other cities have their sights set on producing a new generation of tech leaders.
Building blocks
But what are the components for a tech city? How do they lay the groundwork that enables techies and entrepreneurs to build the tech companies of the future?
Perhaps the first element in a thriving tech centre is people and talent. Whether through training schemes or new university courses, the one thing Africa has in abundance is young people with enthusiasm and drive to be at the heart of the tech industry.
In Johannesburg, Forvis Mazars has even established its own data school to develop skills that serve across the tech industry and finance.
‘We wouldn’t have the sector we have without the energy of young people’
Shaun Vorster, head of digital transformation at the firm, says: ‘You need to have a diverse talent pipeline. Diversity is quite an important aspect when you want innovation to be stimulated – and when you want to have some radical thinking.’
Diaspora returns
There is another aspect to the impact of talent. Many countries have witnessed the return of their diaspora to form the bedrock of their tech development sector. There is a whole generation returning from overseas pre-prepared with education and experience to fuel a new wave of startups.
Ojoma Ochai, managing director of CcHUB Africa, a tech hub network with bases across the continent, points out that young people were generating organic startup activity long before governments began tailoring policy initiatives.
‘Some governments across Africa have genuinely stepped up’
CcHUB, for example, established a decade-and-a-half ago in the Yaba district of Lagos (now known as Yabacon Valley), has helped foster Nigerian fintech Flutterwave, which achieved unicorn status in 2021. The hub has also collaborated on financial innovation, pairing with Bank of Industry Nigeria in 2015 to found what is thought to be the country’s first social innovation fund.
‘We wouldn’t have the sector we have without the energy of young people,’ says Ochai. ‘It would be a disservice to Nigerian society to not acknowledge that the energy and the entrepreneurial spirit definitely drove it.’
Policy shift
Another increasingly important ingredient is government policy, which can take many forms. One of the first key decisions in Lagos was to waive the right-of-way fee for laying fibre-optic cables into Yaba, drastically improving its internet connectivity.
That was the work of Lagos state; the federal government has helped, too. In 2022 the government passed the Nigeria Startup Act, creating a framework to support tech companies in their early years. This includes a new ‘startup’ label for companies, which, when granted, opens the door to various government support and incentive schemes. More than 12,000 startups have since signed.
‘That was a landmark moment in Nigerian tech and entrepreneurship,’ says Joy Mabia, head of marketing for Endeavour, another tech hub. ‘Some governments across Africa have genuinely stepped up and I think this is an underreported part of the story.’
‘It takes the right kind of mindset from the leadership of these governments’
Kenya, too, has seen its fair share of government action. More than a decade ago the country introduced its ‘understudy’ law to ensure that expat workers passed on their skills to locals; updated digital privacy laws have brought the country into line with international standards; and a Startup Act is currently awaiting presidential approval.
Elsewhere, Turumella says Tanzania is a ‘sleeping giant’, with the government introducing or partnering on a number of startup programmes. This includes the FUNGUO programme launched in 2022 in which Tanzania has partnered with the UN Development Programme, the European Union and the UK to provide early-stage funding for startups with the aim of attracting further finance from other sources. Efforts in Zanzibar, for example, include subsidised office space and electricity for startups.
‘It takes strong policy,’ says Turumella. ‘It takes the right kind of mindset from the leadership of these governments.’
Accountancy opportunities
All this development activity has had an impact on professional services serving the tech industry.
CcHUB figures show that, as well as developing thousands of jobs, the hub’s activity has created many indirect ones – accountancy roles among them, thanks to the valuations and business models that underpin funding rounds.
African startups may also focus on profitability at a much earlier stage
Forvis Mazars’ data school, aimed at helping ease South African unemployment, is also designed to serve the tech industry with experts. Part of the success of South Africa’s tech centres is being able ‘cross-pollinate’ tech skills with business knowledge, says Vorster. ‘The guys who come through the data school that understand audit, debits and credits and financial statements are worth so much and we get so much out of them.’
Innovation in financing
Perhaps one outcome of the involvement of finance professionals is innovation in the financing of startups.
Ochai points out that, in Silicon Valley, the common model is to provide big injections of venture capital cash that are not available in Africa. Governments are therefore playing a role, alongside international bodies, banks, homegrown and external investors including big tech firms, and mature corporates such as those in the telecoms sector.
African startups may also focus on profitability at a much earlier stage than their Californian counterparts; Ochai calls this an emerging ‘maturity’ for Africa. ‘That’s different to any other place and that’s what works for this geography,’ she says.
A vibrant startup community has emerged across African cities. It has attracted the attention of big investors but also thrives on local entrepreneurship and government policies designed to promote growth. Now over a decade old, these urban tech hubs can list their success stories. But there is surely much more to come – and that will inevitably be an opportunity for finance professionals.
More information
Read an interview with Lucia Okafor FCCA, global head of operations at Flutterwave
