My friend Jonny sent me this article wondering what my reaction was, asking me to comment. I’ve been doing some thinking on it, and figured I’d take to the blog to put down my thoughts. I have a lot of thoughts, so this is part 1. Assuming you’re not going to read the Forbes article, some tidbits:
To this point, Africa is, yes, still emerging, and there is a stark gap in the investment ecosystem. The asset class that supports entrepreneurs who need enough capital to scale their internet business to millions of users and generate comparable revenue falls behind the others.
First let me say something about the others: there is a huge focus on microfinance, with the list of notable organizations having distributed tens of millions of dollars in very few years. And on the other end of the spectrum there is a large amount of volume in private equity, not only with LBOs, but M&A, mezzanine funds, and funds of funds that transact primarily in the natural resources space, with a rapidly expanding agri-business industry, and some impressive large-scale work in networking infrastructure. Actis, Helios, Fidelity Capital Partners, AAF, Cauris, and Aureos are among the many who have invested billions – by Africans, for Africans – in keeping the economy robust, and providing returns that have pushed Africa ahead of the entire West in GDP growth over the last decade.
It is to misunderstand the nature of a technology-driven industrial revolution – where economies are being shaped in ways that are utterly unfamiliar to generations previous and similar markets that have matured before them – to draw parallels the way Mr. Nsehe does. Microfinance cannot be underestimated as a driver of innovation, and all you have to do is look at the mobile movement of the last 15 years in Africa, including the banking revolution spurned by M-Pesa. There are 500 million mobile phones in Africa, and at current growth rates, it will surpass India as a mobile market in only a few years. All of that said, there are indeed venture capital investors, and there are few, given that it is an especially risky asset class and one that in some ways is challenging for emerging markets. But take a look at Hasso Plattner Ventures, Invenfin, Powered by VC,Acorn Equity, IDC, and more in South Africa ALONE. These are venture capital firms: they are small, and only have a few positions thus far, but they are growing, and they are growing fast. Read about iHub in Kenya, or the Bandwidth Barn in Cape Town. Take a gander at the announcement that Google is launching a new tech incubator in Cape Town for South African entrepreneurs. We need to encourage activity like this, both venture investing and “innovation communities” with positive news (like the Silicon Valley does, to a point of being perhaps too self-congratulatory). He goes on:
But as I read the article, I could not help but ask myself the pertinent yet habitually unanswered question: What about Africa? Why hasn’t a globally-renown, groundbreaking software, social network or mobile application ever emerged from the continent?
This strikes me as a profoundly fatalistic, and based on an assumption which I disagree with. There are plenty of globally renown software, mobile and information technology companies that have come out of Africa. Let me name a few:Dimension Data, MTN, and if those aren’t start-uppy enough for you, M-PESA moved 20% of Kenya’s GDP in only 3 years. That is groundbreaking software if I’ve ever heard of it. And Yola is an international company by any definition, and it was founded in Cape Town. And that’s just a handful from South Africa and one from Kenya. North Africa and West Africa are exploding with fascinating companies that need to be encouraged, not discouraged. There’s nothing productive about discourse that complains about what Africa lacks. The world has been doing that for three quarters of a century now, and it’s gotten old. Let’s talk about opportunity Africa has, and encourage more people to join the community. Innovation in this space requires a positive feedback loop. The more talented kids deciding to become entrepreneurs, the more investors are attracted to the space, the more *Positive* media about growth, the talented kids deciding to become entrepreneurs, rinse repeat. Forbes articles about how fucked Africa is accomplish nothing but take prejudices and ignorances people have about Africa, and encourage people to dig their heels into their wrongly held assumptions.
The next section will get into the more interesting assertion written into his article. In brief: I want to challenge his metrics for success (something only matters if the West thinks it does), and what that implies about how we understand the future of our global community. It’s a more nuanced debate, and will take me a few days to put that one together, but stay tuned.