(Knowledge at Wharton) – The road for a start-up in Africa can be like a video game — each time a player slays a monster, a larger one appears. Whether it is roadblocks imposed by regulators, the lack of a viable workforce or a paucity of infrastructure, the path to success for a burgeoning tech firm in Africa can be harrowing. Yet it can also be a great opportunity for those willing to negotiate their way through those challenges, according to experts and entrepreneurs on a panel titled, “Technology Start-ups in Africa,” at the recent Wharton Africa Business Forum.
“Incubators are all over the continent,” said Kathleen Bomani, the founder of Made From Cloth, which encourages and helps locate funding for fashion businesses. “Building the infrastructure is ahead. We have the opportunity now to do things that may not be available to entrepreneurs later on.” The problem, however, is that no one is making it easy. The continent has no equivalent to Silicon Valley and its warren of venture capitalists and mentors. On the other hand, the advantage is that the big players have no real conviction or impetus to go to Africa, at least for the time being, leaving the market open for small but scrappy firms.
“In Africa, it is hard to buy books. Even going to a store can be a headache,” noted Chika Uwazie, chief operating officer for Keejul, which is trying to bring digital content to the continent through mobile technology. “Amazon is not a solution because the delivery system is not there. Living in Lagos is a headache. Driving down the street is a two-hour journey. We are hoping that people on the African continent will download books, which right now is pretty much limited to primary and secondary school books. But we have to create the market for fiction and non-fiction.”
Just as bricks-and-mortar businesses in developing areas rely on local connections to grow, so too must online firms, the panelists said. Farai Lorraine Gundan, the co-founder and CEO of FaraiMedia, which has specialized in media businesses and is now in the process of creating a travel service for visitors to the continent with mid-level budgets. “As Africa opens up to the world, you need to have African voices directing your start-up,” Gundan noted. “We have dealt with the African community. We are there providing an answer to the culture that is there. It is imperative if you want to do [business] in Africa that you know how things work.”
Because young Africans in relatively developed areas such as South Africa, Ghana and Nigeria or the coastal nations of East Africa, are tethered to their cell phones, the panelists pointed to significant business opportunities in the mobile technology sector. “In Nigeria, it seems like [the country's entire population of] 170 million people have BlackBerries,” said Ike Nwaneri, co-founder of meeting and event planning firm Kojami. “Right now, there are three iPads [in the country], and they are all out of service,” Nwaneri joked. “But Nigerians, especially those who are young — and there are a lot of them want to have the sexy and new thing.”
But entrepreneurs must concentrate on finding solutions to the roadblocks to e-commerce that exist in the country, rather than creating new operating ecosystems, Nwaneri added. “We need to [create technology for] online bill paying and accepting payments, and [convince] people to do that. We can’t worry about whether it is via BlackBerry or iPad…. A start-up in Africa has to look at where the need is and provide the solution somehow.”
Finding the Three-star Hotels
To nurture a community of start-ups, the continent’s education systems must also change, according to the panelists. Universities are teaching business and technology, they noted, but not encouraging creativity and entrepreneurship. Colleges seem to be preparing students to take jobs working for big corporations rather than encouraging them to find ways to be innovative.
Nekpen Osuan, who grew up in the United States, but has African roots, has helped launch Beni American University, headquartered in Abuja, Nigeria, which offers online courses in information technology and business management, and is starting a new course in social entrepreneurship. “The governments do not have enough money to build up the infrastructure, so private business has to step in and invest,” Osuan said. “As more and more Africans have mobile technology, we see an opportunity. Roads are bad, so they can’t [physically] get to classes. For us, there is no need to build campus housing. No one has to move to a city if they do not want to. All they have to do is get our courses online.”
Chika Umeadi, Nigerian community manager for e-commerce marketplace Cont3nt.com, has a similar view. More and more people in Africa have mobile technology and are itching to communicate with it, noted Umeadi, whose site allows people to upload photos and video they believe are newsworthy. Cont3nt.com then markets the footage to commercial outlets, including global media companies like CNN.
“People believe their video is valuable, but they cannot figure out where it can go — where they can have that accessibility,” said Umeadi, whose company takes a 5% cut of the profit from arranging deals between photographers and media companies. “Once it is created, how can they get it to CNN or the like? Ultimately, Africans, like people everywhere, want to interact with their technology — and they would like to make money doing it.”
Gundan added that African consumers also want to spend the money they make on travel, which she hopes her start-up will give them a chance to do. Even with mobile technology, she said, only top-tier hotels and spas in Africa have a significant web presence. “Expedia has something like 4,000 hotels, but there are 10,000 in South Africa alone,” Gundan pointed out. “We just found that a lot of travelers could not find the two- and three-star hotels, which have just depended on word of mouth. Lonely Planet would have a few reviews, but nothing comprehensive.”
Her site targets consumers in the United States and Europe who have “some money, but are still looking for deals,” she said, noting that the company has to visit hotels one by one to convince owners to trust the Internet for marketing and payments. The company is licensing the information to travel agents, but also wants to make it available to independent travelers. “That is what a start-up does — reach out to an audience that is being underserved.”
But there are still many challenges standing in the way of entrepreneurs in Africa. Each government is different, and each has fees and, just as likely, regulators and others who expect to be paid under-the-table tips or bribes. Then there is the problem of the power grid, which shuts down at an alarming rate in some areas, a disaster for a technology start-up at a crucial moment in its development.
The key, the panelists agreed, is to get to know each market. There is no short cut for that, especially for a niche business. Nwaneri noted that a businessperson cannot just go into a Nigerian village and show a man how to use an iPad to buy shirts simply because he or she has a feeling that there is a market there. “First of all, will the man run away when he sees an iPad?” Nwaneri asked. “Does he really need another shirt? Who is going to deliver that shirt? … There is no substitute for knowing the culture.”
According to Bomani, it may be better to have local people run the businesses, which is how she structured Made From Cloth. She discovered a great interest in fashion across Africa, so she decided that her tech business would act as more of a middleman, helping designers and manufacturers to market their wares around the continent and the world through the Internet.
“We are not doing the glitz and glam, but getting down to where every designer has a connection to the business world,” she noted. “What is wonderful about a start-up is that you see the infrastructure getting built up. Anything can be a revenue-generating business. If we get fashion businesses started, then there will be lots of jobs and lots of revenue…. It will take time, even with African mobile technology booming, but all the effort will be worth it.”