In the latest Africa’s Investment Destination Index that was recently released, Nigeria was ranked 19 out of 54 African countries. In effect, if a foreign investor was to make a choice in which economy to do business, Nigeria would be his 19th choice. It is a far cry from a country, which not long ago was ranked as the third fastest growing economy in the world.
For much of Africa, the optimism of the Africa rising slogan is wearing down. Much of the problem tends to be that many African economies are rentier states. In effect, when there is a boom in the sale of natural resources, the economy tends to look generally healthy. At best, this creates superficial climate of prosperity, and at worse it fosters a complacency, with the revenues of from such boom largely frittered by the political class. Little effort is ever made to close the infrastructural gaps that could aid SMEs.
It is clearly time for more African countries to start paying attention to changing economic and investment realities happening at the global level. When we understand how money and investment works at the global level, we can better understand how to attract it. The digital takeover is the new conversation, and start ups that have found brilliant and effective ways of simplifying daily life are the new magnets for venture capitalists.
While it has been the norm for governments to shape the economic focus in most African countries, this is one area I believe private sector have the better opportunity to drive growth, even against the backdrop of infrastructural and institutional gaps. For example, Nigeria’s foremost tech incubator, the Co-Creation Hub which is solely private sector driven appears more vibrant than Botswana Innovation Hub (BIH) which is fully piloted by the government. The former had attracted the attention of Facebook’s Mark Zuckerberg, culminating to his first ever visit to Nigeria, and in fact, West Africa.
At the recent Forbes Under 30 Summit in Israel, venture capitalism and foreign direct investments in emerging economies was predictably top of the agenda. I was particularly lucky to attend the Forbes Under 30 Summit in Boston, in October 2016. The Summit afforded me the opportunity of interacting with brilliant investors and entrepreneurs, and particularly an opportunity to meet Richard Branson whom I have always admired deeply. These events create opportunities for young African entrepreneurs, like myself, to identify ways in which we can shape the future of our own businesses and economies in collaboration with important global capitalist actors.
The discussions at the Under 30 Summit in Israel bordered on new frontiers for investment. For the majority of folks gathered at the event, is a palpable, if not impatient desire to evaluate and discuss where the next most favourable destination for business are. What are the next best ideas they can fund, and how good are the prospect of returns on their investment(s). Interestingly, Africa features rather marginally, if at all, in this conversation. There is money, yes. There are investors with the stash, yes. But the continent is yet to position itself properly to welcome these opportunities.
Sitting in the panel with some of these venture capital portfolio managers, we discussed guerrilla financing; mostly how businesses move from start up to scale-up. Start ups are businesses that have the potential to grow and expand, because it plugs an important need in the market. Scale-up is when this little business receives the required amount of funding to give it the needed stability to compete in the market.
This is where tech incubators can act as catalyst for economic growth in Africa. Places like Zambia and Code d’Ivoire are already showing promising signs in attracting these sorts of FDIs, but Nigeria has the talent and potential to attract double of what they currently do if there is a targeted policy to develop spaces for these tech incubators to thrive. Through tech incubators, the continent can generate genuine ideas that use technology to solve various economic, social and in fact governmental problems, and attracting foreign capital while at it. Marketable ideas generated from these tech incubators can attract foreign capital either in the form of for-profit investment or grants.
For example, BudgIT the Nigerian IT organization that uses charts and infographics to explain government revenues and remittances across the federation, is a good instance of how home-grown start ups can attract foreign investment. Given its early promise, the investment group Omidyar Network injected $400,000 in the firm, and in less than two years afterwards, the organization won a $1.4M grant from Bill and Melinda Gates Foundation. BudgIT exemplifies how start up ideas can plug governance gap, and at the same time attract foreign capital from global bodies interested in open governance. BudgIT’s use of charts and infographics to simplify government remittances at both the state and federal level, gives every Nigerian, even the barely literate, a chance to understand government spending.
This is not to suggest that every technology-driven solution has to solve problems of government transparency. Far from it. Tech incubators can produce ideas that are also strictly for meeting an economic and social need, while making profit for its shareholders. Every extra fund such organisations receives, however, puts it in a position to scale up their activities, as well as open them up to new local and international networks. With that also comes the opportunity of expanding operations beyond their immediate borders, attract new clients, and widen the breadth and depth of their operations. Essentially, this is one way the private sector drives growth in an economy.
Tech incubators, and other such spaces for such technology-driven ideas to solve economic and governmental problems are urgently needed at this time in the continent, if we are to join the global business train. Tech incubators can drive solutions from financial technology for banks and corporate bodies, educational technologies for higher institutions, and governance solutions in terms of using technology to promote accountability. Currently, Africa is lagging far behind, and time is running out.