Africa’s innovation landscape is accelerating as its population grows larger and younger and as technology evolves. This is leading to greater numbers of aspiring entrepreneurs and – the inevitable outcome – more solutions to local problems. We have seen African innovations deliver solutions to the continent’s own problems right across Africa – famous examples include Kenya’s M-PESA, which allows for payments to be made my mobile phone. The system has evolved to provide microfinance to small businesses and allow people to send money overseas, save money and facilitate the fast payment of goods and services: all without a bank account. However, the continent needs to define new approaches to boosting innovation and productivity, help innovators to scale up their business models and break down remaining barriers to success.
In many ways, African innovators are already doing an incredible job of scaling up. M-PESA is such an example – taking advantage of the rapid expansion of cellular coverage and low cost of basic mobile phones and entry-level smartphones. Achieving widespread cellular coverage was a major challenge itself – Africa is bigger than the United States, China, India and most of Europe combined. So many parts of Africa ended up leapfrogging the older technologies – fixed lines and copper cables.
One way of boosting Africa’s innovations is to look at the informal sector, which is fast-growing but go unrecognized. A 2015 report on the informal sector by the United Nations Economic Commission for Africa (ECA) claims that around 70% of those employed in sub-Saharan Africa are in the informal sector. The tragedy for innovators in the informal sector is that informal businesses are not licensed and are therefore unable to access capital through traditional routes. The expansion is extremely difficult, partly because governments often make it more difficult for informal businesses to register by asking them to pay tax in advance. This is an issue that was discussed at a February 2016 meeting of experts at the Africa Research Institute. For many small businesses owners in the informal sector, the costs attached to ‘going formal’ are prohibitive.
Financial and regulatory barriers must be broken down so that informal businesses have an opportunity to grow and compete on a level playing field. Yet we also must learn that the continent can benefit enormously by harnessing the potential of the informal sector, particularly in agriculture and farming. The informal agricultural and farming sectors often withhold generations of expertise in sustainable farming techniques – but the lack of technical training, low literacy or vocational training means that those working in the informal sector have limited options. There must now be a greater drive towards bridging the gap between those working in the formal and informal sectors. Transitioning to an innovative, knowledge-based economy is an important objective if we are to see those from the informal sector achieve their potential.
Emerging innovation ecosystems
Developing innovation ecosystems is part of that journey towards building a knowledge-based economy. Niche incubator hubs, Makers Spaces, and Hybrid-Hubs provide much more than capital. Support services teach individuals how to grow a profitable business and how to make the right decisions. They vary in how they operate and what they offer young innovators, but the common thread is a commitment to creating an environment that steers entrepreneurs in the right direction through operational guidance and the provision of an entrepreneurial, creative space.
For example, in Angola, I created the country’s first hybrid innovation hub, Fábrica de Sabão, in the heart of the largest slum in Angola. I believe there are tremendous opportunities to tap into this segment of society to drive needs-based innovation. Apart from comprising of an incubator, accelerator and co-working component, it also has a MakerSpace, fitted out with 3D printing and CNC machines. The goal here is to enable marginalized communities to become their own designers, manufacturers, buyers, and sellers – a self-sustaining community of entrepreneurs.
Hubs are popping up right across the continent and are financially backed by governments, NGO’s, VC’s, private businesses and wealthy donors. The objective is to simply throw open the doors to anybody who has an idea and a business model – and we must ensure that the doors are open to those in the informal sector too.
Encouraging bold ideas
Encouraging entrepreneurs to come up with bold ideas and creating a culture of enterprise risk-taking also means creating funding models that support enterprise and help those who are willing to take a risk. In the developed markets, we have much easier access to finance through a whole range of avenues: traditional bank lending, VC’s, crowd-sourced-funding.
Innovative finance models are needed in Africa. They may include loans and grants from organizations such as the Rockefeller Foundation or competition prizes from organizations such as the African Innovation Foundation’s (AIF) Innovation Prize for Africa (IPA), which awards $100,000 per year to the winner of its Africa-wide innovation competition. Innovative financing is incredibly important because the region’s capital and banking markets are still too immature to accommodate entrepreneurs and innovators and the domestic investor community is smaller than those of the West.
Competitions, which offer lucrative cash prizes are growing in popularity. They play an important role not only because they inject cash where it is most needed but they raise the profile of enterprise and encourage others to reach out and attempt to bring their ideas to fruition. The African Development Bank (AfDB) launched its first Innovation Weekend in 2015, with the goal of finding technology-led solutions from West Africa – particularly ideas that better the lives of women and youth. This event saw 1200 contestants take part in a three-day workshop that focused on how to evolve their ideas, whilst also gaining access to mentors.
We also should remember that many innovations that have succeeded through unusual methods and new modes of funding have changed lives. The 1st place prize for the AIF’s annual Innovation Prize for Africa is $100,000 – and we have seen this competition give rise to solutions that are changing lives for the better, including in areas such as agriculture, tuberculosis, and malaria. For example, IPA 2013 winners, Agriprotein, invented a method that uses waste and flies larvae to produce a natural animal feed that is more ecologically friendly, higher in nutritional value and cost-effective for African farmers. They went on to raise over US$11 million within one year, and have since opened two large-scale commercial fly farms as well as securing increased long-term funding from investors.
Simply put, competitions can transform society. There are untold numbers of individuals working in the informal sector, academia or their own backyard with ideas that may turn out to be transformative. However, we must all collectively find new ways to break down barriers to success and help innovators small, medium and large realize their full potential.
By Jean-Claude Bastos de Morais, Founder, African Innovation Foundation