How Governments Can Help—Or Hinder—The Growth of a Thriving Tech Industry in Africa

What's at stake for governments?

In a continent that is brimming with potential, the tech industry in Africa stands out as one of the most promising sectors for driving economic growth, creating employment, and solving entrenched social challenges. From innovations in fintech and agritech to breakthroughs in healthcare and education technology, the tech industry holds the power to redefine the future of Africa. However, the realization of this immense potential hinges critically on the role that governments play.

What's at stake for governments is not just the promise of increased GDP or more jobs—though these are essential—but also the cultivation of an environment where problem-solving through technology becomes the norm rather than the exception. Such an environment can drastically reduce barriers to entry in various sectors, democratize access to essential services, and create a fertile ground for innovation to flourish.

In short, the future of the African tech industry is a litmus test for the effectiveness of governance and the strategic foresight of its leaders. Whether governments act as facilitators or inhibitors will significantly influence the trajectory of development across the continent.

In this article, we start by looking at ways in which governments harm or create barriers for their tech industry and then we finally look at ways in which African governments can play a constructive role in championing the development of the tech industry in their countries.

First Do No Harm: How Governments Stifle the Tech Industry's Potential

Incompetent Leadership Has Predictable Results

One of the most glaring missteps made by governments, especially in Africa, is appointing leaders to ICT Ministries who lack a foundational understanding of the tech sector. This out-of-touch leadership often makes decisions that fail to foster innovation and growth. The appointment of incompetent leadership for political considerations is a bug that continues to hold back the potential of the African continent in many areas. What typically results is neglect of the important work that needs to be done in order to power the technology industry.

Prioritising "Glitz" and PR

An even more visible error is the tendency to pour scarce resources into building glitzy 'tech cities' over understanding the foundational work that needs to be done. While tech cities may look good on paper or in glossy magazine spreads, they divert crucial funding away from the foundational human resource development and opportunities for startups in resource constrained environments. People forget that before Google had a glitzy campus, they started in a small garage. The foundation for building the tech industry starts by first building the human resource - providing technical and managerial skills before you can see the results of successful companies in the form of glitzy campuses in Silicon Valley, Bangalore and Hangzhou. Citizens can innovate from their homes if they have the skills required. Investing in tech cities is putting the cart before the horse especially when the human resource has not yet received the attention it deserves yet.

When Overregulation Kills Innovation

Reflecting on my journey in the tech industry, one thing becomes glaringly clear: many startups are unable to move forward due to restrictive regulatory frameworks. Let's take Kenya's insurance sector as a case in point. The high minimum capital requirement of 20 million Kenyan Shillings effectively locks out startups from even dipping their toes in the water. This capital requirement, designed with large incumbents in mind, excludes young innovators from bringing fresh ideas to an industry that may be ripe for disruption.

Similarly, the prolonged licensing procedures are a startup's worst enemy. Imagine a young company having to wait months, if not years, to secure a license. The loss of financial runway during this period can be a death knell for startups operating on slim budgets. This regulatory rigidity is a monumental barrier to innovation. It's as if these sectors are ring-fenced for incumbents with deep pockets, leaving no room for young, cash-strapped innovators to even make an entry.

Taxes that Steal Capital from StartUps

While startups struggle to find any funding and while many African governments might not be able to afford funding startups, they should not tax startups into an early death. In Kenya for example a startup will end up spending up to 30% of its capital on income taxes when paying employee salaries. Given that the startup has not yet even turned a profit, the effect of this is to immediately reduce the runway of the startup which further worsens the problem of lack of funding. Investors in this case will prefer to stick to safe investments in government offering upwards of 10% interest per year over funding startups which already have the odds against them and will endure additional taxes while creating jobs in the economy.

Moreover, even after taxing the startup, when it comes to government contracts or business, there's an evident bias towards larger, more established, more experienced and often well funded local and international companies, locking out startups from vital opportunities in government spending. Essentially this locks startups out of government spending, stifles competition and innovation and can often be the final nail in the coffin for a local tech industry that has the odds stacked against it.

Neglect of the Startup Industry

The startup industry in many African countries suffers from neglect. Startups will many times only interact with government for licensing and regulatory issues. The concerned government departments do not make a point of engaging with and collaborating with the industry, figuring out how to help them get better organised, showcasing their solutions to government and industry. This represents a major lost opportunity for the governments to help catalyse an industry that could become a strong force of growth and employment if they engage and come up with ways to create an enabling environment for startups to thrive.

What Governments Should Do: Unleashing the Tech Industry's Potential

Visionary & Competent Leadership

The cornerstone for a thriving tech industry starts with visionary leadership at the helm of the government's ICT Ministries. Leaders who are not only proficient in technology but also possess a deep understanding of its transformative potential are critical. Their primary roles should include laying out a compelling vision for the industry, acting as its chief cheerleader, and serving as a central point of contact with the tech community. These leaders need to be proactive ecosystem builders who can inspire and educate the public and private sectors about the opportunities the tech industry presents and manage government resources to drive change. It's encouraging to see that the Nigerian government has appointed a competent and visionary leader for its Ministry of Communications, Innovation and Digital Economy in the person of Dr. ‘Bosun Tijani . Visionary & Competent Leadership is a must-have requirement for a government that's serious about building its tech industry.

Being the industry's number one cheerleader isn't just about laying out a vision; it's about incessantly advocating for it. Government leaders can make substantial strides by publicizing startup success stories, speaking at industry events, and even showing up at product launches. This will help galvanize investor interest, motivate young talent to join the industry, and psychologically uplift entrepreneurs. Moreover, it will legitimize the startup ecosystem in the eyes of both local and global stakeholders. This role was played very well in the nascent Kenyan tech industry by Amb - Prof Bitange Ndemo but since then has struggled to find a champion within the Kenyan government.

The Role of Government in Licensing and Regulations: Paving the Way for Startups to Thrive

While government regulations are often designed to protect the public and maintain a level of standardization in any industry, they can inadvertently serve as barriers to entry for startups, especially in sectors like financial services and healthcare. However, this doesn't have to be the case. Here are some of the strategic steps that governments can take to turn licensing and regulations into catalysts for startup growth rather than obstacles.

Implementing Regulatory Sandboxes

One way to foster innovation is to establish 'regulatory sandboxes' that allow startups to test their business models and technologies within a controlled environment without incurring all the traditional regulatory consequences. This model enables startups to validate their ideas, prove their value, and demonstrate their safety and efficacy before rolling out on a larger scale. Such an approach also gives regulatory bodies the time to understand new technologies better, facilitating a more tailored and effective regulatory framework over time. This means that the door for startups remains open; they can try out their ideas at small scale and when they succeed will have attracted the necessary requirements to be issued with the full license.

Easing Capital Requirements and Licensing Procedures

In many African countries, sectors like insurance and money transfer services have high minimum capital requirements and complicated licensing procedures that act as gatekeepers, keeping startups at bay. Governments can revisit these requirements, perhaps offering staggered or conditional entry requirements that would make it easier for startups to break into these industries. The conditional requirements could be based on milestones like customer numbers or operational scale, allowing startups to grow responsibly without the burden of immediate, substantial financial commitments.

Focused Regulatory Liaison

Governments can set up specialized liaison offices whose primary role is to guide startups through the labyrinth of regulatory requirements. These offices could offer templates, advice, and even one-on-one consultation services to help startups comply with existing regulations without getting bogged down in paperwork, thus saving them both time and money. It is the duty of the regulator to spur innovation within the sector by working with startups.

By adopting these measures, governments can ensure that regulations act as enablers, not obstacles. The ultimate aim is to foster an environment where startups can focus on innovating and scaling, rather than navigating red tape. In doing so, governments won't just be regulating an industry; they will be nurturing an ecosystem, the benefits of which will ripple across economies and societies.

Government's Role in Human Resource Development: Building the Builders of the Industry

The success of a burgeoning tech industry hinges not just on capital and regulation but equally, if not more, on the quality of its human resources. The government has an instrumental role to play in developing this critical asset. Here's how:

Revamping Educational Curricula

The starting point for a highly competent workforce is an education system aligned with industry needs. Governments can collaborate with educational institutions to modernize curricula, incorporating courses that teach relevant skills for today's tech environment. This would go beyond traditional computer science courses to include areas such as artificial intelligence, data science, and cybersecurity, to name a few.

Public-Private Partnerships for Skill Development

Governments can forge partnerships with private tech companies and startups to create skill development programs. These programs could offer practical, hands-on training and could be integrated into the educational system as additional courses or extracurricular activities. This collaboration ensures that the training is directly relevant to what the industry needs.

Sponsorship and Scholarships

By providing scholarships for tech-related courses and bootcamps, the government can make it easier for financially constrained yet deserving candidates to acquire essential skills. These scholarships could be funded through public-private partnerships or earmarked government budgets.

Tech Incubators and Accelerators

Establishing government-backed tech incubators and accelerators can offer a nurturing environment for tech talents. These centers could provide training, mentorship, and resources, effectively acting as a launchpad for aspiring tech professionals and entrepreneurs.

Encouraging Lifelong Learning

The tech industry is ever-changing. Therefore, governments should also focus on continuing education. This could be through online courses, workshops, or seminars that allow existing professionals to keep abreast of the latest technologies and methodologies.

Facilitating International Collaborations

Governments can act as facilitators for international educational exchanges, apprenticeships, or internships that offer exposure to global best practices and technologies. Such opportunities can be invaluable for upskilling the local workforce.

Financial Support and Tax Incentives

While laying down the vision and removing barriers is critical, financial support cannot be overlooked. If resources are available, establishing a government-backed startup fund could give young companies the necessary runway to launch and grow. Even if direct funding isn't feasible, tax incentives, like waiving income taxes on startup employees, can free up much-needed capital. This also encourages potential founders to take the entrepreneurial leap, knowing that the financial risk is somewhat mitigated.

Making It Easier for Startups to Build Products: The Government's Role in Infrastructure and Support

One of the key ways governments can ease the path for startups is by facilitating easy and affordable access to essential infrastructure—be it high-speed internet, co-working spaces, or cloud services. Additionally, governments can advocate for open platforms and encourage critical infrastructure providers like telecommunications companies and public service entities to offer accessible APIs. This would allow startups to easily integrate essential services into their own products, thereby speeding up development cycles and reducing costs. Support for ecosystem builders like tech accelerators and incubators can further cushion startups during their most vulnerable stages, offering them the mentorship, resources, and networking opportunities they need to grow and succeed.

Assisting Startups in Market Entry: A Government's Guide to Fueling Innovation

Once a startup has a viable product, the next major hurdle is market entry—a phase fraught with challenges that can range from customer acquisition to regulatory compliance. Here, the government can play an indispensable role by becoming an early adopter or a test client for startups. This not only provides startups with an initial revenue stream but also serves as an endorsement that can attract further business.

Another avenue of support can be through public-private partnerships, where governments can act as an intermediary to connect startups with larger companies, thereby facilitating pilot programs or investment opportunities. Government-hosted industry events, trade shows, or startup showcases can serve as platforms where startups can exhibit their products to potential clients and investors, increasing their visibility and credibility.

Moreover, governments can consider setting up 'Startup Challenges' focused on solving specific societal or governmental issues. Winners could receive financial incentives, mentorship, and the chance to pilot their solutions within public departments. This not only solves government problems but also offers startups the validation and exposure they need to attract more clients.

By actively aiding startups in breaking into the market, governments can ensure that innovation does not just take root but also thrives and contributes to both societal advancement and economic growth.

Strengthening the Legal Framework and Dispute Resolution in the Startup Industry

In addition to policy and regulation, there is another crucial but often overlooked area where government can have a profound impact—dispute resolution and governance. Startups are particularly vulnerable to internal conflicts, be it between founders, investors, or regulators. These disputes can have crippling consequences, often leading to the downfall of otherwise promising ventures.

Government can step in here as an impartial arbiter, providing a structured framework for dispute resolution that is specifically tailored to the startup environment. This can go a long way in preventing unnecessary dissolutions and ensuring that each stakeholder gets a fair hearing.

Furthermore, governments can offer unified legal guidance on startup governance, ensuring that best practices are adopted from the get-go. By standardizing governance protocols and offering templates for legal setups, they can reduce the ambiguity that often leads to disputes in the first place.

In doing so, the government not only provides startups with the stability they need to flourish but also signals to investors and other stakeholders that the ecosystem is mature and well-regulated. This can be a significant step in building a thriving tech industry, fostering both innovation and trust.

Conclusion: The Imperative for Governmental Stewardship in Africa's Tech Industry

In conclusion, the rise of the tech industry in Africa is not just an opportunity—it's an imperative. From fostering innovation through regulatory sandboxes to building human capital and offering dispute resolution frameworks, there are manifold ways in which governments can serve as nurturing stewards of this burgeoning sector. The onus is on the governmental authorities to recognize their indispensable role and act upon it earnestly.

The ideas presented in this article are not exhaustive but provide a solid foundation upon which governments can build. By taking on the role of visionary leaders, regulators, facilitators, and cheerleaders for the tech industry, governments can significantly influence the course this sector takes. The duty to cultivate this emergent industry is not just an option but a responsibility that bears enormous potential benefits for employment, problem-solving, and socio-economic advancement across the continent.

The stakes are high, but so are the rewards. A thriving tech industry could be the linchpin for Africa's long-term sustainable development, serving as a beacon of innovation and opportunity for the rest of the world. By embracing this role wholeheartedly, governments won't just be powering tech startups; they'll be fueling the future of the entire continent.