10/02/22

Africa’s digital startups ‘miss out on incentives’

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Writing a computer programme. Copyright: Mike Ngo, WOCinTech Chat/CC BY 2.0

Speed read

  • ‘Report says ‘fourth industrial revolution’ offers huge potential for Africa
  • But only seven per cent of national incentives studied supported digital technologies
  • African governments ‘should partner with private sector’ to spur adoption of digital technologies

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[KAMPALA] Less than ten per cent of government incentives in Africa facilitate investment into startups focusing on so-called fourth industrial revolution technologies such as robotics and artificial intelligence, a report says.

The report released by the World Economic Forum in collaboration with Deloitte last month shows that startup funding in Africa topped US$1.2 billion in 2020 – a six-fold increase in five years.

However, the evaluation of 188 national incentives across 32 African countries found that only 14 incentives (about seven per cent) concentrated in ten countries were responsive to investment in technologies that drive the digital revolution.

“By adopting the digital technologies and solutions created by private businesses, governments can deliver digital services to citizens and in the process improve their lives.”

Shireen Ramjoo, CEO, Liquid Crypto-Money, Johannesburg

“While there are incentives to support industrialisation, there are very few that focus on technology, technology adoption and technology integration,” says the report, which looks at how to attract investment and accelerate adoption of digital technologies in the region.

“Probably the progress we have seen so far has been around mobile technology,” says Strini Perumal, senior manager for global investments and innovation incentives at Deloitte South Africa, which produced the report.

“Mobile [technology] seems to be the way in which Africans have been able to connect in spite of not having traditional infrastructure which the rest of the world has developed.”

According to the report, Africa’s digital economy could contribute nearly US$180 billion to the region’s growth by the middle of the decade, but experts worry that only 39 per cent of the population use the internet, making Africa the world’s least connected continent.

Perumal says that the continent should start asking questions such as what to do to begin connecting more people. “We have to work hard on the aspects of data and infrastructure. We need to make data more available. This is an area of concern,” he explains.

He adds that the level of skills in Africa is low compared with the rest of the world. “Knowledge-based capital requires skills development, and this is the area that we are not doing too well,” he says, adding that research and development is critical to digital transformation.

Perumal hailed countries such as Senegal and Tunisia for enacting policies meant to help tech startups to take risks.

He tells SciDev.Net: “The most striking aspect has been to see that in countries like Senegal and Tunisia, their piece of legislation seeks to encourage start-ups to take risks, especially in the tech sector.
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“And in order to do that, they allow them, for instance, tax holidays until they become profitable. Also, they allow them to return to their former place of work if their startups fail. These are the kinds of regulation and policy instruments that are really working well.”

Shireen Ramjoo, chief executive officer of Liquid Crypto-Money, a startup in Johannesburg, describes the report as alarming. She says that government regulations and incentives are pivotal in driving the continent’s digital economy and addressing problems such as addressing such as high data costs, poor connectivity, and lack of digital skills.

“Governments’ key roles should be to work closely with the private sector and invest in tech startups to boost digital transformation,” Ramjoo explains.

“By adopting the digital technologies and solutions created by private businesses, governments can deliver digital services to citizens and in the process improve their lives.

“The digitisation of the economy creates benefits as digital technologies drive innovation and fuel job opportunities and economic growth, and create opportunities for people to access products and services from any location more cheaply.”

This piece was produced by SciDev.Net’s Sub-Saharan Africa English desk.