12 predictions for Africa Tech Scene in 2012
It has been a banner year for the Africa technology scene as the world begins to turn to the continent – the Economist Africa rising cover story article was for many, a big validation in the future opportunities as well as challenges for Africa. The best follow up post worth reading is by Professor Juma of the Harvard Kennedy School in the UK Guardian blog, both recognize the importance of the technology scene in supporting Africa’s prosperity.
In the spirit of the new year and holidays, I compiled 12 predictions for 2012 based on my experience and trends I am seeing as a Silicon Valley professional, observer and participant within the East African tech startup scene, many inspired from stories we covered here over 2011. Here’s to a great year in Africa Tech. I hope to continue covering this exciting area next year and beyond.
1) Feature phone to Smartphone + a touch of Tablet: Smartphone adoption will grow among Africa’s emerging middle class as entry prices for an unlocked phone continue to dip below $100. Nokia/Microsoft Symbian/Windows Phone and Google/Samsung Android will battle for smartphone dominance- Nokia’s strong brand and feature phone momentum will prove to be an advantage. But affordable Chinese smartphones led by Huawei’s Ideos will continue to tempt Africans to upgrade. Tablet usage will begin growing as prices drop below $200 starting within education sector. Check out the Nigerian tablet from Encipher based on Android, locally designed hardware customized to a big local market like Nigeria is a smart strategy if prices are kept in check. RIM’s Blackberry will continue to be adopted by the elite and corporate circles- one of the last bright spots for RIM’s declining dominance who initially popularized the smartphone category.
2) Evolution & Maturity of Mobile Money: Mobile money will begin to grow with other mobile operators in other countries (emulating Safaricom’s M-PESA success in Kenya) after operators refine and adapt their marketing and customer education programs after some slow starts. For example, Gates foundation provided Vodacom Tanzania with marketing support before the service started to take off this year.
New models of mobile money will be explored that are less dependent on mobile operators, such as Pagatech in Nigeria, but their growth will be relatively slow given the lack of a strong agent network to begin with. More application of mobile money into vital sectors from health, education and energy but access to financial services will still remain big- especially with the support of donors and the banking sector. Long awaited Mobile Money APIs will finally arrive, empowering developers to build more interesting applications. Recent mobile money outages such as seen with MTN Uganda will not be tolerated and steps will be taken to further regulate as billions is put at risk within these systems which are the digital financial future economy of many African countries.
3) Mobile Commerce & Payment Wars Intensify: We are in the early stages of an amazing change in how electronic payments are done on the continent. Africans will begin to gain more trust from mobile online commerce as trusted global brands including VISA, MasterCard and Paypal enter and compete to play in the ecosystem they previously ignored. We may see new unexpected players such as Google and even local banks (maybe another acquisition of a startup like Fundamo this year?). Verticals that solve key problems in ecommerce will take off first, these include remittance, travel, education and healthcare. We will also see many hybrid models bridge the mobile money world to conventional payment, banking options as was evident with Mastercard/Airtel/Standard Chartered’s Pay Online solution.
4) Mobile broadband Internet Access and the 3G Divide: Mobile broadband rollout will start going more rural, but the urban story will continue to grow strong. The Urban/Rural “internet digital divide” will be a topic of conversation as much as the feature phone vs smartphone debate. Otherwise why should a low income African living in rural areas buy a smartphone if 3G coverage is spotty in their area? Smartphone adoption and mobile broadband rollout are obviously positively correlated- the faster 3G spreads, smartphone demand will follow.
5) Mobile Health coming of Age but still not mature: MHealth projects will begin to move from pilot to scale and impact investors will salivate at the results. We have seen this with Praekelt Foundation in South Africa and expanding into Tanzania, and the successful launch of MedAfrica in Kenya. However business model sustainability will remain a challenge for startups that don’t achieve broad scale to survive longer than 1-2 years.
6) Media disruption takes root: Social media, led by Facebook growth will continue – we will begin to see Facebook API used in more apps. From social gaming niches to media. Africa’s advertisers might even leapfrog into more effective social media marketing bypassing traditional banner/display ad networks- with exception of mobile (Inmobi is a clear leader here). Twitter will continue to break the news faster than traditional African press can keep up with- new opportunities for new media will be exploited to take advantage of this disruption. We might see the chaos of Arab spring fueled by social media head south as African citizens demand more from their Governments.
7) Rush and stumble to Invest in Africa Tech: New investor interest thanks to continuing coverage of Africa economic growth potential vs other markets- especially in the attractive mobile segment (700M subscribers barrier will definitely be crossed in 2012). But most new investors will be spending the year “getting to know” Africa and be largely risk averse. They will realize that Africa is a “negotiated market” coined by Helios Investment Partners’ Tope Lawani-– no one size fits all, rather searching out unique opportunities on the ground vs relying on vanity macro-economic country metrics as a guide. Smart investors will set up offices and presence on the ground at key hubs and hire mix of foreign and local talent, while others will attempt what I call “driveby investing” from abroad, many will not succeed in adopting to the local culture fast enough. Private equity or late stage investing will continue to focus on much needed infrastructure to support growth and of course on those Tech parks.
8 ) Rise of Angel & Seed investing “Sea Turtles vs Residents”: There will be more seed funding for African tech startups as investors realize they need to take more risks to generate deal flow and more tech savvy angel investors begin showing up in Africa to fill the void. Domestic tech investing will start to take off as more capital is mobilized from the Africa elite class and successful first generation entrepreneurs realize the strategic value of investing in Africa tech vs other areas. Returning Diaspora, similar to the “sea turtles” of China (educated abroad and swimming home) in the first wave of tech startups there, will lead the charge based on technical and business skills, but resident Africans will learn fast and outsmart diaspora/sea turtles with their unique understanding of the local market- teams that combine a smart mix of both local, foreign and diaspora talent are poised to win. Events such as Pivot25 and Convergence will be the primary go-to areas to find investments, but smart investors will look harder in unexpected places.
9) Impact Investors figure out what “impact” actually means in Africa and add Tech to their portfolio: Impact investors (a growing movement and a confused asset class) will realize software is eating up the world and that includes Africa, but many investors will move on to the “next big thing” (first it was microfinance, then health, education and energy) but balance it with investing more on livelihood via job creation for real impact as they realize jobs for Africa’s youth is the continent’s biggest challenge for stability. Others of course have already figured this out- such as Omidyar Network.
10) New Africa Tech Hub Challengers emerge: Nigeria will emerge (“Silicon Lagoon”?) as a region to challenge Kenya’s “Silicon Savannah” but Kenya will still lead based on strategic position, business culture, welcoming policies and hungry talent- this will accelerate post 2012 election. Silicon Cape in South Africa will also continue to exert influence with the launch of Umbono accelerator.
11) China lays down infrastructure, India and West builds services: Increasing multinational corporate interest in Africa, led by mobile, business process outsourcing, cloud computing vendors and hardware. China and India based firms will lead the charge in new firms operating in the region with their respective strengths. China will continue to exert their influence by providing cheap hardware, networking equipment and infrastructure- India and the West focus on services and software development.
12) Africa Tech Talent and Skills shortage is real. Steps to strengthen continue: A continued focus on education and incubation as a key pillar in building an African entrepreneurial tech community. Kenya ICT board showed this in their Julisha Report. Diaspora talent will begin to help out more in building tech communities at every level from technical capacity to finance. Government incubators will begin to show their weakness- a realization that technology excellence, passion and fostering of strong “hacker” communities are key to succeeding. World Class Universities will begin to build partnerships with African educational institutions to strengthen a tech ready talent pool as we saw with Carnegie Mellon and Rwanda. And if you missed it, Bob King who made a fortune investing in Chinese search engine Baidu, donated $150M to Stanford University to explore, research and support emerging market entrepreneurs– Africa is clearly in sight. Corporates such as Samsung will further roll out training programs, others will follow in their lead.