As East Africa recovers from the social and economic impact of the pandemic, could the region's vibrant tech startup ecosystem be a catalyst for accelerated growth?
Following a year of constrained growth - East Africa saw only meagre growth of 0.9 percent in 2020, compared to 6.6 percent in 2019 - economies across the region look poised to recover some lost ground.
According to the latest data, Kenya is expected to see the growth of 6.3 percent in 2021, Ethiopia 4 percent, Uganda 3.7 percent, Rwanda 5.7 percent and Tanzania 5.2 percent in 2021.
While traditional sectors such as tourism took a heavy knock due to the lockdowns imposed as well as limits to international travel, the region’s tech sector proved resilient and could hold promising potential for accelerating the region’s economic recovery.
For example, mobile money, for which the region is considered a global leader, continued to perform well. Mobile money transfers in Kenya grew by 62.9 percent in 2020, largely due to social distancing measures that saw consumers shy away from cash payments.
The (healthy) state of startup innovation in East Africa
The quality of fintech startups that have emerged in East Africa over the past decade has established the region as one of the continent's most innovative.
Nairobi, long considered as a regional technology and trade hub, recently took a bold step toward also becoming a world-class financial hub with the launch of the Nairobi International Financial Centre.
The centre could unlock a new era of international investment into East Africa and its vibrant business ecosystem, as evidenced by the recent $181m investment by the UK government.
The region has also established vital innovation hubs to provide support and greater market opportunities for local innovators.
Rwanda's kLab provides an open space for collaboration and innovation and brings together students, thinkers, and entrepreneurs to turn concepts into viable products and services.
In Uganda, the Outbox incubation and innovation space provides similar support to local entrepreneurs, while Kenya's iHub has brought together innovators and some of the world's leading organisations to accelerate startup activity in the country.
And in Kenya, the Konza Technology City, a brand new smart city spanning 2000 hectares and designed to create up to 100 000 new jobs, is currently under construction. Once completed, the smart city will play host to business processing outsourcing, software development, data centres, call centres, a university campus and residential units, schools and hospitals.
Supporting innovators and entrepreneurs
There is arguably a vital role that larger enterprises can play in supporting the region’s startups and fostering greater innovation.
In the energy sector, green energy innovation could unlock an estimated $100-billion a year in investment into the continent's transition away from fossil fuel energy.
As large global enterprises shift to more sustainable practices and boost investment into cleaner technologies, partnerships with local innovators could prove beneficial and ensure knowledge and revenue is retained locally.
Building climate-resilient infrastructure - a growing concern for nations facing the escalating impacts of rapid climate change - holds a further investment opportunity of between $130 billion and $170 billion.
And investment into the circular economy could unlock not only new innovation but an opportunity to reverse some of the more harmful and unsustainable business practices that are still prevalent today and establish the region as a leader in the fight for sustainability. Examples of circular economy innovation in East Africa abounds:
Kapa Oil Refineries, one of Kenya’s leading manufacturers of sustainably and ethically produced consumer goods, has established more than 1.5GW of solar power to reduce the impact of its operations on the environment.
Silafrica, the region’s largest packaging manufacturer, has embedded circular economy principles in its production processes, and today counts leading global companies such as Coca-Cola among its customers.
And CP Solar Resources, a leading solar power installer in Kenya, is providing households, businesses and manufacturers with turnkey solar power options to reduce the strain on Kenya’s power grid while advancing the growth of the local green economy.
Such examples point to a growing ecosystem of contributors to the circular economy, driven by the region’s most innovative entrepreneurs and companies.
As we work together to repair the economic damage wrought by the pandemic and endeavour to build a more sustainable and equitable society, our world-class tech startups could hold the key to our collective success. It is vital that we provide them with the support they need to find solutions to some of our most pressing challenges.
Hardeep Sound is the Regional Sales Director, East Africa at SAP.
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