European Tech Entrepreneurs in Africa: Can They Succeed?
European entrepreneurs can solve problems in Africa by creating tech products, and they might be able to relate more than they realize.
However, some challenges exist in the African market, which EU entrepreneurs should know before developing tech products.
The African economy is volatile, and entrepreneurs should choose African decision-makers carefully before trying to solve problems on the continent. Still, the private sector is ripe for the picking, and some African entrepreneurs are ready for economic growth.
Discover the business opportunities for direct investments, economic development, and the entrepreneurship ecosystem. You may find the ideal joint venture or unprecedented opportunities in the startup ecosystem for European entrepreneurs.
Overcoming Africa's Tech Startup Obstacles: The E-Toll Case Study
South Africa provides an example of common obstacles for African startups, particularly those partnering with European entrepreneurs. South African businesses developed an e-tolling system to fund over €1 billion worth of upgrades to the roads in major cities. Many obstacles derailed the venture, with the government's failure to end e-tolls initially resulting in a continued contract with a European company.
Massive gantries were installed in 2011, capturing payment information from tags situated inside vehicles passing under them. The South African National Road's Agency Ltd. (SANRAL) partnered with Austrian company Kapsch TrafficCom to design and implement Electronic Toll Collection (ETC) software to automatically bill South African drivers using e-tags.
Obstacle one was that South Africans were reluctant to change. They also felt like the new e-toll system was overpriced, as traveling from one freeway offramp to the next could cost a few euros. Drivers refuse to pay their bills, even using anti-e-toll stickers to show their distaste for the automated system.
Unfortunately, another obstacle became clear soon enough. "E-toll contractors accused of corrupt payments" headlined the news in 2021, including the Austrian tech giant and SANRAL. By April 2024, South Africans rejoiced for a new headline, "e-tolls scrapped." The South African economy and people won the battle to tear down the gantries.
The political environment is ripe with corruption when partnering with government institutes in Africa, and the stubbornness of South Africans created two obstacles that ensured the tech product couldn't survive. Private African companies may not have the corruption challenge, but Africans are as stubborn as Germans, making European entrepreneurs likely to relate.
Other challenges facing European Union and Silicon Valley tech investors and innovators include a lack of digital literacy, a strong hesitation toward technology adoption from advanced economies, a fragmented African market, and inadequate IT infrastructure. Additionally, state agencies and large business groups tend to monopolize sectors.
Show Me the Data! Research By the International Finance Corporation
The International Finance Corporation (IFC) published a book about leveraging digital tech for African business growth, and Marcio Cruz, an IFC principal economist, shared some valuable insights. Cruz explains that many African countries don't even have access to general-purpose technology like mobile banking and supply chain management software.
Cruz noted hesitation and stubbornness when realizing that only 20% of the 60% of African companies with productivity tools actually use them. He further noted that opportunities were vast, with additional funding for nearly 12 million formal businesses and 230 million companies in the informal sector paving the way for the EU financial sector to step up.
A lack of natural resources also fails the African economy, providing many opportunities for European entrepreneurs to boost Africa with human capital, corporate entrepreneurship, access to education, and green technologies. However, a lack of managerial capabilities and infrastructure were some of the most concerning data points in the research.
The African Development Bank latched onto the opportunities for the cross-border trade of tech products and technology transfer opportunities in African countries. The African Development Bank and European Union Boost Africa Program plan to invest 10 million euros in the Seedstars Africa Ventures program designed to boost Africa’s startups.
The data shows opportunity and how other EU programs and companies are investing in African decision-makers. The European Investment Bank also shared an article about leading African fund managers receiving rewards for investing in African startups, including the First Circle Capital, Knife Capital, and SpeedInvest groups.
Another success story that provides data to support an African investment plan is how the Global Gateway Europe Investment Package helped 300 new companies and created 5,000 jobs in North Africa while introducing sustainable technologies for a green economy. Private sector stakeholders boosted the human capital and created a low-carbon economy.
Understand the Regulatory Environment for Innovative Technologies in African Companies
The digital divide between over 50 African countries can also challenge venture capital innovators from Silicon Valley and the European Union because regulatory requirements differ from one region to another. North Africa, East Africa, South Africa, and Sub-Saharan Africa are regulated by different digital policies and laws, which even change between the public and private sectors.
For example, Carnegie Endowment shows that Ghana, a Sub-Saharan African digital technology leader, has 4 laws and 2 regulations, while Egypt in North Africa has 6 laws, 9 regulations, and 13 policies regulating digital technology. Meanwhile, South Africa institutes 7 laws, 11 regulations, and 13 policies.
A technology transfer to private sector stakeholders or digital innovation for green technologies for a low-carbon economy requires EU entrepreneurs to understand the regulatory environment, whether in North Africa, East Africa, or South Africa. Private sector players seeking tech innovation in Africa should rely on trusted programs.
Innovation with public sectors through the African Circular Economy Alliance (ACEA) can guide business leaders as the organization welcomes an "Africa-EU partnership." EU entrepreneurs can also consider applying to the European Regional Development Fund, an EU-funding program designed to move development wealth to underdeveloped regions.
Working with the European Regional Development Fund or African Circular Economy Alliance will guide regulatory compliance for European entrepreneurs working with a center of innovation in Africa. Another program is the EU Talent Partnerships program, providing venture capital, regulatory guidelines, frameworks, and "Africa-EU partnership" guidance.
Opportunities for Foreign Investments From Private Companies in the Public Business Environment
Business leaders, major private sector players, and especially European startup entrepreneurs can provide access to funding, access to education, access to capital, or even access to electricity, boosting corporate entrepreneurship in African countries. Access to funding is a primary need in public-private partnership ventures.
For instance, the BBC suggests that South Africans are rejoicing as the public entity called Eskom manages to keep the lights on after 17 years of an energy crisis that saw the country plunged into darkness for hours every day. Access to electricity was one of the primary supply chain management challenges in South Africa.
The state-owned supplier used a system called load shedding. What is load shedding? The system was used to distribute the load because the infrastructure wasn't stable enough, and access to funding wasn't easily available to renew the energy infrastructure. Sustainable supply chains are a major necessity in various African countries.
Many African countries experience an energy crisis, and infrastructure and technology investments from private sector entities are necessary. However, understand the political environment before investing in state-monopolized entities, as corruption can run rampant. The BBC published how Eskom's load-shedding roots actually began with corruption.
Investing in sustainable supply chains, infrastructure, or sustainable growth controlled by state-owned monopolies in Africa requires a coherent approach. Always partner with the African Union or European Union entities that guide the actual implementation approach before investing in tech products, infrastructure, or sustainable supply chain management.
Entrepreneurial Opportunities for the Startup Ecosystem: Advanced Technologies for Economic Development
Partner with innovation hubs in multiple African countries for sustainable growth, including North Africa, East Africa, South Africa, West Africa, and Sub-Saharan Africa. The rise of African tech hubs in Cape Town, Lagos, and Nairobi provides private companies with many opportunities for investment and tech product development.
The center of innovation in these cities has often been called Africa's Silicon Valley, providing seamless access to markets for mobile banking, supply chain management, and other technological innovations. Business leaders can also enjoy local access to resources necessary for international or cross-border trade by focusing on an innovation hub.
South Africa is the technological pioneer of Africa when considering the top 5 African countries for IT development and sustainable growth opportunities, with the innovation hub located in Cape Town, a beautifully scenic city EU entrepreneurs can visit when partnering with private sector stakeholders in the center of innovation.
Meanwhile, Nigeria is the African giant among the top 5 African countries where EU entrepreneurs can invest and develop tech products. Nigeria has a massive startup ecosystem and access to market potential for private sector entities in the EU. Additionally, Kenya has excellent infrastructure and government support for EU investors.
Rwanda is a rising star among the best African countries for European entrepreneurs as it has simple regulatory compliance standards and oversight. It also has government initiatives to help startups. Finally, Egypt is the gateway to tech products for cross-border trade, and its ideal location is close to Europe.
Alternatively, partner with private sector associations like the Center for Cooperation with the Private Sector (CCPS) in South Africa, which was established by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) to help private sector stakeholders enter the South African market to provide access to education and other technologies.
The European Commission states that many EU startup entrepreneurs are building bridges of innovation between Europe and Africa by developing popular tech products like smart health apps and wearable devices, FinTech solutions, food products, education tech, and sustainable energy technologies.
Summing Up European Entrepreneurs Solving Problems In Africa By Creating Tech Products
Opportunities for entrepreneurs to create tech products to solve African problems are abundant, but business leaders must understand the political environment, regulatory requirements, major private sector entities, and available seed investment programs and service providers that guide private sector stakeholders from the EU before investing in Africa.
The EU Boost Africa program, the African Development Bank, EU Talent Partnerships, the European Investment Bank, and the European Regional Development Fund are some private sector associations that guide a technology transfer from advanced economies in the EU and Silicon Valley.
Let our expert business consultancy services help you drive economic growth in Africa. Our entrepreneurial coaching services provide the backbone of how advanced economies can integrate with the digital economy in Africa, using the right business models and following regulatory requirements. Private-sector players can contact us today for guidance and strategic investment plans.
