The last couple of years have been very interesting for the African startup ecosystem. 2023 specifically saw a rebalancing of investments across four of the continent’s largest tech markets; Egypt, Nigeria, Kenya, and South Africa, according to ‘Africa: The Big Deal’, a tech research firm.
Over the years though, policies have continued to to affect the growth of startups in the region. Governments in the region have failed to prioritize policies that promote entrepreneurship – this includes supportive tax frameworks, streamlined business registration processes and event funding.
The African Tech Startups As Engines Of Growth & Development report by Mozilla Corporation notes that despite the startup industry in Africa being poised for significant growth, African policymakers and ecosystem stakeholders need to take action to address these challenges.
‘’There is an urgent need for vision, clarity of purpose, commitments, and implementation of institutional infrastructure to drive the startup ecosystem’’ the report says.
‘’Political leadership at the highest levels, definitively the presidency, should embrace the challenge of driving the growth of the African startup ecosystem and lead the way by giving policy direction and actively engaging with lower-level governance structures to create an enabling environment for startups in each country,’’ it adds.
Mozilla in the report says government support for innovation and digital entrepreneurship must be much stronger than it currently is.
‘‘African governments can stimulate a culture of entrepreneurship and risk-taking by reducing regulatory barriers, promoting education and mentorship, and celebrating success stories. They can also consider enacting startup legislation in addition to supportive policies and regulations that open the opportunity for startups to serve Africa through the AfCFTA arrangements. However, legislation must enable transnational collaborations and be periodically reviewed.’’ it says.
In countries like Kenya, President William Ruto has committed to signing the Startup Bill 2022 into law by April this year.
The Startup Bill which has been in the works since 2021 seeks to govern the interactions between the government, incubators, start-ups, and investors. Registered startups will receive incentives such as tax breaks and access to credit, a move that is expected to boost innovation and job creation in the country with a large population of unemployed youths.
When the bill finally becomes law, Startups will further gain access to much-needed resources, including funding, mentorship, and training.
Mozilla is also urging African governments to do more to deepen the talent pool available to the startup ecosystem.
‘’Many African founders say that most graduates are “half-baked” and need to be retrained as the disconnect between academia and industry is said to be huge. Stakeholders are unanimous that Africa’s educational curriculum needs to be strengthened from high school so the culture of entrepreneurship and innovation can be created and cultivated early on.’’ it says.
Nevertheless, the report notes that there is demonstrable evidence that there is massive potential throughout the African startup ecosystem even in markets that are currently struggling.
The near-sudden influx and relentless growth in the levels of new investments flowing into African startups year-on-year, the improving climate of digital transformation and youth entrepreneurship – inspired by recent big-ticket capital raises – and the growing implementation of sectoral incentives through startup acts offering tax breaks, salary support for new founders, preferential treatment in public tenders, and other government initiatives altogether hold good promise for the future of the African startup ecosystem.
African policymakers the report says, however, need to adopt an ecosystem approach in coordination with industry to immediately lift national startup regulatory systems to address these issues while balancing the interests of various stakeholders.
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