Hype around NGO-funded apps is stifling Africa's innovation

Digital Content

The Silicon Savannah brings to mind a hyper-tech innovation zone, a mini-city of mirrored buildings ringed by sandy sub-Saharan scrub. Closer to the truth is a handful of industrial-style offices that occupy the top-floors of mirrored buildings and overlook a traffic-clogged Nairobi city artery called the Ngong Road.

Another common misconception is that Nairobi's most successful tech startups connect small-scale, rural farmers with the wonders of the worldwide web, or provide pre-natal care for penniless pregnant mothers cut off from urban amenities. It's true that some of Kenya's most visible technology products occupy the social enterprise space, but experts caution that the hype surrounding apps such as iCow and M-farm is disproportional, and that the ready availability of NGO funding for social apps could be damaging the business ecosystem and stifling innovation and growth.

A recent private equity confidence survey suggested Kenya's tech sector was not performing as well as expected, and is often overlooked by investors in favour of Nigeria and South Africa. "The hype about Kenya as a Silicon Savannah is in fact not translating into business opportunities", Andrea Bohnstedt, director of private equity consultancy Africa Assets, told Kenya's Standard newspaper.

Nikolai Barnwell, investor and director at Nairobi incubator 88mph, has offices in all three Africa tech hubs -- Nairobi, Johannesburg and Lagos. When he compares business in Nairobi with business in Lagos, the disparities are stark. "In Lagos, there's no fluff. It's hard business, tough deals, the right kind of business. The first investors made good money. The ecosystem is very healthy," he says. "When you look at the infrastructure here, we should be miles ahead. But there's so much fluff money, no hard talk, NGOs propping businesses up -- it kills it."

Lagos, Africa's biggest city, was once dubbed the "Worst city in the world" by BusinessWeek and is considered the fourth worst destination for ex-pats (Economist, 2013). Nairobi, meanwhile, consistently ranks among the top 10 cities in Africa. And as a relatively stable and reliable partner, it's understandable why so many NGOs base their international staff in Kenya, and, by extension, why there's plenty of NGO money around.

Barnwell believes that the best way for the aspiring tech entrepreneurs to learn is not from visiting consultants, but from the success of their elders or even contemporaries. "But where are the prominent tech billionaires?" he asks. "There is immense opportunity -- which is why we are here."

Mark Kaigwa, founder of Nendo, a strategy and storytelling consultancy for digital Africa, is more optimistic. He believes the next big thing will emerge from the social enterprise space, from "the grey area between capitalist enterprises and more socially conscious ventures".

M-KOPA Solar is one such venture, proving that it's possible to target the lower social strata and make money. It provides off-grid clean energy solutions that are both affordable to people in rural Kenya and profitable. And its investors include both venture capitalists and charitable foundations.

"The only way that everyone's critical needs can be solved is by building businesses that both address a human problem and have a business model to ensure it can keep solving that problem in a scalable and sustainable way," says Timbo Drayson, who recently left Google in London to start OkHi, a technology company solving the lack of address system in Kenya, based out of his Nairobi garage. NGOs, he says, solve a problem, but can they keep solving that problem indefinitely?

He sees this period in Kenya's tech scene as "a fascinating inflection point". The forecast for global smartphone  growth is stratospheric: from 1.9 billion smartphones in 2013 to an expected 5.6 billion in 2019, leading to an estimated tenfold increase in mobile data traffic. Mobile money is becoming ubiquitous, and technology is finding ways to circumvent typical bureaucratic stumbling blocks.

To make the most of the current investment climate, Drayson says, developers need to get out on the streets more: "A lot of tech entrepreneurs spend a lot of time at their desk. They go to launch it and the chances are they've got it wrong."

Entrepreneurs, he says, need to think in terms of problems, not ideas: "An idea assumes you've found a solution to your problem. Invariably your idea is wrong, but your problem is right. Fall back on the problem and find a new solution." And they need to think big. "For the first time you have an opportunity as a business person in Kenya to have a complete global audience," he explains. "You can be getting paid in strong currencies with thousands of customers around the world, but developing it at low cost in Kenya."