There are many tech hubs in Africa, from iHub in Kenya to ActivSpaces in Cameroon. These tech hubs hope to develop gems like those of the Silicon Valley. While we strive to make these peculiar spaces of creativity relevant to the economies and lives of the citizens, they will be more productive if they could mimic the infrastructures – both soft and hard – that existed even before Silicon Valley became a hub for tech innovation.

The Making of Africa's Silicon Valley

A Hackathon session in the Nairobi Innovation Hub in Kenya

Taking e-commerce as an example, it is a sector that can change the lives of developers and non-developers alike. However, e-commerce cannot thrive in Africa mainly because of two reasons. The lack of a trusted e-payment system and the lack of a reliable and affordable logistics system.

e-Payments

In the developed world and much of Asia, more citizens have access to banks. These institutions are wired to one another and can transfer funds from one account to another without much interference from humans. People can exchange cents to millions of dollars through these electronic systems with ease.

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These backbones of automated clearing and other technologies made the adoption of electronic holders (credit and debit cards) easy. Even in the Internet era and its e-payment systems like PayPal, the credit card systems many still rely upon for verification of account holders. In short, Credit/Debit Cards are the foundations of e-payments.

The Making of Africa's Silicon Valley

If Africa’s e-commerce is to go beyond the traditional cash-on-delivery model, there is a need for a system that can mimic the essence of the credit card system.

Though there are many mobile money systems across Africa, from m-Pesa to MTN Mobile Money, they are not yet anything like the Credit Card system. They still rely on closed proprietary systems and services. There must be a more open system to integrate Orange Money, MTN Mobile Money, M-Pesa, myPaga, and banks across Africa. Then, make them available in an electronic format that e-commerce sites and individuals alike can use.

Logistics

UPS, FedEx, DHL, TNT, Post Office networks and the list goes on and on. These companies have been offering express delivery services long before the democratization of the Internet. Mail Order companies used them to deliver their sales directly to customers who never knew how their warehouses looked like.

The Making of Africa's Silicon Valley

The problem of moving goods from one place to another as cheaply as possible is an age-old challenge Africa has been facing. With e-commerce now in the room, it becomes even pressing to get it right sooner than later.

Poor logistics: The case of Cameroon

In Cameroon, there are delivery systems that rely on the interurban bus network. It has been a good way of getting mails and goods across from one town to another. Yet, it is poorly developed and not designed with the customer in mind. It is relatively expensive and inconvenient.

For e-commerce to thrive in Africa, shipping goods from point A to point B should be such that an average citizen can afford the full package. Buying online ought to be affordable and accessible. It should be a necessity and a way of making merchandise cheaper since most of the costs associated with brick and mortar stores no longer exist. 

The Making of Africa's Silicon Valley

It’s no news that tech startups are high-risk ventures with more failures than eventual successes. This makes it necessary to have a set of financiers that are not traditional, who are more like the European monarchs in the 1500s who invested in navigators with the hope they are going to find lands with ample treasures. This is exactly what the angel investor and venture capital networks are to the US and a lesser extent EU. But it did not start with them. It’s more about the application of financial innovations people have gleaned for more than a century.

Here, I’ll mention two principles that make up a great financial system from whence capital can be stocked for risky ventures ‒ tech startups.

Contracts

Contracts are at the backbone of finance. Basically, fiduciary money or other financial instruments are agreements between two or more persons.

The Making of Africa's Silicon Valley

In countries where there’s rule of law and contracts can be enforced without much delay, the financial system works efficiently. But in countries where chaos rules and there are many bottlenecks in the judicial system, contracts are just a necessary inconvenience to get done with.

If the African tech sector must develop, it may be necessary to have contracts set in a jurisdiction other than the country in which the project is being implemented.

Transferability of contracts

The world is in constant flux. These changes, therefore, create opportunities on the one hand and disrupt stable systems on the other hand. As such, it’s not only enough to have a great system for the creation and enforcement of contracts.

The Making of Africa's Silicon Valley

Established contracts should be such that they can be transferred from one party to another under conditions that will be determined during the transfer. The transferability of contracts will enable the creation of marketplaces for the various contracts that can be available.

Once there’s a market, the risk associated with these established contracts is significantly altered southward. With regards to the tech startup scene in Africa, we are talking about contracts pertaining to investments in startup companies.

The establishment of markets for investments in startups will reduce the negative perception about investments in Africa lacking viable exit strategies given the hurdles with capital markets. VC4Africa is a great start.

The Making of Africa's Silicon Valley

It could go a step further to create an investor-entrepreneur market. Here, investors and entrepreneurs will trade investments in startup companies, especially those who may need liquidity at certain times.

Looking at the e-commerce sector in Africa today, it’s clear it’s not yet ready for the average citizen. Yet, it is the most promising to both developers and non-developers. Unlike other Internet utilities, in e-commerce is embedded the right motivation to engage ‒ trade. While there are more financial innovations that are to be adopted in Africa to speed up the development of its tech sector, these are just a few.

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