Twenty-sixteen was a pivotal year for African tech. -TechCrunch
The continent’s IT scene attracted major investment, produced its first $1 billion startup, launched a national drone delivery program, and drew one of Silicon Valley’s biggest icons to tour its innovation hubs.
This from a region that only a decade ago generated almost no Google News hits for tech. That certainly wasn’t the case this year. Though Africa has yet to produce big startup profits, IT IPOs, or even its own dot-com bubble, it did register significant tech events over the last 12 months.
Jumia Became Africa’s First Unicorn, Orange Acquires DealDey
A torrent of capital and a notable acquisition boosted the value proposition of e-commerce in Africa. In February, digital sales startup Jumia became the continent’s first unicorn when it surpassed $1 billion in market value after a $326 million funding round including investors AXA, Goldman Sachs and MTN.
Founded by Germany’s Rocket Internet and based in Nigeria, Jumia is deploying the funds across its 11 startups in 23 African countries. Its e-commerce platforms offer online services ranging from fashion and employment to real estate. Jumia also launched its own digital payments platform JumiaPay, in 2016.
In March, the African subsidiary of Swiss media and e-commerce company Ringier acquired Nigerian online shopping startup DealDey for an undisclosed amount. This created exits (rare hereto in African tech) for Ringier’s initial investors. The move was part of Ringier’s strategy to invest in four verticals within Africa: classifieds, content, digital marketing, and e-commerce. The Swiss firm formed Ringier Africa Deals Group, a joint venture with South African Silvertree Internet Holdings Ltd., for the DealDey buy and future market moves.
Big Name Expansion: Netflix, eBay, Uber, IBM
Several notable tech names expanded on the continent in 2016. In January, Netflix went live in Africa, accelerating from 0-54 countries in one fell swoop. This presented a challenge to African VOD startup, iRoko, which countered with several of its own moves to enter new countries and produce more proprietary Nollywood content.
eBay expanded in Nigeria and Kenya in July through a partnership with online shopping startup MallforAfrica.com. The collaboration launched an eBay Powered by MallforAfrica platform through which U.S. businesses with a 300+ star rating can sell. eBay will add 11 new countries to the partnership in 2017, including Angola, Botswana, and Tanzania, according to MallforAfrica CEO Chris Folayan.
little-cap-i-2-1Uber extended its product, country, and city reach in Africa in 2016. In June, we reported on the company’s testing of unique service options on the continent not available in many of its global markets. These include cash payments, new safety measures, and mobile image direction apps.
Uber gained a homegrown rival in Kenya in 2016 with Safaricom’s launch of the Little app. Little’s entry has spurred a tit for tat competition in Kenya’s ride hail market around price and product offerings between Uber and the country’s other viable digital-car services. The biggest winner so far appears to be Kenyan consumer.
Big Blue also increased its Africa presence in 2016. We reported in May on IBM Research Africa’s project to create a cognitive computing equivalent to Watson, dubbed Lucy, from its Nairobi lab. The U.S. blue chip giant expanded that effort in August, opening a second research lab in Johannesburg, South Africa.
Zuckerberg Surprise African Tech Tour
Facebook CEO Mark Zuckerberg’s unannounced August/September trip to Nigeria and Kenya put the global spotlight on Africa’s emerging IT ecosystem. In Nigeria he talked to startup heads (Hotels.ng, Afrinolly, and Andela), visited the Co-Creation Hub, hosted a Facebook town hall, and met with President Muhammadu Buhari.
In Kenya Zuck stopped by the iHub innovation space, reviewed the BRCK mobile Wi-Fi device, had lunch with Kenya’s ICT Cabinet Secretary and met with local tech leaders including Juliana Rotich and Erik Hersman. Facebook, which has roughly 85 million users in Sub-Saharan Africa, announced no new initiatives, saying the trip was about “learning and understanding.” There’s certainly more behind the scenes— most likely a 2017 upgrade to Facebook’s Free Basics program, which currently allows users limited mobile internet services gratis in 17 African countries.
Drone Delivery in Rwanda
Throughout 2016 we covered California based drone delivery startup Zipline’s partnership with UPS and the government of Rwanda to launch drone delivery of crucial medical supplies in Rwanda. After several test rounds, Zipline went live with the program in October, becoming the world’s first national drone delivery program at scale. It’s a commercial endeavor, with Zipline earning revenues per delivery. Zipline’s Africa drone operation also gained the attention of the White House UAV initiative, which tapped the startup to test drone delivery of medical supplies to remote U.S. communities.
In January, it looked like there was the strong possibility of Nigerian fintech firm Interswitch becoming Africa’s first public startup unicorn on a major exchange. CEO Mitchell Elegbe did not rule out a possible dual listing on the London and Lagos stock exchange. Another source said the company’s bankers selected an LSE IPO in Q4. The offering didn’t materialize but could still happen in 2017. In a recent interview, Elegbe said the delay was due to investor concern over Nigeria’s declining 2016 macroeconomic situation and volatile naira. On a possible 2017 public listing, a company spokesperson said that “an IPO remains an option.”
VC: Incoming and Pan African
The continent continues to gain international investments and is forming homegrown tech investment funds. In the digital finance space, Y-Combinator backed Nigerian startup Paystack closed this month on a $1.3 million seed investment from sources including Tencent and Comcast, CEO Shola Akinlade confirmed.
The World Bank’s International Finance Corporation (IFC) also flagged more investment for African startups in 2016 as part of its $30 million Startup Catalyst Initiative.
Kenya’s iHub incubator announced this month the launch of its new Africa Innovation Fund for startups. The raise, targeted at $10 million for Kenya and $40 million for other African countries, is still active, iHub’s interim-CEO Kamal Bhattacharya said. This follows a market trend of African innovation hubs shifting away from grant-based financing toward more for-profit and investment oriented models, as reported here.
So what big movements are worth watching in African tech in 2017? First, some failures. This isn’t exactly downbeat. Failing is an inevitable part of the tech ecosystem. The continent’s IT sector has been on a several year run of things growing, expanding, gaining new investment. Some attrition and creative digital destruction must be imminent.
On the flipside, it’s about time one of Africa’s commercially oriented startups demonstrates notable profits. Yes, over 2016 the continent showed it can produce unicorns, exits, attract big VC, and even get close to a major IPO. But as Cameroonian IT leader Rebecca Enonchong once told me, “To be taken seriously African startups need to win in the for-proﬁt global marketplace.” Perhaps some examples of that will emerge in the new year.
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