Scaling African Innovation
With the recent success of Demo Africa and the upcoming Innovation Prize for Africa [IPA], there’s a palpable wave of momentum for innovation and its implications for the continent. And there should be. Our generation has seen Africa leapfrog towards greater financial inclusion, thanks to mobile money. We’ve seen $100 3-d printers coming out of Cameroon and urine-powered generators coming out of Nigeria. In short, we’ve seen tremendous African ventures that were remarkable not just for their technology, but their capacity to impact millions of lives.
After all, isn’t that what its all about?
In Africa, is it enough for innovation to be novel or should it also be disruptive? More importantly, should it also be scalable? And what is the definition of scalable, anyway?
I was fortunate to enjoy a brief chat with IPA’s Program Director, Ms. Pauline Mujawamariya, in which we discussed the distinction between technological upgrades and scalable innovations, the kind that can change a continent’s trajectory.
In the West, entrepreneurs make millions everyday from technological services or products that optimize customer experiences for non-essential goods and service (Twitter, Instagram, Uber). But estimated annual per capita income in sub-Saharan Africa is still only $1615 USD, which means the most lucrative businesses must go for volume. It means the big money is in solving big problems for the majority, i.e. the mass market, otherwise known as middle and low-income customers. Because technology reduces marginal costs so dramatically, it’s becoming cheaper and quicker than ever to reach the base of the pyramid. And technology is reducing the risks associated with serving the BOP, making it easier for businesses to scale quicker.
For example, in 1983, Muhammad Yunus broached the heretical idea of bringing micro-credit to the poor. It took over 20 years to perfect his model before the methodology was reaching scale and likewise considered creditworthy.
By then, 70% of SMEs in Africa still lacked access to capital and in 2004, GroFin introduced it’s mezzanine debt solution. With proprietary technology, we have likewise refined a replicable model across 12 operational offices. This means steadily increasing volume while steadily improving returns. And this increased scale has been key to unlocking investor support, bringing GroFin to over $400 MM AUM today. Nevertheless, we are still far from plugging a global SME finance gap, which is still estimated to be approximately $3 trillion USD.
However, specialized tech solutions and software, like RSA Archer, Efront and B Analytics and even crowd funding platforms bring impact investors and the general public a bit closer to unlocking capital for the 2.3 billion unbanked people globally. They do this by increasing speed, reducing risk, improving data availability, pooling funds, etc. VC4Africa’s own nanoCredit is a fantastic example, using big data and analytics to reduce cash- flow based loan processing time to nanoseconds, thus potentially helping banks and mobile companies to finally fill Africa’s missing middle. With over 100 million MSMEs potentially touched in Africa, it a perfect example of accelerating scale by using technology to address the needs of the base.
This is an exciting innovation but only a piece of a much larger puzzle.
For Africa to reach its potential, our challenge is to scale access to health care, to renewable energy, to low-cost education in a continent where nearly half the population reportedly earns less than $1.25 a day.
For those up for the challenge, the Innovation Prize for Africa [IPA] is accepting applications until November 3oth. The Innovation Prize funds up to $100,000 and provides mentoring and exposure for entrepreneurs pioneering technological breakthroughs in manufacturing and service industry, health and well-being,agriculture and agribusiness, environment, energy and water and ICTs.
And for those that intend to build these scalable innovations in an ecologically sustainable manner, VC4Africa’s Green Pioneer Accelerator is also another great resource. They will be accepting applications until December 1.