DEON NOBREGA: African tech start-ups push the continent to develop

The ceremony for the 2023 World Summit Awards in Mexico was an opportunity to meet the most exciting, innovative digital entrepreneurs working to effect positive societal change. It was also a reminder of the immense potential digital start-ups hold for Africa in particular.

The awards have since 2003 recognised innovative digital start-ups across 187 countries, encouraging entrepreneurship focused on effecting positive change. Paymenow was the business & commerce category winner, which celebrates how we are building a sustainable wage access company to financially educate, empower and support workers in SA and beyond.

Engaging with category winners from all over the world, and reflecting on the earnest, passionate attitude of entrepreneurs across the globe, renewed our belief in the potential for start-ups to alter Africa’s trajectory for the better.

African start-ups leveraging advancements in mobile technology, fintech, e-commerce, renewable energy, health tech and more are addressing local challenges with innovative solutions adapted to the needs and conditions of African markets.

Africans have been historically excluded from targeted innovation, with very little tech specifically designed for our users’ needs and nuances. African tech start-ups have harnessed the power of leapfrogging, bypassing traditional infrastructure and adopting the latest technologies, and then using local knowledge to apply them to local problems.

Many African start-ups are focused on sustainable development, addressing environmental and social challenges. They are developing innovative solutions in renewable energy, waste management, agriculture and water and sanitation, among other things. These start-ups are working towards creating a more sustainable future for the continent while promoting environmental stewardship and social inclusivity.

Start-ups are bridging gaps in access to essential services, particularly in remote and underserved areas. For instance, health tech start-ups are leveraging telemedicine and mobile applications to provide healthcare services to people in rural areas where access to medical facilities is limited. Similarly, edtech start-ups are using technology to enhance education and provide learning opportunities to underserved communities.

The start-up ecosystem is gaining momentum

Tech entrepreneurs and start-ups working in Africa do face significant structural challenges. The continent remains a largely fragmented market with complex local regulations, infrastructure remains below global averages, and skills remain scarce.

Key sectors are often controlled by large, established businesses or public sector institutions. As a result, African entrepreneurship lags behind global peers. Africa has produced only seven “unicorns” (start-ups valued at more than $1bn), as opposed to 100 in China and 200 in the US. And returns on venture-capital investments are low compared to other regions.

Despite this, Africa is a promising environment for digital entrepreneurs, and the world has increasingly taken notice. According to Partech Partners’ Africa TechVenture Capital report, “the African tech sector was one of the few, if not the only venture capital market to boast net growth funding in 2022. Globally, venture capital funding fell by 35% over the same period.” 

According to the Boston Consulting Group, from 2015 to 2020 the number of African start-ups receiving funding grew six times faster than the global average.

Africa’s young and growing population constitutes a market hungry for innovation: 70% of people living in Sub-Saharan Africa are younger than 30. This represents a powerful opportunity for growth.

The 10X principle

When Paymenow started our mission was to financially empower people who were financially excluded and exploited. The problem was systemic in that a monthly payroll cycle is a huge disconnect from how the average South African lives — daily transport costs, weekly rental, frequent electricity and data top-ups and supporting extended family members who live far away.

As we started unpacking the problem, we knew that by using technology we could be 10 times cheaper than the market we are disrupting. That’s the foundation of fintech and its disruptive potential: figure out how to make something 10 times faster, 10 times cheaper, or 10 times more reliable. But as we progressed we realised that from a quantitative  results perspective 10 times was insufficient to build a sustainable business model.

This is when Paymenow focused on how to build a business for good, while turning a sustainable profit. Our explicit aim is to have an effect on the customers we serve. Paymenow worked with industry experts, including the Catalyst Fund and DNI, to pioneer a concept that incentivises financial literacy while promoting responsible usage. A dynamic financial health check monitors customers’ behaviour both within our app, as well as the users’ external financial environment, and this drives the responsible change we have been measuring over the past three years.

Tech, done well, is an enabler of accessibility and inclusion and levels the playing field where inequality has reigned. It challenges discrimination and allows for economies of scale that benefit the end user. Users don’t need to spend money to access services (taxi fees to travel to a brick-and-mortar service provider), put their money at risk of theft or fraud (instead accessing verified providers through secure apps), or waste time on inefficient bureaucracy. The  advantages are endless and this all benefits the end user.

African start-ups are challenging stereotypes and changing perceptions about the continent. They are showcasing Africa’s potential for innovation and entrepreneurship, attracting attention and investment from both domestic and international sources. By creating success stories, they inspire and empower the next generation of African entrepreneurs, fostering a culture of innovation and entrepreneurship.

With continued investment, mentorship and favourable policies, African start-ups will play an even more significant role in shaping the future of the continent.

• Nobrega is CEO of earned wage access platform Paymenow.