I Beg To Differ: Corruption in Africa IS NOT an Obstacle to Tech Investment
Regardless of whom you ask, I believe we can all agree that corruption is costing Africa. Where our opinions may differ is on the gravity of the cost to the continent, especially in the area of tech investments.
Some state that Africa’s tech start-up scene isn’t more advanced due to the level of corruption in Africa – a level that repels foreign investors – while others argue that other developmental factors such as lack of infrastructure, poor educational and skill levels of aspiring entrepreneurs are the reasons Africa’s tech start-up scene lag behind those of the rest of the world.
I think it’s more of the latter than the former though both play an active role in decelerating tech growth. Yes, African countries have a history of corruption however, African countries have a lower level of corruption compared to some countries with similar levels of income – and whose tech scenes are a lot more advanced.
Though corruption is a pressing challenge to venture capital investment in the African tech start-up scene, it’s neither the only challenge nor the greatest challenge. A major limitation facing tech companies and entrepreneurs is the shortage of capital available in the market – due to the perceived Africa risk. There is also the “myth” that venture capitalists cannot achieve profitable returns and exits from their investments in African companies. Another issue is the shortage of quality investment-ready companies due to the lack of enabling ecosystems for tech entrepreneurs – a problem that a strong emphasis on mentorship (to help strengthen the quality of the businesses available) will easily solve.
To enhance the investment climate in Africa, we need to first improve on Africa’s reputation given that the continent is consistently rated the world’s least business-friendly region. We do this by reviewing business regulations (many of which are excessive, in my opinion), revising restrictions on the movement of goods (especially if these goods are being moved within the continent) and rebuilding legal mechanisms needed for resolving commercial disputes.
With these in progress, we can begin to tackle other issues such as replacing paper files with electronic files, speeding up customs procedures, eliminating unnecessary roadblocks that slow down the transportation of goods, improving technology in the judiciary to make it difficult to tamper with evidence, formalizing the economy and expanding access to credit, improving the quality of and access to education (which provides skill sets needed in the start-up scene) and stabilizing our countries politically.
Putting these in place will lead to a more business-friendly environment that not only encourages international and domestic private sector engagement but also increases foreign investment (and possibly new players within Africa) in the tech scene. It will also create high-potential entrepreneurs capable of demonstrating that high returns are possible regardless of the corruption hurdle.