Challenges present opportunities: innovation in Africa

by Dirk Knemeyer

This series on technology in Africa is written by Involution friends and emerging markets experts Niti Bhan and Muchiri Nyaggah.

Early last week, rolling blackouts across most of Nairobi interrupted daily life for the better part of two days. Intrepid Data Systems, a local systems integrator who had just moved into brand new office space, found out the hard way that their landlord had yet to install a backup generator for the building. Welcome to the reality of doing business in the new frontier.

"Backups are a must have," as Tosh, the manager at the iHub, an open collaboration space a couple of kilometers further up the road, explains. "We chose this building primarily because the landlord had ensured an uninterrupted power supply for our community."

So are the qualities of patience and perseverance, as Intrepid managed to meet their deadlines by resorting to USB 3G modems on their laptops until the batteries ran dry. Next time, they'll be prepared, acquiring a battery-based backup system for their office. Businesses that succeed in Africa do so in part because they have found ways of mitigating the challenges or effectively exploiting the opportunities these challenges present.

Inadequate infrastructure and scarcity of resources have long plagued African nations, but it was not felt as keenly until the popularity and penetration of communication technology that required recharging or a steady power supply. 80% of communication towers run on diesel in order to ensure uptime for cellular signals, while reputable ISPs build redundancy into their business models.

This has given rise to homegrown ingenuity seeking affordable alternatives and a proliferation of readymade solutions for individual devices, households, small businesses and government agencies. From the village inventor's bicycle powered charging device for car batteries (a very popular source of off grid power) to Madagascar-based Tough Stuff's "Business in a bag" (a solar power kit with an LED lamp, rechargeable D cell batteries and outlets for mobiles and laptops), there are new solutions every day.

Kenya, as a leading economy in East Africa, perceives the need for solar powered solutions for off-grid households: only 20% of all households are connected. One initiative is a joint venture with the Japanese intended to reach small businesses across the rural countryside unconnected to the grid. The aim is not only to provide energy from renewable sources for small scale industries but also offer the surplus for sale to nearby communities. The South African government has just commissioned the first large scale solar panel facility in the country while every other equipment maker is testing new towers that are as self-sufficient as possible. Samsung, on the other hand, has developed and launched solar-powered billboards for their advertising needs, while Freeplay's fetal heartbeat monitor is not only self-powered but is entirely mechanical in nature minimizing the need for expensive maintenance and spare parts.

This situation is not restricted to energy or fuel alone. A vacuum exists in areas as diverse as transportation systems, distribution networks, basic raw materials, tools and spare parts. Lack of affordable financial devices, such as loans or overdraft facilities for small- and medium-sized businesses wishing to expand without waiting to accumulate sufficient cash or accessible consumer credit, is a constant hurdle for a population of irregular employment and often no bank account. Risk and uncertainty in this environment are considered endemic leading to high interest rates, closed business networks that operate on trusted referrals, and a healthy skepticism that a system will work as advertised. Yet, for the enterprising, these are the very environmental conditions that offer immense opportunity for creative ingenuity and innovation.

Sharing and cooperation are a natural part of local culture, where community is your insurance in times of need. Personal relationships and an extensive social network offer ways to avail everything from urgent loans to wifi access and temporary desk space but it doesn't just stop at the individual. Tower sharing by service operators is becoming increasingly popular as sharing infrastructure reduces costs and capital expenditure, particularly when dependent on the price of fuel as a primary source of energy. Airtel Africa has plans to spin off independent tower management companies in each of the 16 countries they operate in even as ATC and Eaton attempt to grow market share. This trend alleviates the burden of expanding capacity and coverage as rapidly as Africa requires.

Informal courier and delivery services are provided by local two wheeler taxis, known as boda bodas - basically the addition of a padded seat to a bicycle or simply a motorcycle. These are becoming increasingly sophisticated solutions for small businesses, as Andrea Lolli, an agricultural equipment manufacturer from the Kenyan town of Thika, describes. The advent of mPesa, Kenya's famous mobile money transfer system, has changed commerce in this primarily agricultural area - farmers send a boda boda over to collect equipment which they order and pay for by phone before the courier arrives at the factory gates. This real-time economy works based on the traditional cash-based systems already in place, but expands the need for staying within the trusted network.

These are still very local solutions, and barriers to international trade still exist. Norbert, an inventor from Uganda, articulated the very real challenges he faces when simply trying to place orders and pay for simple electronic components and LED lights from suppliers abroad. PayPal, for example, does not work in Africa and solutions like mPesa are still regional. Recently MasterCard and Standard Chartered have partnered with Airtel to regionally pilot a virtual credit card with a single use number for online payments. There are no platforms that provide a means for reliable transactions to take place between individuals or small companies, and bank charges for the smallest transaction can be debilitating to the startup entrepreneur. For African businesses to truly go global, ecommerce may be the next hurdle to cross successfully.

Ultimately, it will be the entrepreneurs and the companies that see these challenges as opportunities for innovative services, business models and product lines that will succeed in the emerging markets of Africa.

Niti Bhan and Muchiri Nyaggah collaborate to offer real world expertise and a holistic understanding of the emerging markets of Africa. Semacraft Consulting Group focuses on understanding the mindset and customer behaviour, market segmentation and archetypes that drive effective product and service concept design as well as the supporting business and transaction models.

Topics: africa, Ideas, development, Blog, innovation