Top 10 reasons why African tech start-ups struggle

Given Facebook’s turbulent entry onto the stock market (with shares recently falling 4% to $20,04 and Zuckerberg’s reported financial loss of $423 million, there are lessons to be learnt about dabbling in technology and establishing a business. The saying ‘be careful what you wish for’ comes to mind.

Pavlo-Phitidis

Business analysts would agree that there are risks to any venture, of any size and focus, and approach certainly matters – the question of where African tech start-ups fit into the bigger picture warrants closer inspection.

What does it really take to establish a credible, sustainable technology-focused start-up business in Africa? And, once established, can these businesses seriously compete for market share?

Before any attempt can be made to answer these questions, those behind business incubators or the business of building business, warn that it is critical to differentiate between the many forms that a tech start-up can take.

There are product-centric businesses that are designed to leverage off learning, science and factual reports to reduce product development cycles and source customer feedback. These are classified as ‘Lean Startups’. There are those that use technology extensively to get up and running, but are essentially squarely focused on other industries. These are startups, yes, but not strictly speaking tech startups.

“Tech startup’s take many forms and good reporting would be cognisant of this fact. Different types of tech businesses will experience different challenges so the question itself is broad,” explains Pavlo Phitidis, CEO of Aurik Business Incubator (Pty) Ltd.

Speaking from a formulations sector point of view, Colin Mkhonza from Chemin and Secretary General of SABTIA (The Southern African Business and Technology Incubation Association) identifies a lack of innovative ideas and seed funds as two of the main contributors towards the difficult situation small-to-medium sized businesses find themselves in.

From their responses below, we are able to deduce the real challenges African tech start-ups face in finding their feet and maintaining balance.

1. Shortage of innovative ideas

There is a huge challenge with Universities not being able to produce graduates willing or able to commercialise their innovative ideas and research projects. The results of PHD theses often end up in dusty store rooms. In addition, a dearth of research funding is also a major hinderance to innovation.

2. Seed funding

So many high technology projects die due to lack of seed funds for piloting production processes and product refinement. This also refers to start-up capital.

3. Skills

Tech companies are built by people, not machines. By definition, these people are skilled in the sciences, the very weakest of all our school syllabuses. This means we are not seeing people secure tertiary education in the sciences and engineering faculties at nearly the levels that we require to build a vibrant tech sector. The scarcity in skills sees many early stage businesses not being able to afford the skills that they need to get going.

4. Social issues

SME companies are predominantly one-man businesses. Some of the SMEs manufacture products from their kitchen or garage, and sell to the surrounding neighbourhood. The products are predominantly of poor quality due to poor manufacturing practices and in some cases, with low quality raw materials. The end result is that the final consumer – be it government department or individual consumer – ends up with a product that is sub-standard.

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