GrowthCore with Jean-Claude de Morais: Innovation can speed up economic diversification and job creation in Africa

Africa’s challenges are numerous, but so also are the innovative talents on the continent. Innovation is regarded as the engine of economic growth; Africa’s challenges can be addressed with innovation.

With its positive economic outlook under pressure and expected to slow to 3 percent in 2016, owing to global economic slowdown and slump in commodity prices, countries on the continent are looking to diversify their economies and look for more sustainable means of growth. Africa needs to exploit its abundance of natural resources and youth population, and industrialize.

Jean-Claude de Morais, founder of the African Innovation Foundation in this interview with The Nerve Africa talks about the need for Africa to industrialize and be innovative about it. He is a firm believer that innovation is key in speeding up economic diversification and stimulating job creation.

He also talks about the African startup scene and his project for African innovators. Every year, the AIF recognizes the top innovators in Africa through the Innovation Prize for Africa.

On how his background influenced what he does now

My background, in particular my dual heritage, has been a major influence on who I am today. Growing up as a Swiss-Angolan, I’ve experienced a culturally rich upbringing and inherited many traits that have been passed on to me in equal measures by both sides of my family. A combination of African wisdom and Swiss ambition have shaped my business and philanthropic goals. My late Angolan grandmother was a tremendous pillar of support. In fact, the African Innovation Foundation, which I founded in 2009, is a result of a promise I made to her to give back to Africa when my time came.

Now when I look back, I am very fortunate to be able to use the success that I’ve worked hard to achieve,to play a part, however small, in Africa’s progress.

Why he has a special interest in innovation and entrepreneurship in Africa

My family’s innovation heritage was probably the catalyst. I was exposed to the culture of innovation from a very young age. My mother’s side of the family come from an old family line of Swiss watchmakers. My grandfather actually invented the light feature in watches.  At the same time, I was aware of the inherent ingenuity that Africans possessed, that innovation came naturally to them, a lot of times out of sheer necessity.

Being entrepreneurial minded, I got involved in the newly emerging Swiss startup scene while I was studying. I found it very exhilarating and so I started a regional micro Mergers and Acquisitions business that sold small companies in the hair dressing, beauty and carpentry space. I also supported my friends in listing the first internet company in Germany. In the mid-90s, at a really exciting time in Switzerland’s SME sector, I launched a venture capital firm.

I’ve always believed that innovation-led entrepreneurship is absolutely crucial to Africa’s growth and development. It drives economic opportunity and has the potential to equalize wealth distribution across all segments of society. It holds the key to speeding up economic diversification and job creation, which is a priority for many African nations where youth are the predominant demographic.

The Africa Innovation Foundation

AIF’s underlying mission is to unleash Africa’s dormant potential and support sustainable projects that improve the lives and the future of people in Africa.The foundation has three flagship programs, the first one being the Innovation Prize for Africa, which was launched in 2011 in initial partnership with the United Nations Economic Commission for Africa (UNECA).

Access to knowledge is a crucial to the innovation equation, especially in Africa’s complex legal landscape. So in 2012, we launched the second program, African Law Library (ALL), to provide the African people with access to legal data freely and to empower them to understand their rights. The ALL contains legislations, acts, court rulings, and customary laws in various languages from many African nations, as well as a host of secondary sources including legal commentaries, journals, dissertations, books and articles.

The third program is the Social Impact Program (SIPA), which addresses social challenges through innovation in my homeland, Angola. It works with local partners to provide solutions to issues such as basic access to medical diagnostics, low-cost services in health, water and sanitation or energy provision, education and rural development in Angola.

Lessons learnt about Africa since starting the Innovation Prize for Africa in 2011

One of the most profound moments came in 2012, just a year after the IPA was launched. The AIF received the highest endorsement to date when African ministers at a joint Africa Union (AU) and UNECA conference passed a resolution calling for member states to work with the AIF to promote innovation-based societies in Africa. I was relieved to learn that many African leaders shared my beliefs that innovation is key in speeding up economic diversification and stimulating job creation.

Between 2013 and 2014, I began to observe the emergence of a deep African innovation spirit. African innovators are ahead of the pack when it comes to creating African solutions for African challenges. They’re very good at identifying needs-based innovation. They’re not big on copying ideas from the West if they see no purpose for them in their respective societies. This is what innovation is all about. Five years on, I’m convinced that Africans are natural born inventors.

The place of home-made innovation in confronting Africa’s challenges

Africa’s potential to become the next great industrialized region is immense. This is the time for African leaders to take a good hard look at past and newer industrialized nations and to learn from the outcomes. We do not want to see Africa become another cheap mass production hub for consumer goods, electronics, pharmaceuticals or whatever else it might be. We certainly should want to avoid, at all costs, conditions of labour exploitation, minimum wage and poor working conditions.

I believe that it’s imperative for African nations to capitalize on their unique strengths and invest in segmented markets in order to create the kind of jobs an industrialized African region might demand. Investing in homegrown innovations to create regional demand and supply is a way of ensuring that Africa’s industrialized future will be niche and more creative-led. By focusing on quality there will be scope for export appeal to international markets.

There is a need for African nations to invest in building innovation ecosystems that can support such creative-led manufacturing. These environments enable the inclusion of marginalized communities in the informal sectors and give them a platform to become their own creators, designers, producers and marketers.

For example, in Angola, I am building the country’s first hybrid innovation hub – Fábrica de Sabão (The Soap Factory) in the heart of the largest slum in Angola. I believe there are tremendous opportunities to tap into this segment of society to drive needs-based innovation. Apart from comprising of an incubator, accelerator and co-working component, it also has a maker spaces, which will soon be fitted out with 3D printing machines. The goal here is to enable marginalized communities to participate in urban manufacturing. We’ve already had young boys from the slum come through to learn how to draw in 3D so that they will be able to work with these machines to manufacture and create. At the end of the day, homegrown innovations are the best chance of driving socio-economic inclusion and growth across Africa.

FdS photo
Fábrica de Sabão

FdS

The impact of the Innovation Prize for Africa

Working with partners, innovation influencers and innovators across the continent, the IPA has been at the forefront of seeding a deep innovation spirit and supporting the emergence of African innovation ecosystems. Through the IPA, the AIF now has the largest network on African innovators who are committed to innovation-led growth in Africa. Now in its 5th year, the IPA has more than 6,000 innovators in its database. This year alone, the Prize has attracted more than 3, 600 participants from 50 African countries, making it a truly Pan-African initiative.

One of the key outcomes is the exposure that the IPA gives African innovators in attracting investors to scale and grow their ideas. The level of funding they’ve received has varied anywhere between $100,000 to $11 million. Regardless of the amount, it has given them the opportunity to take their innovations to a whole new level, which is really great.

Additionally, the fact that African governments and other key stakeholders now bid to host the IPA in their countries is a testament to the Prize’s credibility and reputation as Africa’s leading innovation platform.

The African startup scene 

It’s growing, albeit not as fast as it could be and not as widely distributed across the continent as it ought to be. On one hand countries like Kenya and Nigeria, as well as the more established South African market, are driving a new era of African startups, attracting significant funding and spurring job creation in the African market place. But in many other African countries, the startup scene is virtually non-existent.

I believe these disparities will eventually even out especially as African economies continue to focus on diversification and the continent continues to make headway in terms of its electrification goals and infrastructure development. Already, Africa’s mobile penetration rates have been growing at mind-blowing rates and have now reached almost 80 percent in some Sub-Saharan African countries due to cheaper access, infrastructure sharing and other cost-cutting initiatives. Africans are using mobile technology in ways that have never been perceived before – from banking to farming and healthcare.

African innovators and startups are at the helm of these trends, having raised around $186 million last year. While this might seem small in comparison to other markets, the signs are favourable for African startups. Investors are interested, ecosystems are flourishing, and opportunities are there for the taking.

Conduciveness of the African business environment for startup growth 

Yes I believe [that the African business environment is conducive to growth of startups], but it’s by no means a sweeping statement. We’re all aware of the challenges that the African market poses to startups and investors alike, but at the same time there is great progress being made. The beauty is that these challenges are also creating opportunities that are unique to Africa, and African innovators are taking advantage of this.

All over Africa, hybrid ecosystems are evolving to house startup colonies. Incubators, accelerators and co-working spaces are now increasingly common place. Kenya’s “Silicon Savannah” with its tech cities such as Kilimani and the planned Konza Techno City and Nigeria’s Yaba Valley for example are playing a vital role in attracting start-ups and venture capital firms. Many of these are either government backed or in the form of Public Private Partnerships (PPPs), which is a testament to the fact that African leaders now see the economic value in cultivating a strong SME sector.

While there is work to be done, I believe Africa is on the right path. This is the time to invest in building capacity and promoting knowledge transfer to boost African startups.

Startups and funding

Africa is an early stage market. The ideas on the continent are also young, reflecting a young demographic that are early adopters of technology. At present, investors are largely interested in startups in the e-commerce, clean technology, e-health and financial services space but many of these startups are still in early stages. What they need is venture capital because they do not yet qualify for private equity.

In Africa, financing models are too focused on private equity. The African Private Equity and Venture Capital Association (AVCA) has also noted that venture capital SME investment is still quite rare within Africa. African governments could play a major role in filling the VC gap by matching funds for VC investment. I’m not saying that PE isn’t important for African startups. They are. But if this gap with VC is addressed, it’ll go a long way in boosting the startup scene at rates never before witnessed anywhere else.

Overall though, more and more investors are seeing Africa as an attractive place to invest, they are prepared to increase their risk appetite and this is a great sign that the African startup scene will continue to flourish.

The African diaspora and local startups

One of the bigger challenges facing young African startups is not so much money as it is know-how. African innovators are pundits when it comes to creating local solutions for local challenges, and their innovations have the sophistication to compete in the global market. Yet they don’t go very far because the fundamental building blocks are lacking.

In addition to becoming a new source of venture capital for early stage startups for instance, African diaspora have a major role to play in knowledge transfer and building capacity in order to prepare these startups to be more investor ready. These trends are already taking place and the diaspora is steadily involved in bridging the skills gap – from understanding IP rights to developing sound business plans, financial planning and leveraging marketing and communications.

They are increasingly helping to strengthen African innovation ecosystems, bringing their talents and money back to their home country, and proactively looking for local collaborations to provide value through mentorship or investment opportunities. In fact, the AIF has a strong network of diaspora who are ardent supporters of programs dedicated to support homegrown innovations.

On fusing knowledge on Africa and international exposure to arrive at specific solutions for African entrepreneurs

One of my greatest desires is to see African nations as great innovation economies where knowledge and creation fuel economic growth, create employment and wealth, and raise the living standards for all Africans.

This is why I launched the AIF. It is in itself a solution designed to strengthen African innovation ecosystems by empowering innovators and connecting entrepreneurs with innovation enablers and investors across the continent. The Foundation’s core activities are focused on innovations & technologies, access to law and governance, and social impact development – all of which are important building blocks for African entrepreneurs.

My goal is to see needs-based innovation and positive change across the continent and so the AIF will continue to focus on building synergies, collaborations, and partnerships that can support African innovators and entrepreneurs in a sustainable manner.

Foreign aid is not sustainable

Foreign aid has its place in any emerging region but it isn’t sustainable and shouldn’t be counted upon to catalyze long-term socioeconomic growth and development. African nations are now in a unique position unlike ever before. There is money in Africa – money to be made and spent. Despite the oil crisis slowing growth in most African countries, it doesn’t change the fact that Africa continues to remain attractive to investors. What is important is how African governments allocate these funds and whether or not it impacts socio-economic growth. One must take a long-term view here.

Many African economies have adopted sound macroeconomic policies and sector reforms over the past two decades, enabling them sustain a trajectory of economic growth. Today, Africa’s public and private sector are looking inwards and focusing on opportunities that can unlock local economies and promote intra-African economic collaborations.

There is also the question of the continent’s extremely young demographic, some 50 percent of which are below the age of 19. By the end of the century, Africa’s population is expected to rise to four billion. The African Economic Outlook 2015 report projects that over the next 15 years, 370 million youth will enter Sub-Saharan Africa’s labour markets, making it necessary to create many more jobs and opportunities for savings and investment. This is crucial in order to preserve the economic and social advance that Africa has witnessed.

Investing in building a strong local and regional SME sector in more productive sectors will only lend itself to job creation on a wider scale and speed up economic diversification.  By focusing on addressing the skills gap, investing in more productive sectors, and modernizing traditional sectors, African nations stand to gain from a demographic dividend. There is also a need to support the wider economic inclusion of African women, especially those in rural or marginalized segments of society. Focusing on initiatives that promote innovation, knowledge transfer and skills development amongst these communities will enable millions of African women to refresh and upscale small industries and come into the formal economic mix at a greater pace than ever before.