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Could Algeria serve as Africa's Silicon Valley?

By , ITWeb
Algeria , 25 Jun 2018

Could Algeria serve as Africa's Silicon Valley?

While Kenya's Silicon Savannah ecosystem has been at the forefront of the narrative over the past decade, the rise of infrastructure development opportunities within Northern Africa has become an increasingly attractive proposition to the Silicon Valley investment community.

Specifically, Algeria is emerging as a truly viable market that is rewriting the rules of entrepreneurship and enabling a new generation of investors to nurture a unique ecosystem.

This is according to organisers of the Smart Cities Global Technology and Investment Summit, scheduled for 27 and 28 June in Algiers.

The event will focus on smart technology and ecosystems, smart mobility and infrastructure, as well as data and sustainability.

Paddy Ramanathan, Managing Director of IValley Innovation Centre, is heading to the event with high hopes on building the next technology champions in Algiers.

"Africa can adopt the Silicon Valley mantra of 'learn fast' by working with start-ups to fast-track innovation and infrastructure development. Algiers is emerging as a truly viable market that is rewriting the rules of entrepreneurship. It's enabling a new generation of investors to nurture a truly unique ecosystem," said Ramanathan.

Growth in VC funding

According to research by Crunchbase and TNA Analysis, there was more than US$400 million in VC funding for African startups in 2014, with the projection that there would be at least US$1 billion in VC investment in Africa's tech startups for the period 2012–2018.

In May 2018 multinational firm Huawei confirmed the introduction of a US$1.5 billion global financing program, with capital from IOT/ smart solutions focused funding company Smart City Solutions, to fuel the development of smart city infrastructure – with specific attention to increasing activity in Africa.

The fund is intended to assist in the construction of Africa's smart city ecosystem.

In January 2018 global venture capital firm Partech Ventures announced the launch of its Dakar-based Partech Africa fund exclusively dedicated to Africa's fast-growing tech ecosystem.

ITWeb Africa reported that the fund had already secured above US$70m in commitment towards its target size of US$120m. It intends to focus on early stage tech-focused ventures that require funding of between US$600 000 and US$6m in order to exploit emerging market opportunities.

Investment into African tech start-ups hit the highest levels since records began in 2017, with 159 start-ups raising in excess of US$195 million, according to Disrupt Africa Tech Startups Funding Report 2017.

The research reveals that the total funding of African tech ventures grew by 51% as compared to 2016, while the number of funded start-ups also increased by 8.9%.

It also found that while South Africa, Nigeria and Kenya remained the top three investment destinations for the third year running, for the first time the amount of funding secured by Nigerian start-ups overtook South Africa in 2017 - although significantly more South African ventures raised.

Given the size of its economy, its infrastructure and level of continued investment, South Africa should have a far stronger tech entrepreneurship ecosystem. However, research commissioned by Google South Africa shows that the country lacks a solid foundation for this ecosystem to thrive – and that foundation is education.

Research conducted by management consulting firm OC&C stated the country's education system is unable to support broad-based tech entrepreneurship, and there is a lack of monitoring in the networks of support offered to young entrepreneurs, and of programmes focused on mapping out the full journey of entrepreneurship.

Sustained growth

Despite the challenges, organisers say all indications seem to point to a sustained growth over the foreseeable future.

"Companies across the continent are betting on leapfrog technologies utilising blockchain and Artificial Intelligence to develop new tech applications to make them commercially viable in African markets," reads a statement issued.

Mehdi Sif, a Silicon Valley entrepreneur highlighted, "In this digitisation era, we have the opportunity to modernise, automate and transform and that entails tackling challenges at the crossroads of communications, information and operation technologies, spanning previously separate administrative domains, organisations and supply chains. The large number of Silicon Valley entrepreneurs converging on Algiers, is in a way, an illustration of that."

However African countries have a different financial and entrepreneurial ecosystem than the US, particularly different from Silicon Valley's.

Adapting the innovation ecosystem to the specific context of African countries is of paramount importance.

A 2017 report by World Bank's Vice President for Africa, Makhtar Diop, outlined that "to increase innovation capacity, African countries can invest in three aspects of innovation policy needs. The first include managerial and organisation capabilities. These come first because they allow organisations to adopt existing innovations and start collaborating and piggybacking on the advances of other countries. The second step involves building technological capabilities, so that countries may adapt and create more of their own innovations. And the third step involves investing longer term in technological programs."

Kiran Inampudi from Alchemist Accelerator, stated, 'it's important for trade deals to invest within the local ecosystem, to allow knowledge and technology transfer, to improve skills and to provide jobs, to really get the benefit of the investment.'

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