Connecting Lusophone Africa: “Are the African Portuguese-speaking countries ready for investment?”

Connecting Lusophone Africa: “Are the African Portuguese-speaking countries ready for investment?”
Angola, image courtesy of Pixabay

By Claudia Makadristo - Regional Manager for Africa at Seedstars

The countries that make up Lusophone, or Portuguese-speaking, Africa are known for being among the most expensive places in the world (Angola), for their distinctive flora and fauna (Sao Tomé and Principe) and as getaways for beautiful beach vacations (Mozambique & Cape Verde). One similarity these countries have, besides language, music and the Portuguese influence on its cuisine, are their nascent entrepreneurial ecosystems. This shared heritage has not always worked in its favour, but nevertheless, being off the radar can be seen as an opportunity as well.

We have seen a growing allocation of funding towards impact investment here. Since 2012, the amount of capital available for impact investment has multiplied by five. Looking at the analysis of the Seedstars Index, the main obstacles for channeling these investments to emerging markets such as Africa is the low number, and more importantly the quality of startups.

Over the past years we have seen that many of the startup ecosystems are still too nascent, resulting in more difficulties in absorbing capital in the first place. When it comes to increasing the quantity and quality of entrepreneurs, one of the indicators that can positively influence this is the activity of local startup support initiatives such as co-working spaces, incubators and accelerators.

A closer look into the GSMA mapping of the most active initiatives on the continent shows that that there are significantly fewer support initiatives for entrepreneurs in Lusophone Africa. Nevertheless, there is a small group of players actively looking to make a change: KiandaHub, Angola’s first incubator, Acelera Angola an entrepreneurship-focused news site,  Bantu Makers, a startup studio in Angola and IdeiaLab, an ecosystem catalyst in Mozambique as well as Orange Corners, a government entrepreneurship programme from the Netherlands in Mozambique and Angola among others. In Cape Verde, initiatives such as Startup Weekend have created some entrepreneurs who today stand to climb, such as food delivery company Ifome and cab-hailing app Taxi Already.

The art of communication

When it comes to the startup scene on the continent, the Lusophone countries seem to be the most disconnected, primarily because of its language. In order to participate in the African or global economy, a certain level of proficiency in English and sometimes even French is required. Typically, the countries that don’t speak English tend to find it more difficult attracting investment. Many South Africans, Nigerians, Zimbabweans, including Chinese, Europeans and Asians considered cities like Maputo in Mozambique with the hope of opening business, but they end up opting for either Tanzania or neighbouring countries due to language barriers.

However, there are more consequences to lacking eloquence and versatility in English, which starts in the earliest phases of startup creation. Mosts tech founders come from a developer background, but the majority of educational material is only available in English. Some young developers in Mozambique have resorted to writing developer education blog posts in Portuguese with the aim of supporting the local and wider Portuguese-speaking community. In addition, Cape Verde introduced entrepreneurship as a subject back in 2013, when many countries did not have entrepreneurship on their radar.

Raising international funding

One of the more difficult cases is that of Angola. While  its ecosystem is becoming more attractive as local startups gain visibility and experience, there are still a few challenges that need to be addressed for local  and foreign investors.  When we look at local investors, the literacy level represents a big hurdle.

Startups often have innovative business models with an innovative investment structure. The stages, maturity and expected involvement for those investors differs from conventional businesses. For those with little experience, the next hurdle is regulation. For Angola, the regulatory framework was only recently created. When it comes to foreign investors, conjunctural and structural challenges become evident. The actual foreign exchange policy and repatriation of capital (the transfer of money or property from a foreign country back to its home country) immediately puts a market such as Angola at a disadvantage as investors cannot have their money outside the country when they want. Furthermore, the pace in which the currency is losing its value is also a concern.

However, despite these difficulties, certain foreign investors have taken a leap of faith in some of the most advanced Lusophone startups: Angola’s Tupuca raised an investment round from Seedstars through the Seedstars Global Accelerator programme (Growth Programme),  Mozambique’s Biscate raised grant-funding through the GSMA Innovation Fund and Mozambique’s Izyshop raised money from local investors DHD Holding.

Hacking the System

Mozambique is a young country with an early stage, vibrant startup ecosystem. Despite its short existence, it has already managed to gain international acclaim. Its talented youth and young ecosystem, makes it the perfect place to pilot and pivot new technologies until they are ready to scale to become a Pan-African success story.

In December 2017 during the Seedstars Africa Summit in Mozambique, award-winning startup UX Information Technologies, a tech4good company,  piloted the concept of a “donor up”. Having been the pioneer startup company in Mozambique, the company realised it did not have an established tech ecosystem and favourable investment landscape but it did have an established aid ecosystem.

The concept was simple: “use donor money to fund your start-up, and the world will be a better place because of it”.  Some of the biggest Mozambican success stories to date were launched in this fashion. As the story goes, UX wanted to bootstrap its first project, emprego.co.mz, a job portal in Mozambique that focuses on democratising access to work opportunities in a country where there are fewer than 750,000 jobs available for a workforce of 14,000,000 people. To do so, UX started technical consultancies for donor projects by taking advantage of a policy called local content, where development projects prioritise hiring a local company in lieu of a foreign one. They would then take the profits generated from offering these services and re-invest it into their own projects. Realising that some of these projects had huge potential to become a startup in their own, they started calling them donor-ups.  

Other opportunities to explore

From an ecosystem perspective, we often look at the concept of creating a “unique story” and specialisation  in a specific sector or industry. Cape Verde for example, has set itself a very bold renewable energy target. As part of its “sustainable energy for all” agenda, it has pledged to obtain 100 per cent of its electricity from renewable resources by 2025. A green tech revolution would therefore be an interesting market for its entrepreneurs to explore. Local initiatives have already started exploring this space, such as an initiative called “Climate Launchpad” that has accelerated four startups to date.

On the other hand, building bridges between Brazil, Latin America’s largest startup ecosystem and Portugal, currently one of the most booming European tech scenes, would be another interesting avenue to improve entrepreneurship locally.

Lusophone Africa is not an easy market to navigate, whether you are an entrepreneur or an investor. But for those who dare, it is definitely worth exploring.

Thank you

Please check your email to confirm your subscription.