Is Africa the Future of European Tech?
European Straits #152
Hi, it’s Nicolas from The Family. Today, I’m discussing Africa and the idea that it may be the large market that European founders desperately need to scale up.
First of all, we’re nearing Christmas, so if you know someone that’s interested in technology, institutional innovation, and the future of capitalism, you can still gift them a copy of my book Hedge: A Greater Safety Net for the Entrepreneurial Age! The book was published in July 2018 but it’s still highly relevant in these times of rising inequalities, stagnating wages, and heated debates about the future of our social contract. Here’s where to buy a copy depending on where you are 🤗:
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Now on to today’s topic: Africa. Scott Galloway, the famous professor, author, and co-host of Vox’s Pivot podcast with Kara Swisher, recently wrote a harsh public letter to Twitter’s Executive Chairman about CEO Jack Dorsey’s idea of spending more time in Africa. Mostly, I disagree with Galloway, but it made me think about Africa from a European perspective. Now, read along 👇
1/ Let me start with a brief parenthesis. Galloway is a very smart guy. But I think he found too much success in bashing big tech companies. Whenever he does it, people love it, so much so that now he’s stuck in that role—he’s *the guy* who bashes big tech. He likely makes so much money speaking ill of The Four and selling his books that now his incentives have been tweaked, preventing him from drifting away from that lane. And so when Jack Dorsey announced that he was considering spending 3 to 6 months in Africa next year, Scott Galloway HAD to bash him. (True, he does hold 334k Twitter shares, which amount to about $10M as of today, so clearly he has a vested interest in speaking up here. But to me it all sounds like more of the same.)
(Before I continue, let me clarify that my business with The Family is to grow a portfolio of highly successful European startups—so you know where I stand and from where I speak.)
2/ What are the problems with Galloway’s argument? One is that he’s stuck in his role of the basher-in-chief, convincing no one but those who are already convinced. But from my perspective, another, much bigger problem is that holding that role in that particular case pushes him quite far into the stereotype of the self-centered American. The US business world has the luxury of a large domestic market, which means that most US companies can succeed at scale without paying too much attention to other countries. But the more American CEOs concentrate on the US, the more they neglect the rest of the world; that then leads to eventual failures at expanding internationally and/or backlashes when they try to apply US recipes in very different contexts. Indeed the “techlash” of which Galloway is a prominent figure can be explained in large part by the US-centric attitude held by prominent figures in the tech industry—whether they are founders, venture capitalists, or university professors.
3/ Now on to Africa. My generation isn’t accustomed to optimism when it comes to Africa. We who were born in the 1970s were deeply marked by the 1983-1985 famine in Ethiopia—in no small part thanks to Bob Geldof and Quincy Jones. Then came the AIDS epidemics, with Africa representing more than two-thirds of the total infected worldwide. There was apartheid in South Africa, and then all the problems that came with transitioning out of it. And there were many other conflicts, mostly civil wars, that killed millions across the continent. Add to that the difficulties that non-African governments, NGOs, and international institutions such as the World Bank have had in tackling the challenges of institution building and economic development across the continent, and you get why the overall picture has been so gloomy for so long—at least from a Western perspective. At best, Africa was deemed non-relevant from a strategic and economic perspective. At worst, negative comments were inspired by blatant racism, such as when Donald Trump made his infamous remarks about “shithole countries”.
4/ But more and more people are having another look. They realize that Africa has never been all about chaos, war, disease, and poverty. In truth, Africa is as diverse and fragmented as Europe: people speak different languages, have different ways of life and approaches to business, and countries have very heterogeneous levels of development. We also need to realize how much our views have been shaped (or rather distorted) by news coverage. Western media used to be interested in Africa but only focused on the violence, the chaos, the corruption. Now we’re simply hearing less and less about Africa. Western media have moved on, not covering foreign countries as much as in the past and, when they do, finding the chaos they crave in other parts of the world.
5/ If you hear about Africa these days, you’ll find that the news is rather positive—even impressive in many respects. First is the size. Have you seen those maps that show the real size of continents? In terms of surface area, Africa as a whole is equivalent to the US plus China plus India plus a large part of Europe (all together, it’s roughly twice the size of Russia). Then there are the demographics. As the world is getting older, Africa is basically the only continent with a population that’s growing fast. To quote Wikipedia, “As of 2016, the total population of Africa is estimated at 1.225 billion, representing 17% of the world's population. According to UN estimates, the population of Africa may reach 2.5 billion by 2050 (about 26% of the world's total) and nearly 4.5 billion by 2100 (about 40% of the world's total)”. Nigeria, the most populated African country, has almost 200M inhabitants, followed by Ethiopia (109M), Egypt (98M), and the Democratic Republic of Congo (84M).
6/ There’s also the fact that several African countries are really starting to catch up. You can read inspiring articles about countries such as Nigeria, Ethiopia, and Rwanda taking off, as well as roadmaps for how African economies could develop in the future, borrowing from the East Asian playbook. Indeed, many people and organizations are arriving to help develop Africa and capture a slice of the upside as they do so. Business in Africa used to be the realm of adventurers and people connected to power. But today it more resembles a mature capitalist economy attracting investments from all over the world—especially from the US (despite Trump’s racism) and China (big time). And there are more and more inspiring thinkers and influential organizations that are covering Africa with a rosier perspective—that includes Quartz’s African edition, Bloomberg’s Noah Smith, economist and blogger Tyler Cowen, and the brilliant Osarumen Osamuyi (check out his infrequent but informative newsletter The Subtext).
7/ Why is Africa relevant? Mostly, in my view, because it shares many characteristics with China in the 1970s. Accordingly, Africa could be to the 21st century what China has been to the late 20th: a region that comes from behind and then races ahead thanks to sound policies and the urgency of overcoming challenges. Climate change is one example. As a continent, Africa will be heavily affected by it. Thus for most African countries, leapfrogging won't merely be a question of economic benefit, but will be absolutely demanded by populations put under serious pressure. Just like China had to rebuild everything after the Cultural Revolution, Africa may not have a choice in choosing their war/direction if they want to seize the opportunity of economic development in the Entrepreneurial Age.
8/ Quite simply, there are just so many things happening. African entrepreneurs are deploying much-needed infrastructures for retail, manufacturing, and financial services. We’re witnessing the rise of the first African unicorns (although Jumia appears to be struggling). Young African graduates facing hurdles from immigration authorities in the West are heading back to their home countries to boost the local ecosystems’ momentum. Meanwhile, large foreign tech companies, both from the US and China, are flocking to the continent to seize the opportunity of future growth, partnering with African governments and local ecosystems. Despite Trump’s racism and lack of taste for foreign trade, the US is still leading when it comes to foreign direct investments in Africa. As for the Chinese, we know that they sell surveillance technology to African governments, but they also contribute to building infrastructures and fostering entrepreneurship on the ground, lifting up the local ecosystems in the process. (By the way, you may have heard about Wolf Warrior 2, the highest-grossing Chinese film ever, which is about a Chinese tough guy saving Africans from their corrupt government and the evil US mercenaries that support it. I wouldn’t say it’s a good movie 😉, but it reveals the new strategic deal in Africa.)
9/ But where are the Europeans? Africa is so close, geographically speaking. It’s in the same time zone. We have languages in common (English, French, Portuguese). It’s even more interesting for us Europeans because, like Europe, Africa is fragmented—and this could lead African entrepreneurs to discover a playbook that could serve as an inspiration for Europe (and the world). Finally, despite its fragmentation, Africa as a continent could give room for exponential growth to any European entrepreneur willing to expand their tech-driven business across the Mediterranean Sea. But you won’t find many European tech startups establishing a foothold on African markets.
10/ Why isn’t it happening? I see three reasons:
Europe is at odds with Africa in so many other respects, starting with immigration. When we consider African immigrants, we look for talent to settle in Europe, not allies to help us grow our business in Africa. And it’s really hard for us in Europe to build up relationships with African countries when we’re so busy trying to repel their citizens as they approach our coasts after making the dangerous (often deadly) crossing of the Mediterranean Sea.
Another problem, clearly, is the legacy of the colonial past. Europeans are embarrassed when it comes to Africa because they have harmed this great continent so much in the past. (I myself feel a distinct twinge of embarrassment as I write this article.) As for Africans, well, maybe they’re not particularly keen on seeing the Europeans come back, even if it’s only to do business. (If you’re an African, let me know your perspective!)
Finally, and this might be the biggest problem, European founders are lacking the ambition to do it for real—and even if they had that ambition, they wouldn’t be supported with enough venture capital. There are only a few exceptions, such as Heetch, one of our portfolio companies that has been operating in Algeria, Cameroon, and Senegal for some time. (Also hats off to Afrimarket’s Rania Belkahia, who tried hard but had to stop earlier this year due to a lack of capital.)
In conclusion, I hope you understand now why Jack Dorsey wants to split his time between the US and Africa. He knows that Twitter needs much more than the US domestic market if it wants to thrive. And he sees that most of the future growth potential is in Africa. It’s as if it’s 1997, you’re the CEO of a large company with increasing returns to scale, and you’re looking at China. Wouldn’t you want to settle in Shanghai or Shenzhen for at least three months a year? Indeed, every European founder I know who has managed to grow their tech business beyond their domestic market has done so by relocating to the front lines. And it’s so much easier to do that in Africa because, unlike the Chinese, they speak English (or French).
So here’s my message to Jack Dorsey (you’re welcome, Jack 😉):
Listen, there will be thousands of Scott Galloways who will beg you to remain a clueless, US-centered American CEO, stuck in your American bubble and far removed from the rest of the world. But I’m confident that you will stick to your decision and make the leap—thus ensuring that Twitter thrives and that Mr. Galloway makes even more money on his investment! My only regret is that there are not more equivalents to Jack Dorsey in Europe—European founders ready to do whatever it takes to establish a foothold in Africa. Or are there?
Please scroll down for a comprehensive reading list expanding on this discussion.
❤️ My wife Laetitia Vitaud is finally launching her newsletter, which will be dedicated to the future of work and HR management, with a feminist perspective. She should send the first issue of Laetitia@Work at the beginning of next year. In the meantime, you should subscribe to her mailing list!
🗺️ Speaking of the future of work, Sifted just published an article bringing together predictions for 2020 from 28 players in the European startup scene. My contribution talks about why I believe that distributed work will move from being a slowly growing trend to a key part of the labor market, and what that means for business organizations. Read it here: The year of remote working.
🛋️ Finally, we’ll soon all be on vacation, and I do hope you’ll also be enjoying a well-deserved break. Don’t worry, there will still be a few holiday editions of this newsletter coming out!
Here are more readings about Africa at the crossroads:
Ensuring Africa’s Continued Rise (Ngozi Okonjo-Iweala, Project Syndicate, March 2016)
Fintech isn’t disrupting Africa’s financial industry—it’s building it (Wim van der Beek, Quartz, August 2016)
Silicon (Valley) Is the Hot New Commodity in Africa (Paul Wallace, Bloomberg, September 2016)
Investors in Africa’s tech sector will win by solving real world problems, not just the digital ones (Tobi Oke, Quartz, October 2016)
Nigeria Could Teach the West a Few Things (Tyler Cowen, Bloomberg, January 2017)
African countries are seeing a “brain gain” as young elite graduates give up on the West (Chidinma Irene Nwoye, Quartz, November 2017)
Ethiopia Already Is the ‘China of Africa’ (Tyler Cowen, Bloomberg, May 2018)
The future is African — and the United States is not prepared (Ari Rickman and Salih Booker, The Washington Post, June 2018)
Clash of the US and Chinese tech giants in Africa (Aubrey Hruby, The Financial Times, September 2018)
The Future Is in Africa, and China Knows It (Noah Smith, Bloomberg, September 2018)
Africa’s smaller economies are leading business reforms on the continent (Yomi Kazeem, Quartz, October 2018)
The Supply Chain Africa Needs (Chuma Asuzu, The Prepared, December 2018)
The other side of Chinese investment in Africa (Emily Feng and David Pilling, The Financial Times, March 2019)
What makes Africa’s largest e-commerce platform African? (Yomi Kazeem, Quartz, March 2019)
Africa’s Only Hope Is Industrialization (Noah Smith, Bloomberg, April 2019)
Jumia’s rise exposes challenges of online shopping in Africa (Neil Munshi, The Financial Times, May 2019)
Marchetti's Motorcycles (Osarumen Osamuyi, The Subtext, May 2019)
Development as Imitation: Can the East Asian Model Become the East African Model? (Damien Ma, Macro Polo, May 2019)
Maybe Africa Really Will Be the New China (Noah Smith, Bloomberg, June 2019)
Are Tech Companies Africa’s New Colonialists? (David Pilling, The Financial Times, July 2019)
Africa Isn’t Being Re-Colonized (Noah Smith, Bloomberg, July 2019)
Why Africa’s Industrialization Won’t Look Like China’s (Ndubuisi Ekekwe, Harvard Business Review, September 2019)
The World’s Next Factory Won’t Be in South Asia (Irene Yuan Sun, Bloomberg, October 2019)
China is cornering Africa’s ecommerce market (David Pilling, The Financial Times, October 2019)
'This is Dubai now': Nobel-winning PM's plan to transform Addis Ababa (Tom Gardner, The Guardian, October 2019)
Global Africa? (The Big Picture, Project Syndicate, October 2019)
From South Africa to the Netherlands: A Firsthand Take on Startup Ecosystem Disparities (Natan Pollack, CMS Wire, October 2019)
African countries can’t industrialise? Yes, they can (Wim Naudé, The Conversation, November 2019)
The Global South Is Redefining Tech Innovation (Ramesh Srinivasan, Wired UK, November 2019)
From London, UK 🇬🇧