Pan-African Cloud Infrastructure in the Age of Tech Unicorns
Why investing in a Pan-African cloud is critical for the emergence of African Unicorns
When it comes to Tech Unicorns the United States (US) and China are undoubtedly world leaders. An estimated 80% of the world’s Tech Unicorns (private companies valued at over US$ 1 billion) are based in these two countries, with a long tail largely consisting of startups from India, the United Kingdom, and Germany.
The three most commonly cited reasons for the US and Chinese dominance are; (1) significant access to growth capital; (2) large populations; and (3) a uniform regulatory market, albeit Federal in the US. The lack of this third factor, despite significant efforts from the European Union (EU), is perhaps why European startups have struggled to compete with those in China and the US. There is also a fourth, and less commonly cited enabling factor — namely, adequate physical infrastructure for high-quality connectivity i.e. broadband and high-performance cloud infrastructure.
In March of 2019, Africa recorded its first tech unicorn — Nigerian startup, Jumia. The company was founded in Lagos in 2012 and has a presence in over ten African countries. Whilst Jumia’s experience since IPO has been a difficult one; its status as the sole African Tech Unicorn in history indicates a wider systemic problem. Let’s consider this in light of the aforementioned success factors:
1. Access to growth capital: This is undoubtedly a challenge, but the African venture capital and private equity markets continue to grow, and international investors are increasingly looking at the continent for opportunities.
2. Large populations: The continent as a whole has over one billion people, 350 million of whom are middle class. The latter number exceeding the whole US population. The continental scaling opportunity is clear for companies with access to capital and the right business models.
3. Uniform regulation: This is non-existent due to the continent being comprised of 54 countries; however, this is not strictly inhibitive due to most African markets being in a state of under-regulation, rather than over-regulation. Self-regulation or alignment with global norms can fill the void.
4. Enabling tech infrastructure: Small pockets of excellence exist across Africa. This remains a significant bottleneck to achieving scalability, even if the first three factors are favorable.
Looking at the above, it's clear how point 4 is a considerable barrier to the development of African Unicorns. Without the enabling infrastructure, the potential of African startups to create world-class and scalable solutions is severely hampered.
The challenge, however, is that as with many things, diagnosing the problem is easier than remedying it. Without a fitting solution to the high-quality connectivity challenge, the likes of Jumia will remain an exception, the quality of digital solutions developed in Africa will lag behind the rest of the world, and it will become increasingly difficult to deploy global solutions on the continent. All of this will undoubtedly contribute to economic under-performance and hinder development. It’s therefore critical for a Pan-African, scale-enabling infrastructure, to be brought to market.
One way of addressing this challenge is by investing in the establishment of Pan-African cloud infrastructure. At a bare minimum, this infrastructure should be platform-neutral, and meet the performance criteria for big tech cloud providers (e.g. AWS, Azure and Google Cloud) to host services (i.e. storage, compute, etc) that are of the equivalent capability to those offered in North America, Asia, and Europe.
As with any investment, the top of mind question is always how would this be funded and who would own it? A viable option may be a mixed ownership model consisting of big tech cloud providers, telecommunications companies, development finance institutions, and government. This type of diversified investor pool, with a mutual interest in the infrastructure being established, would not only assist in sharing risk but also potentially and increase the total funds that can be raised to deliver on the solution.
Achieving this is easier said than done; however, it’s worth noting that companies such as Global Switch have built multi-billion dollar businesses on the back of rolling out cloud-neutral data centers across Europe and Asia, following a similar model to the one proposed.
Until this gap in the market is addressed, deployment of world-class cloud services across the continent at scale will not be possible; dreams of African Unicorns transforming business and life across the continent will not materialize, and African entrepreneurs looking to create Pan-African and global digital business will not flourish.
As we enter a new decade with hopes and dreams of economic breakthrough and prosperity for the continent; it is imperative that all stakeholders who stand to benefit come together and make this happen.
Achievement of this objective will not only unlock currently unattainable opportunities, but also contribute to creating an environment where more African Unicorns can emerge, and other businesses that solve African challenges can thrive at scale.
Njabulo is a business and development strategist who believes science, technology, and innovation are key for enhancing human life. He writes in his personal capacity. Twitter: @skhosi1