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Dissecting Challenges in African Tech Development

Updated: Nov 22, 2023





African City
Busy Street








Original story & credits & written by : Olokede Winner






Dissecting the African Tech Landscape: Why Companies Folded in 2023

Unearthing the Reasons Behind African Tech Companies’ Demise in 2023: Funding, Competition, Management, and HR Values Explored






Foreword:



These are thoughts and challenges that one may face as and up and coming business in East Africa such as demand, supply, & labor. Discussed are view points one may dissect in a business for maximum productivity efforts. SHIFT Enterprise Academy has developed a model of management system that will assist the local communities in solving everyday problems that one may face increasing the quality of life.


There are multiple reasons a promising idea may continue to grow or may become stagnant after its inception, this read goes through a risk analysis covering some of these obstacles that may occur. SHIFT Enterprise Academy is dedicated to positive growth & problem solving with the belief that with hard work & proper support through partnership goals driven for community, we can make this a better world for all business by business.







A Business Meeting
Business Meeting






As conversations echo through boardrooms, Twitter, and just about everywhere, the year 2023 has undoubtedly left an indelible mark on the African tech industry. The VC funding in the African ecosystem declined by 48% compared to the corresponding period last year at just the end of the sixth month of the year. With this sort of news, and considering economic downturns all around the world, doom is a topic that’s on everyone’s lips, and a persistent lingering sense of the untimely demise of once-promising companies still lurks. This phenomenon, though disheartening, serves as a stark reminder of the challenges that persist in this dynamic space.






The Grim Reality: African Companies Going Under

So far in 2023, several African tech companies, including Laserpay of Nigeria, Dash of Ghana, Sendy of Kenya, Kune of Kenya, and so many more have faced the harsh reality of folding. These once-promising startups were poised to make significant impacts in their respective niches, but somewhere along the way, their journeys took an unforeseen turn.



The Triple Edged Sword: Funding, Competition, and Management


Lack of Funding

It’s sad to note that a staggering 70% of startups in Africa grapple with the challenge of securing adequate funding. This financial bottleneck proved a formidable obstacle for Laserpay and Sendy, both of which held immense potential. Sendy for example, a groundbreaking logistics company had to close up and consider selling its assets, after running out of funds to continue running, this is after a 10% cut of its workforce last year. Despite innovative solutions, their inability to secure the necessary capital impeded their ability to scale and adapt to an ever-evolving market.



The Grim Truth

Limited Access to Capital

One of the prevailing issues that startups face in Africa is the limited availability of venture capital and angel investments. According to the same report, early-stage funding remains elusive for the majority of startups, with only 20% successfully securing seed funding. This scarcity of initial capital significantly hampers the ability of startups to develop and refine their products or services.


  1. Scaling Challenges

Inadequate funding poses a critical barrier to scaling operations. The inability to secure growth-stage funding inhibits startups from expanding their reach and penetrating new markets. Without sufficient capital infusion, many innovative solutions with immense potential find themselves constrained, unable to realize their full impact on a broader scale.


2. Fierce Competition

In an era where technological advancements are rapid and boundaries are blurred, competition in the tech sphere has never been fiercer. Zumi, a b2b e-commerce startup, faced the daunting task of standing out in a market saturated with similar offerings. According to the co-founder and CEO Willaim Mccaren in an article on Disrupt Africa “The current macro environment has made fundraising extremely difficult, ad unfortunately, our business was not able to achieve sustainability in time to survive” he said

The lack of differentiation and a clear value proposition led to dwindling market share and eventual closure.

This challenging backdrop, combined with a lack of a distinctive value proposition, ultimately resulted in Zumi’s market share eroding and, regrettably, the eventual shuttering of its operations. This sobering tale serves as a sad reminder of the imperative for startups to not only navigate the competitive landscape but to also define a unique value proposition that sets them apart in a crowded market.


3. Poor Management: The Achilles’ Heel

Dash, a prominent Ghanaian company, exemplifies how subpar management can erode the potential of even the most innovative ventures. Despite offering a groundbreaking solution, amidst embezzlement and outright fraud, Dash fell victim to a lack of effective leadership and strategic guidance, ultimately leading to its untimely demise. Astonishingly, according to Disrupt Africa’s Report, a whopping 85 % of South African startups end up failing and only very few make it past their first year, and only 50% of those make it past three years. This sobering statistic and many others across Africa underscores the pivotal role that effective leadership plays in the success and sustainability of tech startups, as Dash’s unfortunate experience vividly illustrates.


4. An Appraisal of HR Values

The fall of these companies also casts a spotlight on the HR values prevalent within the African tech space. A survey conducted by Bendada highlighted that 67% of talents start contemplating their exit less than 6 months before they left showing startups struggled with talent retention and development, indicating a critical gap in HR practices. This, coupled with a lack of emphasis on organizational culture, has been a recurrent theme. Such shortcomings inevitably lead to dissatisfied teams and hindered productivity.


5. Charting the Way Forward

In the wake of these sobering realities, the African tech space must undergo a collective introspection. It’s important to foster an ecosystem that supports startups through sustainable funding models and mentorship programs. Additionally, companies must prioritize effective HR practices, investing in talent development and creating environments conducive to innovation.


The burden also falls on governments and private investors to play a more active role in nurturing and sustaining the tech ecosystem. By providing tailored support, regulatory frameworks, and access to funding, we can ensure that the next wave of startups doesn’t meet the same fate.


In conclusion, the fall of all of these startups serves as a reminder of the many challenges that African tech companies face. While the road ahead is not without its own obstacles, it’s through collective effort and strategic investments that we can pave the way for a thriving, resilient tech ecosystem in Africa. The time for action is now.





Written by : Olokede Winner


Writes about technology, politics, people and society.
















At SHIFT Enterprise Academy we will continue to keep the SHIFT pillars in mind while working towards a sustainable future for the world.


In the words of SHIFT Enterprise Academy Founder Ethan Brisby, former VP of City Lending & Counseling Operations, & author of "Economic Mobility" ; "Review your plan weekly if not daily, and stay the course, you have nothing to lose, and everything to gain!"









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@SHIFTenterpriseacademy


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