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Start-up scene in East Africa: a hub for innovation or doomed to failure?

A travel report about a start-up tour full of insights and inspiration

East Africa's start-up scene: young, inspired, hopeful - and with a lot of problems. A few weeks ago ten KIT students were in East Africa with the student start-up initiative PionierGarage to exchange ideas with the local start-up scene. The PionierGarage has now been in Karlsruhe for ten years, has built up a network of founders, investors and supporters and provides a lot of support to make it easier for students to get started in the start-up scene. In addition, a group travels to the start-up centers around the world every semester. Previous tours have gone to Silicon Valley, India and China, among others. This semester the destination was East Africa: Kenya, Uganda and Rwanda. But what do the start-ups really have to offer there and how do the Karlsruhe students judge the start-up scene? Where is the potential and where are the problems?


A few facts about our tour

The start-up ecosystem in East Africa is thriving and is one of the most progressive on the continent. At the forefront: Kenya. The country has been the start-up hub in East and Central Africa for years. But Uganda and Rwanda are also catching up. A few facts about the tour, we spent 17 exciting days in Africa. We flew into Kenya, then traveled to Uganda and last spent a few days in Rwanda, from there we traveled back to Germany. Within Africa we only drove by bus. On the tour, we visited over 25 start-ups and start-up hubs and spoke to founders, employees and supporters of the start-up scene. We organized the travel planning ourselves, most of the contacts were made through web research and LinkedIn.

Challenges and why they offer so much potential

The living conditions in East Africa lead on the one hand to unbelievable challenges, but on the other hand also offer unbelievable opportunities. I am talking about topics such as demographics and population growth, lagging development and a lack of structures. But what are these circumstances and why could they lead to a particularly flourishing start-up scene? Africa's population consists of around 1.3 billion people. This number is expected to double by 2050. The population is not only growing rapidly, it is also very young. Over 40 percent of people are under 15 years old. This initial situation can lead to problems. However, the population can also become a “demographic bonus” as there are many people of working age and hardly any old people to care for. The demographic bonus only comes into play if all the children who are born also receive the necessary education and people actually work and earn enough money to be able to earn a living with it. And this is often where the problem lies, so our impression.

Why entrepreneurship is so important for Africa

A lack of structures and unemployment lead to start-ups out of necessity. Jobs are literally created artificially by hiring a person for the smallest services such as "clearing bags in the supermarket". It is obvious that these jobs are not enough to make a living and lead to frustration. Therefore, many people try to earn more money on the side. “Most of them also have to work in the evenings,” one founder told us in Nairobi. So here is founded out of necessity.

Nevertheless, we experienced a lot of hope and initiative: With stable access to the Internet, the path to the necessary knowledge is there. In this way, problems can become possibilities that, with the help of innovation and the creativity of the founders, can be solved in a way that is in no way inferior to solutions from industrialized countries. In summary, our impression was: There are many profound problems and also many people who could theoretically solve them, provided they received the necessary education. There is no question that this is largely a political problem.  

This is what the startup scene looks like in Africa

Good access to the Internet makes information accessible, which in turn offers a good starting point for innovation and a flourishing start-up scene. Most of the start-ups we visited dealt with elementary problems such as health care, internet access, logistics and transport or power supply. They are working on very far-reaching topics and have even laid initial structures. Our impression was that Africa actually skipped industrialization in some places. Whether it is an X-ray device that can be connected to a smartphone or a logistics solution that functions as an “Uber for trucks”.


The three countries in comparison

Kenya: the most advanced startup hub

Despite the amount of innovative solutions, Kenya, Uganda and Rwanda couldn't be more different. Both the mentality and culture, as well as development, politics and, last but not least, the start-up scene. Kenya is an up-and-coming point of contact for foreign investors; the gross domestic product per capita is more than twice that of Uganda and Rwanda. In addition, the start-up scene is very established and most foreign investments go there. Summarized in key words: economic hub, corruption, foreign investment, low trust and “hustle”, which translates as “work hard”. This also largely describes the work mentality. Kenya's economic growth has various reasons, the determination of the people is certainly one of them. In addition, a large part of the affluent population goes to the USA or Europe for their studies. We hardly ever visited founders who only used education in Africa. Founders with a western background bring contacts and, above all, knowledge of the western mentality with them. This is the only way to get money from the USA or Europe. So the mentality noticeably supports hard work and aggressive economic action. However, corruption and a lack of trust within society prevent sustainable and open business relationships.

Uganda: The most entrepreneurial country?

In Uganda it looks completely different again. Economically less ambitious, but cheerful and creative. We have often heard “We are the most entrepreneurial country”. In addition, that Uganda ranks as one of the happiest populations and also that the population is not quite as hard-working, one of the founders jokingly said, "at least compared to Kenya". Our perception showed something similar. We felt much safer in Kampala, the capital, than in Nairobi. The founders were very sociable and friendly. They also spoke more openly about their mistakes and setbacks. We also felt an inspiration and hope in people when they talked about goals and plans. However, almost none of the startups in Kampala had an investment. There are hardly any foreign investors and domestic investors prefer to invest their money in more conventional assets such as the real estate market. The money is there, but it doesn't end up with the start-ups.

Rwanda: new structures and rapid changes

This problem is omnipresent not only in Uganda, but also in Rwanda, a small country full of changes and once again showed us a completely different side of East Africa. Last stop Kigali. The genocide took place 25 years ago in Rwanda, in which up to a million people of the Tutsi ethnic group were murdered by supporters of the Hutus. The land lay fallow, the population was traumatized and culturally destroyed. President Paul Kagame has been in power for almost 20 years. His goal: Rwanda should become the Singapore of Africa. With a strict culture of reconciliation, goal-oriented politics, a social system and laws that are actually implemented, he is on the right track. The streets are new and all the houses are bricked. Everything seems orderly and calm. Starting a company couldn't be easier. Filling out a form is enough to be a registered company. The orderly life is actually more reminiscent of Singapore, but the business opportunities of the African market remain. With these prerequisites, Rwanda is also a magnet for founders from Europe or the USA. Investments for local founders are in short supply here too.


Our conclusion

Conclusion of our trip through East Africa: The region urgently needs money and education. Education so that the demographic bonus comes into play and money so that business ideas can also be implemented across the board. There is a lack of investment, especially in the seed phase, as the gap between a validated idea and the actual implementation cannot be closed. In the industrialized world, a seed investment of 100,000 to 500,000 euros is negotiated, in East Africa 10,000 euros would be sufficient for a start-up in this phase. At the moment, some of the funds are flowing into incubators and hubs that offer office space, workshops, etc. But it would be much more helpful if the money were invested directly in local start-ups, we have often been told. However, this would require a network of local ambassadors who know the market very well and who can select and promote promising start-ups. But that is very complex and in the end there would not be a presentable project with certainty. What can be said with certainty is that you have to meet founders and the market at eye level. There is a lot of economic potential in East Africa and this can only be promoted with sincere and sustainable economic relationships. With a view to the future in particular, it is worthwhile not to see Africa as a backward continent, but as a place where you can find business opportunities and partners. And above all a lot of new and creative ideas.

List and links to the start-ups and more information: tour.pioniergarage.de