Africa's accelerating venture capital financing for tech startups: What is Huawei's role?
Alexander Ayertey Odonkor
A Huawei Technologies Co. branded booth in Nigeria, March 29, 2021. /Getty

A Huawei Technologies Co. branded booth in Nigeria, March 29, 2021. /Getty

Editor's note: Alexander Ayertey Odonkor is an economic consultant, chartered financial analyst and chartered economist with an in-depth understanding of the economic landscape of countries in Asia and Africa. The article reflects the author's opinions and not necessarily the views of CGTN.

Across most countries on the African continent, technology (tech) startups are gaining significant attention as they leverage innovation and technology to provide pertinent solutions to pressing challenges associated with healthcare, financial services, energy, agriculture, education, transportation, trade, etc. While the activities of African tech startups in these key sectors are vital for increasing productivity, creating jobs, eradicating poverty and reducing inequality, limited access to funding is a snag that impedes startup growth in the region.

Fortunately, since 2015, African tech startups have found another window of opportunity that can bridge the financing gap and scale up productivity on the continent. Specifically, the firms are experiencing increased access to venture capital funding, a form of private equity and financing option provided by investors to startup firms and small businesses with long-term growth potential. According to the 2020 Africa Tech Venture Capital Report from the global investment firm Partech, the equity rounds raised by African tech startups witnessed a surge from 55 in 2015 to 250 in 2019. 

However, a drop was recorded for the first time in 2020, which was mainly attributed to lockdowns, travel restrictions and economic slowdown as a result of the COVID-19 pandemic. While the total amount raised for African tech startups in 2020 was $1.429 billion, it represented a 29 percent decline from $2.02 billion in 2019. 

A detailed analysis of the distribution shows that for all the tech startups that accessed the equity funding, the largest proportion of the total amount is allocated to firms specialized in financial technology, followed by agricultural technology, logistics and mobility, energy and health technology. This burgeoning pattern for tech startups and equity funding is reshaping the region's ecosystem.   

So why is Africa's tech startup ecosystem experiencing an unprecedented transformation with faster venture capital financing? To answer this question, it is imperative to first examine the digitization of financial, agriculture, energy, health and other related sectors in Africa, which as the key enabler attracts tech startups and investors.

For many decades, Africa has suffered from infrastructure challenges, so how come the region is now experiencing a boom in digitization? Well, the truth is that currently Africa benefits from China's tremendous investment in the continent's information and communications technology (ICT) sector.

According to the Infrastructure Consortium for Africa, an initiative that was launched during the G8 Gleneagles Summit, Chinese investments committed to developing Africa's ICT infrastructure exceeded $1 billion for the first time in 2015. These development projects in Africa have benefited immensely from the technical expertise of Huawei, the world's largest telecommunications equipment manufacturer. 

Huawei's contribution to the improvement of the region's ICT infrastructure is second to none. The company employs about 10,000 Africans and has training centers in Angola, Tunisia, South Africa and Egypt, which have equipped their employees with needed tech skills.

A Huawei Technologies Co. mural painted on a wall in Zambia, December 11, 2018. /Getty

A Huawei Technologies Co. mural painted on a wall in Zambia, December 11, 2018. /Getty

Huawei's footprint in ICT development can be found all over the continent. For example, in Kenya, the second-largest receiver of tech startup equity funding after Nigeria, Huawei is the project contractor for Phase Two of the National Optic Fibre Backbone Infrastructure Extension Project that commenced in 2014. Its goal is to complete a 1,600-kilometer fiber, which is supposed to link all 47 counties in the country with an additional 500 km dedicated to military use. The project is expected to strengthen the country's ICT infrastructure and stimulate productivity.

For the past two decades, Huawei has been carrying out similar ICT development projects across many countries in Africa, providing high-speed, stable and secured networks for the region. For instance, the company has provided fixed network infrastructure to access broadband for six million households and currently serves more than 900 million people in Africa, three-quarters of the continent's entire population. 

Huawei's investment in ICT in the region is also not limited to developing physical infrastructure. The company has demonstrated a strong dedication to creating a transparent technology ecosystem that will benefit all relevant stakeholders by training more than 24,000 subcontractor engineers, collaborating with over 1,200 subcontractors and employing more than 150,000 people across the industry chain in Africa.  

As said by Chinese philosopher Confucius, "If you give a man a fish, you can feed him for one day, but if you teach him how to fish, you can feed him for a lifetime." Huawei's commitment to securing a bright future for Africa's growing youth population aligns with this proverb, as the company invests heavily in Africa's ICT education and training to create world-class institutions and human resource capacity to support the region's rapidly growing technology ecosystem. 

Among China's many achievements in developing education in Africa, Huawei alone has established an ICT academy in more than 400 high-level ICT universities in 17 African countries.

With the ambition to promote the digital transformation of Africa, Huawei's investments in ICT infrastructure, education and technical training of the growing youth population are creating an enabling environment for tech startups to thrive. All these merits contribute significantly to attracting venture capital financing for tech startups in Africa.   

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