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WhiteAfrican

Where Africa and Technology Collide!

Page 14 of 109

Africa’s small merchants and payments

I’ve been pondering small business, payments and incentives quite a bit recently. Partly because of the web startups I’ve been seeing crop up locally, partly due to the inefficiencies in the system, and also because I’m a bit of a merchant at heart.

Specifically, I think that small business in Africa will bring a major wave of activity in the online space. That some smart startups will take advantage of mobiles and the internet, and will be beneficiaries of this growth. We’re all quite impressed with the peer-to-peer mobile money growth on the continent, but those numbers pales in comparison to what can be done with high penetration of active merchant payment options.

The African Payments Picture

A recent post about Square (the merchant payment system for iOS devices) and their use by small businesses started me thinking beyond the mobile peer-to-peer payments we’re so focused on here in Kenya and more in the direction of the merchant side. Right now Square moves $4 million per day, a healthy business, but not a massive amount compared to the big guys in the field. Most merchants in the US and Europe default to having some type of credit card or bank card payment setup for customers, it’s almost a given.

Meanwhile, in Africa it’s a different story. Mobile payments have taken the stage due to the lack of credit/debit card penetration. In short, African’s lack payment options, so innovative ways to use what they do have (phones) has pushed payment innovation forward.

While the mobile operators have been busy diversifying their revenue streams and figuring out new ways to hook in their subscribers with mobile money, the banks haven’t been nearly as active. Many of them would rather just create a mobile way to check your balance, rather than provide a tool with truly meaningful interaction, something you could pass money through to merchants or your contacts. Instead of offering something of equal, or better, value they’ve instead chosen to try and block the operators movements.

As I’ve suggested many times, we need an agnostic system, where the user isn’t penalized for their choice of mobile operator or bank.

New Ideas

While the big players continue to fight it out, the small players are innovating where they can. We’re seeing mobile payment aggregators, such as PesaPal, begin to see success as their web options catch on with merchants, schools and events. Meanwhile, groups like KopoKopo are going further down the stack, providing a subscription-based mobile payments processing package for SMEs.

New startups like Niko Hapa are creating locally-relevant incentive systems for merchants that works with everyday customers. Others, like M-Order, are creating simplified mobile and web-based ordering systems for customers to order services and products. MIH-backed Dealfish and Ringier-backed Rupu/Pigia continue to duke it out against each other across sub-saharan Africa, getting small merchants to list their goods on their marketplaces.

What I’m pointing out is that we have a wave of new products and services specifically aimed at merchants. Most of them are small and don’t have critical mass, but that is changing rapidly. These are just the first movers.

Shifting Sands

Bonk is a t-shirt company in Nairobi that offers the coolest designs around for their target market of urban Nairobians, and they have a shop set up in a nice shopping center in town (Junction). Let’s call them the high-end of the small merchants who need a good way to get payments. Their current setup allowing Visa transactions account for around half of their customers, and they have to pay a rather large 5% transaction fee. They don’t have an online store (yet… Shame on them.), so walk-ins are their only sales channel and they do very well with them.

Other examples of small businesses that run the range of medium- to lower-level transactions would be auto parts stores, retail clothes shops and restaurants. They all have a need to attract customers and they are all served better by having an easier way to setup a merchant account and have easier ways for their clientele to pay.

There are hundreds of thousands of these small businesses across Africa. Few of them have any solution other than cash. Companies that accept credit cards, like Bonk, are the anomaly.

A Hybrid Solution

What would a Square-type solution look like for them? What if a company were to create a simple (for customers) payment system that solved the problem that Square is solving? That is, a way to get your hands on a solution easily, without oversized transaction fees, and which also worked within the local context of mobile payments plus credit cards.

I can imagine someone coming up with an device that works on most phones. Probably Android phones here instead of iOS devices. That way, as a merchant I can buy an $80 IDEOS Android phone, get one of these swiping devices, that also has a chip in it for near-field communication payments and which seamlessly works with Mpesa and other mobile payment options. It’s simplified, and it works across not just a country, but across the continent.

What would this device look like? How could it connect to the phone? What type of technology would be embedded in it to make it work right? Which merchant systems could be signed on in order to allow people to signup and get started?

IPO48 Nairobi Startup Finalists 2011

I’m at the final pitches for the 2011 Nairobi IPO48 event that’s been happening non-stop over the last 2 days. This year it’s being held at the iHub, with 12 companies working through ideas, prototypes, business plans and finally an investment for the winner. In total, they’re offering:

  • 25.000€ (3.3m Ksh) in funding after 48 hours
  • Mentorship from serial entrepreneurs and professionals
  • Great media exposure for your startup
  • Find talented people that want to join your startup

If you want a quick rundown of who the 12 finalists are, and what their apps do, check out Afrinnovator’s writeup. You can also watch quick 1-minute videos on each of them on YouTube.

The 2011 Winner: Tusquee Systems with their SchoolSMS app (which also won their category at Pivot25)!

Runners Up Ghafla! and 6ix Degrees will win an additional 15k Euro investment (more on Afrinnovator).

Kenya Startup Events


It’s only 2 months since Pivot25 and now we’re on another startup event with Human IPO back in Nairobi for the second year. The Tandaa $690k startup grants for techies have gone out to 15 companies. We didn’t have any of these events going on. None.

This is important for a number of reasons:

  • Kenyan entrepreneurs are getting experience in pitching their ideas.
  • Techies are finding out the hard truths about themselves as business people, and that technology alone doesn’t make a business.
  • Local and international mentors are giving the entrepreneurs much needed insights and wisdom.
  • Investors and international media are being catered to, they’re getting a chance to see the Nairobi startup scene up close and personal.
  • Design is being taken a little more seriously (though a lot more needs to be done).
  • It brings an angel and early-stage investment mentality to Nairobi that hasn’t really existed before.

In short, we need to continue with local startup competitions. The more people who learn how to think through, build and pitch their ideas, the more likely we are to continue our upward growth in mobile and web innovation. It’s only by a lot of practice, lessons learned and hard knocks that we’ll see more success stories.

The finalists in these competitions represent a small percentage of the people who apply, but don’t make it. It’s a pure numbers game, where we’ll see the 10-15% succeed and most fail. Again, that’s okay, it’s how the startup game works.

We’re only half way up the mountain, and startup competitions are only part of the equation. There’s a lot more work to do if we want to see more success stories. Thus we need the whole technology community in East Africa to continue supporting the events and the people behind them, but also get involved in the startups themselves, whether for mentoring, business or investment.

Going Off-Grid (Holiday)

I’m off-grid on holiday until August 8th. This means that any communications that come in before Aug 8th will be DELETED upon return. I do this for peace of mind on vacation, not because I don’t value what you have to say. No one wants to come back to an inbox of 2000+ messages.

Feel free to get in touch with my colleagues at Ushahidi and the iHub in my absence.

Interesting Reads

What makes the iHub work?

I often get asked what the iHub is, what happens here, and why it has worked. Often followed by the question of whether or not this model could work elsewhere in Africa. Here are my thoughts on the matter.

The iHub is Nairobi’s nerve center for technology; a place where we can grab coffee, create apps, find funders and build businesses. It’s where the community of web and mobile programmers connect with each other, businesses, the government and academia.

[TLDR version: Championed by credible people, alongside advisors from the community. Experimental mindset. Strong connections to corporates. Strict community focus.]

A brief history

Juliana, Erik and David

There was a discussion at Barcamp Nairobi 2008 about how valuable it would be for the Kenyan tech community to have a static space of our own. No one would fund that idea. My organization, Ushahidi, decided that we liked it the idea enough that we would fund it. It fit with our overall thoughts on being “open”, it would serve as Ushahidi’s home in the region, and most of all, we thought we could use our good fortune to find and help the next startups in Kenya.

Thus, I moved back to Nairobi in 2009, with funding from Ushahidi via Omidyar Network and Hivos, to build the iHub. I quickly selected a space, and picked the energetic and gifted Jessica Colaco as the Manager. In March 2010 we started work on the space, and in June it was open for use.

Though we had provided funding for the first 2 years, the iHub is an independent Ushahidi initiative. Meaning, that it runs outside of the normal Ushahidi operations and organization. Though the Ushahidi team has full access for the space, we have a very light footprint, and use it the same way everyone else in the community does. We knew that even though we were the most neutral of parties, with a ton of local credibility, trying to “own” the space would fail – just as it would if it had been named the “Google iHub” or the “Nokia Innovation Hub”. It had to be owned by the community, and that meant name and usage both.

The community

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At the heart of all that happens at the iHub is the community. They designed the room layout and logo, run the network, hold events, built the website, create the house rules and drive the direction of the space. The management of the space is there to provide basic infrastructure support, a foundation, which the community then builds on to make the space what it is today.

What’s important to understand is that we come from this community too, we are it. We knew it could work because it was ourselves we were building for. When people ask me if I could do the same thing in another city, I respond that it would be questionable. A space like the iHub needs to be put together by someone from that community of techies who understands at a basic level the needs and has the credibility within it to make it happen.

As the iHub grew, we realized that all of the administrative duties, mixed with community interaction, were too much for one person. Thus we brought on Tosh to be the community manager, where he is in charge of working with people, memberships and events. His job is to aggregate, translate and enable the communities needs.

The advisors

That “being part of the community” was what drove me to start looking for a small team of advisors who could help make decisions, especially early on. This iHub advisory board was made up of 4 influential and highly credible technology players from Nairobi, plus myself. The greater community could appreciate that they were being represented well, and it provided a small enough team to move quickly.

Initial roles for this team were to make the final decision on build out design, logo and name, as well as figure out how to deal with an influx of members in a tiered membership model if the need arose (and it did, quickly). With over 4,300 white-level members, this team is also responsible for making the decisions on who gets green-level membership, the people who ultimately get to have free and unfettered access to the iHub facility.

The design

IHub Nairobi Incubator 3D

The design of the space was very important, and we were lucky to have Fady Rostom and Kwame Nyongo to lead the design team. They spent a lot of time listening to the ideas and thoughts of the advisory team before they started drawing, and it shows in what was built.

We needed a place that was open, and could be flexibly turned from community commons to event space. We wanted a subsection of the space to be rentable desks, for pre-incubation and co-working activities. At no time was a coffee shop not included – it was seen as core to the vibe and culture of what would happen here. We’d need a secure server room, and plenty of ethernet and electrical points, both inside and outside.

Most of all, the iHub needed to be a place where Kenyan techies were proud of. A place that was uniquely ours, and that we could show off to our visiting friends from abroad. It had to have the feel of being any high-tech community space in the world, with a Kenyan flavor. And it is.

The sustainability strategy

Early on we had no idea how we would pay for things beyond the first 2 years. We projected costs, but didn’t know where the revenue would come from. We had some ideas, but instead of creating a grand plan, we decided to take a very experimental approach, iterating on what worked and killing ideas that didn’t fit.

Right now the iHub has revenue coming in from red members (co-working desk rental), events and the new research arm. Events and desk rental were obvious and worked from very early on. The R@iHub arm didn’t come into being until January of this year, and was very much a big experiment – which appears to be working marvelously well. Jessica’s background is as a technology researcher, and she’s built a brilliant team around her to focus on this. Already we can see that 50%+ of future income will come from this initiative.

The other experiment was taking lead on the m:lab, a space the same size as the iHub which sits one floor beneath us. It’s an incubator. It plays the iHub’s foil, where upstairs is about community, openness and fun, the m:lab downstairs is about professional tech companies building quality products and making it into the market. We took the lead on the consortium behind this, and it is seen as a sister-facility to the iHub, with many shared services between the two.

The corporates

Both the iHub and the m:lab have strong corporate partners. Early on, before the first brush of paint was dry in the iHub, we had started talking to big technology corporates who call Nairobi home. Large tech corporations need an active dev community, and the dev community needs them. Luckily, Kenya is geographically well-positioned for some great companies to make it their home in the region, which worked well for us. We also happened to know a number of them personally, which sped up the discussions and interactions considerably.

We didn’t want to just have corporate partners who were sponsors. We made it very clear early on that their money was less important to us than what value they could add to the space that would help the dev community, but that it was a 2 way street. If we couldn’t facilitate a strong value back to them from the local tech community, then it was a no-go.

Fortunately, despite our lack of a clear idea of exactly how things would work, or what our metrics of success would be, we found some great patners. Nokia, Google, Wananchi and Microsoft are corporate partners with the iHub, and downstairs we have MIH, Nokia and InMobi working with us.

A small aside here, which isn’t corporates, but we’ve also nurtured strong connections with the Kenyan government, though we take no money from them. This also applies to academia.

Final thoughts

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By the end of 2010 people were already claiming that the iHub was a model for technology engagement, aid stuff (gah!), etc… in Africa. I thought that was a premature statement, it was an experiment and it still is. The success of the iHub has come from a strong foundation of advisors and community members who understand their city, their peers and their region.

The success of other tech hubs across Africa will be based on leadership credibility, and ability to engage their community.

Much of the iHub’s success comes from a community that works together. In that spirit of “harambee” that is so much a part of our Kenyan life. While there is always healthy competition, we would rather work together and celebrate each others success, and ultimately help each other along with the knowledge that if more of us succeed, then we all benefit.

I hope to see many more labs and hubs across the continent, and we’re seeing them grow too, in Cameroon and Ethiopia, Uganda and Nigeria. Though some of them will need financial assistance to get going, like Ushahidi did with the iHub, they’re organic growth is what makes them viable.

TEDGlobal 2011

This last week I was in Edinburgh, Scotland at the TEDGlobal conference. As always, it was filled with inspiring talks, great conversations and I went away with a brain full of new ideas. (TEDGlobal picture sets)

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I’m one of the TED Senior Fellows, and I should add that there is one more week open for applications to this program. Every class of new TED Fellows seems to get better, where their talent, ability to speak and communicate their ideas grows stronger. In fact, I think this year’s TED Fellows talks were at a higher quality on average than TED U talks.

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Not all of my favorite talks are up yet, but two of them are, embedded below.

A Magna Carta for the Networked World

One of my favorite people in the world is Ethan Zuckerman, who gave a talk at TEDGlobal last year in Oxford. He co-founded Global Voices, and his colleague on that was Rebecca MacKinnon, who spoke at this one. Here’s her talk on why we need a Magna Cart for the networked world:

Trial and Error

As knowledgeable as we are in whatever our chosen field is, there are things that we shouldn’t jump to assumptions on. Instead, economist Tim Harford makes a case for the use of trial and error in order to come up with the right decision.

Africa’s First National Open Data Initiative: Kenya

Today Kenya becomes the first country in Africa to launch a national open data initiative. There have been many people pushing for this, over many months, and it’s been an exciting process to watch unfold. Foremost amongst the drivers on this has been Dr. Bitange Ndemo, the Permanent Secretary of Information and Communications. This is indeed a very proud moment for Kenya, and a leading position to take on the continent.

The Kenya Open Data Initiative (KODI) goes live this morning in a big event that includes President Kibaki, as well as many politicians, government officials and local technologists. The World Bank, who has been instrumental in organizing and helping publish the data is here as well, along with Google, Ushahidi, the iHub community and a large selection of youth.

Data Sets

The data is available online through the Socrata platform, which allows users to view different data at national, county and constituency levels. They can compare different data sets, create maps and other visualizations.

Data sets are categorized into 6 main categories: Education, Energy, Health, Population, Poverty and Water & Sanitation. It includes data from the national census, the ministry of education, ministry of health, CDF projects and many more.

Here’s an example of that data, “county expenditures by administration”:

Mashing up the Data

This all came together rather quickly, starting about 3 weeks ago. The tech community was immediately reached out to, and as the data sets have come online over the last week, we’ve had access to them early in order to show what can be done. Here’s a few samples of that.

The Ushahidi team is taking the census data and overlaying healthcare institution data on top of it into our Huduma site. It’s still very beta, but it shows what can be done in just a few days.

We’ve also built a simple SMS query tool. If you’re in Kenya, send an SMS to 3018 with the name of your county or constituency and you’ll get back an SMS with the demographics and MP of that location.

The Virtual Kenya team has built an app that shows which MPs refuse to pay taxes.

The iHub community has done some things around tracking CDF fund usage in the constituencies. There’s a mobile app called “Msema Kweli” that allows you to find CDF projects near you, and for you to add pictures of them.

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A West African Mobile Hacking Event

There’s generally a communications wall between francophone and anglophone Africa. Both sides could use greater exposure to the other.

It’s no surprise to see a bunch of tech companies and community members coming together for a 24 hour hackathon on September 24th in four French speaking countries: Côte d’Ivoire, Benin, Senegal and Cameroon.

What’s great to see, is that there are 6 tech labs/hubs that are supporting it in these countries:

Côte d’Ivoire : AKENDEWA
Sénégal : JOKKOLABSACT DAKAR – iHUBSENEGAL
Cameroun : APPSTECH
Bénin : ETRI LABS

What Should Google Do in Africa?

This week I’ll be speaking to a delegation of around 30 Associate Product Managers (APMs) who are exploring leadership positions within Google. Along with them is Marissa Mayer, VP of Location and Local Services. Like I did when I addressed Nokia’s Africa leadership last year, this is a chance for them to hear from more than just one person with one opinion.

I will bring them your answers to the questions below:

  • What is Google doing well in Africa that they should continue?
  • What should Google be doing better, differently or new in Africa?

A Few of My Thoughts

Google has done what few other tech companies have done on this continent. Having 54 countries to scale across isn’t easy, so anyone trying it gets a lot of credit.

  • They’ve invested in people; both their own and the community in general.
  • They realized early that there was a need for tech policy change, and put time, resources and energy into that.
  • They have surfaced content, from maps to books to government data that wasn’t available before.
  • They have localized search into multiple local languages, made their services more mobile phone friendly and experimented with services for farmers, health workers and traders.
  • Their Google Global Cache has sped up the internet by upwards of 300% for some countries.

Here’s are my suggestions:

Double down on Android. Do this in two ways; first, keep driving the costs down, like what was done with the IDEOS handset. Second, help your partners (Huawei and the operators) push the spread of these beyond the few countries they’re in now (and at the same price as in Kenya).

Gmail ties everything together. Google has been the beneficiary of most other companies ignoring Africa. Facebook is the only challenger in the chat, mail and social spaces. Get started on zero-rating Gmail with the mobile operators, figure out how to make Google Voice work here, and extend Gmail SMS Chat beyond the 8 countries that it currently works in.

Figure out payments. It’s still difficult to get paid if you’re running ads or making Android apps, you’re not on an even playing field with your counterparts in other areas of the world. It is clear that Google Wallet is a strong personalized LBS play on consumers in the US. Take that same energy and figure out how to crack Africa, realize just how much money there is in a payment system that spans the continent.

Keep experimenting. Many don’t know of the apps and services you build and test out in various hyper-local areas. Some work, some fail. This curiosity and willingness to try something innovative and new is what makes the open web such a great space, and it is what helps us all overcome the walled gardens of the operators. Don’t stop.

Finally, though you have all the power and brand name needed to make things happen, remember that it’s the local devs and companies who need to own their space and especially their data. While flexing your muscle, especially with government types who own vasts amounts of data, do push for local ownership over taking it for yourself.

[Notes: hat tip on this post goes to Steve Song who started thinking through this years ago. Image credits from Memeburn.]

A Pivot 25 Retrospective

PivotNairobi 65

Pivot 25 was a blast! Over 100 teams from Kenya, Uganda, Tanzania and Rwanda applied to pitch their startup over a 2-day period. We named it “pivot” because we wanted to play off of the word, often used in the startup scene to denote a need for a startup to nimbly move in a different direction (plus it had a good sound). We did the event for 2 reasons:

  1. To bring attention to “what’s next” coming from the vibrant mobile startup scene in East Africa.
  2. To support the new m:lab, a mobile incubator that launched yesterday, where all profits from the event went to sustain.

This wasn’t your ordinary conference, it was a pitching competition mixed with lively fireside chats with the regions top business and government leaders in the tech space. Larry Madowo, a TV news personality in Nairobi, did one of the most amazing jobs I’ve seen with the fireside chats, keeping them lively and (best of all) disagreeing with each other. The event with 300+ attendees was smoothly MC’d by AlKags, keeping the pace fresh and upbeat.

Each category of finalists consisted of 5 companies, with an independent panel of judges (in other words, the organizers had no say in this). The finalist pitched for 7 minutes, followed by some very pointed and tough questions by the judges. Each judge scored the presenters on their pitch, business viability and model, an average of all these scores was tallied to find that session’s winner.

The Winners

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Prizes of $5,000 were awarded to the winners of each of the 5 categories, and the overall winner was picked from these and will go to pitch at the DEMO conference in California:

A massive congratulations to all the winners, and we expect to hear great things from the MedKenya team of Mbugua Njihia and Steve Mutinda when they head to Silicon Valley in September to pitch on an even bigger stage.

Big Thanks!

The real reason this event worked was due to the team behind it. Countless hours spent getting sponsors, working with the finalists and designing the space. I want to thank the guys who really put the work in behind it, making it such a huge hit: Jay Bhalla (producer), Tosh, Joshua, Ryan and Jessica, the Sprint Interactive team, the Ark for the video, plus a good dozen volunteers from the iHub community.

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I’d also be remiss if I didn’t thank the guys at Afrinnovator for live blogging the event, and for CapitalFM for live streaming it to the 3000+ people who tuned in from all over the world. Zuku provided us with 100Mbs for this to happen, though we will make sure we have more, and more robust, access points next time.

Finally, thanks to Nokia, Equity Bank, Samsung, Google, Tigo and Elma for sponsoring the event and helping us pay for what was a very costly exercise.

For those who want to know, the full revenue from the event was $145k, with a cost of $110k. Leaving $35,000 to put into the m:lab.

Stay tuned for where Pivot will be next year. Thanks everyone!

Broadening the Base of the Startup Pyramid

While in London at the RGS event I spoke about a different way that I’ve been trying to explain the startup and successful ecosystem needed in places like Africa. Specifically, in the major technology hubs for the continent, these are cities; Nairobi, Jo’burg, Accra, Lagos and Cairo. There seems to be enough funding available for SMEs. How do we get more of them?

It goes something like this.

We have a few good success stories in any one of these cities. There are a handful of great tech companies and organizations that have “made it”. This can be seen as a success in innovation or in business (or in both). Everyone wants to be at the tip of this, and these are the examples we hear of at international conferences and read about in the media.

In the middle we have everyone else, the guys who are still slugging away. They have some clients and revenue streams, but they’re not at the top (yet).

At the bottom, that’s what we deal with in places like the iHub and m:lab. These are those scrappy startups that might or might not have any right being in the place. They’re risky, probably don’t have a solid business model yet, and only a few of them will graduate into the SME space above them.

What to do?

To make the tip of the pyramid bigger, to have more success stories in the tech space, there is only one option: you have to make the base of the pyramid broader.

If your job is to see more innovative new tech companies come out of Africa, the recipe is quite simple:

  • Invest seed funds into local tech entrepreneurs.

(that’s my only bullet point, it’s that simple)

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