Support grows for the incubation of new businesses

The success of start-ups in driving the US technology sector has spawned a raft of attempts elsewhere in the world to emulate that growth. Ghana is working to foster an environment that helps encourage entrepreneurial activity in the tech sector, with some success. While connectivity constraints and research access are often cited as a significant barrier for tech start-ups in Africa, Ghana’s possession of some of the continent’s fastest and most affordable bandwidth, and a number of dedicated tech institutions, provides the country with significant comparative advantages.

“Today in Africa, those who are driving ICT and emerging as industry champions are not necessarily those who control the devices, but those who develop the applications that are run on mobile devices,” Andile Ngcaba, executive chairman of Dimension Data for the Middle East and Africa, told OBG.

Support

At a state level, the country already has a number of ICT-dedicated tertiary institutions, including the Kofi Annan Centre of Excellence in ICT, which is a government-to-government collaboration with India, as well as the Ghana Technology University College. At a post-graduate level, the Meltwater Entrepreneurial School of Technology (MEST) is both a training programme as well as an investor, educating prospective future entrepreneurs and acting as an incubator, having invested $1.5m in tech start-ups in Accra since 2008. So far, efforts appear to be bearing fruit, and in 2012 Forbes Africa listed two Ghanaian start-ups as being among the 20 most promising in Africa.

Two examples of recent successful start-ups are Saya, a mobile messaging app recently purchased by a US firm that develops voice SMS-based mobile value-added services in emerging markets, and ClaimSync, a local software provider that has created a platform for hospitals and insurers to digitise medical records and claims. ClaimSync was also acquired by GenKey, a global provider of biometric identity management solutions. Both Saya and ClaimSync were founded by MEST alumni and incubated at the MEST Incubator.

Finance

For Eric Kwame Asah-Addo, CEO of software company Bista Solutions, incubators such as MEST fulfil a key funding vacuum in Ghana. “IT start-ups cannot get traditional financing from banks who find it difficult to understand the IT business model. Banks also want collateral, which young start-ups do not have,” he told OBG. Indeed, the Association of Ghana Industries publishes a quarterly “business barometer” in which access to credit is commonly cited as the leading factor hampering business growth for small and medium-sized enterprises (SMEs).

“Government borrowing has pushed up interest rates, and lenders are particularly apprehensive about extending credit to new industries when there is an easier investment option of risk-free investments in T-bills,” Michael Quarshie, managing director for software development group Persol, told OBG. “On top of this, there is not yet a vibrant venture capital (VC) ecosystem and the few that exist do not have a strong appetite to invest in companies whose main assets are people.”

Access To Market

Quarshie said that universities and incubators are performing their role in churning out ambitious graduates with appropriate skill sets and business acumen to convert ideas into something commercially viable. However, the ability to launch a scalable new venture in the local market, especially one that is premised on a business-to-business model, is constrained by the dominance of the public sector as the main driver of the overall economy. “Government is less willing to procure software or services from young start-ups,” Quarshie said.

Praveen Sadalage, managing director at BusyInter-net, also expressed concern over an absorption capacity for young talent that is not keeping pace with the amount of fresh talent being generated. “Traditional companies see IT as an extra cost rather than a resource and do not feel a need to hire in-house IT staff,” she explained. “As a result, not enough IT graduates are able to find work, and not enough are able to make it on their own as start-ups due to a lack of a local market.”