Daniel Asare-Kyei, CEO, Esoko; Curtis Vanderpuije, CEO, ExpressPay; and Daniel Marfo, General Manager, Zipline Ghana: Interview

Interview: Daniel Asare-Kyei ; Curtis Vanderpuije ; and Daniel Marfo

Which segments of the economy are most likely to benefit from emerging technologies?

DANIEL MARFO: Technology could potentially revolutionise health care. This is urgently needed, especially in Ghana. Ghanaians have only recently embraced social media and mobile money. As a result, they have become more open to making technology an integral part of how they live and work. Over the past few years technology has enabled the emergence of digital health insurance platforms, which have gradually replaced paper-based methods. This has significantly reduced fraud and improved the speed and efficiency of claims processing.

More broadly, technology can ultimately help ensure that everyone has near-immediate access to health care. The deployment of delivery drones, for example, has helped address crucial infrastructure gaps. In a medical emergency, the problem is not a lack of competent health professionals, but the time it takes to deliver essential medicines. Through the use of drone technology, anti-venom or blood for transfusions can be delivered anywhere within a matter of minutes. In the future, such devices will be integral to health care infrastructure, and we expect that drones will be routinely deployed within the next 10 years.

DANIEL ASARE-KYEI: The agricultural industry employs about 55% of the population, yet productivity in the sector has remained low. Over the last few years we have seen companies deploying emerging technologies to transform the sector and address this imbalance. Ghana boasts a young and relatively highly educated population, with an increasing supply of aspiring agri-business entrepreneurs. This has gone a long way in turning Ghana into one of the four main pillars in Africa – along with Kenya, Nigeria and South Africa – where technological innovation in agri-business is poised to revolutionise productivity. Digitalisation will be very important in this regard, since digitalised payment services and certification programmes improve the ease of setting up and running agri-businesses. With a more advanced certification process, market integration will be promoted and the country will be able to export more fair trade, organic and high-value agricultural goods. The digitalisation of supply chains will also bring down the high cost of last-mile logistics. In order to really appreciate the impact of technology in this space, it is important to note that there are 8m smallholder farmers who are not yet digitally literate. With the creation of digital profiles, it will become possible to create a single mass market for their products.

CURTIS VANDERPUIJE: Despite the relatively late start, Ghana is doing really well and has become one of West Africa’s leading mobile money markets. In fact, the number of registered mobile money agents in Ghana is on par with the number in Kenya. The next step is expanding the reach of payment tools. We are going to see more value-added services on top of the basic payment infrastructure. Now that telecoms companies have paved the way for informal sector penetration, banks will either partner with financial technology (fintech) companies or create their own digital banking products to gain access to the bottom of the pyramid. There will be an increasingly blurred line between banks and fintech companies in the financial services sector. With the new Payment Systems and Services Act, there will be more flexibility for firms to collaborate with the banking and insurance sectors. As a result, we are already seeing not just an increase in the sophistication of financial products and services at the higher end, but also greater reach at the lower end of the scale. As cashless systems becomes more ubiquitous, even smaller shops will be able to build sales records, which will allow for greater access to credit and reduce non-performing loan rates.

What can be done to enhance local start-ups’ access to finance and accelerate their growth?

ASARE-KYEI: Ghana does not lack ideas, it lacks access to capital. Venture capital funds do not come to Ghana in great numbers. When they identify Africa as their target market, countries with larger populations, more established tech companies and a higher number of start-up success stories – such as Kenya, Nigeria and South Africa – are seen as more attractive. Therefore, we need to increase the visibility of Ghanaian start-ups to the global investment community. Attracting investors is going to be very important: they bring knowledge and well-developed networks, as well as money. To this end, the government has promoted a number of initiatives, but considering the great demand for more accessible capital and the need for larger initial investments, these are spread very thin. For a technology company, $10,000 or $15,000 is not enough to really scale up. We need more focused government initiatives that understand the specific needs of entrepreneurs. Social impact investors are currently the main source of finance, which means that a lot of resources are being channelled into specific projects, such as those that focus on renewable energy, and the development of solar lamps and cooking stoves, which offer both profitability and social impact. Unfortunately, this enables only a small subset of start-ups to easily secure funding.

VANDERPUIJE: One of the biggest challenges for startups involves stringent collateral requirements, which put a drag on businesses’ ability to access credit and scale up. This is especially true for technology companies that generally have few physical assets. Ghana also lacks an equity investment culture, and there is a very serious need for people to put up patient capital. Experienced investors need to pave the way. However, potential angel investors with sufficient, available capital are often risk averse. Moreover, they typically lack access to and knowledge of the types of business where they could secure a good return on their investment.

On a positive note, we are seeing more and more companies that have managed to grow out of the very early start-up phase by successfully securing capital from outside the country. The stability of the country and the attractiveness of fintech companies will continue to drive such flows, although the risk of currency erosion dampens enthusiasm somewhat. The recent Payment Systems and Services Act and other regulations that require domestic ownership of certain technology companies might boost investment, as they encourage acquisitions, which, in turn, will provide a clearer path to exits and drive equity investment.

How successful are domestic companies at leveraging relationships with regional partners?

VANDERPUIJE: It is inevitable that there will be a high degree of cross-pollination across African markets. Nonetheless, it is important to dispel the assumption foreign investors often hold that Africa is a single, homogeneous investment destination. When it comes to achieving pan-African success, there are two competing models: expand as fast as possible across as many countries as you can, or become a dominant player in one market and then move to other countries. The former is not straightforward, and companies that attempt this often run into unexpected hurdles as they face different regulatory, cultural and market forces. While technology is borderless, restrictions remain significant. In terms of regulatory and policy developments with the potential to transform relationships, the African Continental Free Trade Agreement may eliminate some barriers and will hopefully result in more activity. Another prospective catalyst is the new Payments Act in Ghana and its requirement for local ownership, which could lead to more collaboration and accelerate the conversation about inter-African partnerships. While some see this as protectionist, it has made the rules clear for foreign players, and it is expected to have a positive impact on inward investment. Lastly, some tech education and developer centres are emerging in other African countries. This can often be a double-edged sword: although it offers the potential for skills development and network-building, it also increases the difficulty of retaining talent in-country or in-company.

MARFO: Connections between entrepreneurs and companies across the continent are not nearly as good as they could – or should – be. This might still all come back to the shared challenge of limited access to capital. For anyone in Africa, it can be expensive to travel to other countries on the continent. Visas are expensive, as well as time-consuming and often complicated to acquire. It is important for start-ups and entrepreneurs to take advantage of digital tools and networking sites to try and connect with people that can provide support to those scaling up their business.

Looking at companies that have achieved success in different African markets, there is often a steep learning curve, but already having entered one African market can significantly reduce the start-up costs within a different market. For instance, in terms of the number of drones deployed and deliveries made, what took Zipline a year to accomplish in Rwanda – its pioneering African base – the company was able to achieve in Ghana in a matter of months. There are some significant advantages to starting a business in Ghana: as a country with quite a large population and a lot of complexities, achieving success here means that businesses can leapfrog into other African countries.

What kind of role can the public sector play in supporting emerging ICT businesses?

ASARE-KYEI: Once again, the question comes back to one of the key challenges: the prohibitive cost of capital. The public sector has an important role to play in lending, supporting the proliferation of financial services and creating network opportunities. It is also key that public institutions develop trust in local tech companies’ ability to deliver. For government projects, there is a strong tendency to award bids to international companies, even when local capacity is available. An example of this is the national 2020 Population and Housing Census. This will require a lot of different services, which, while sophisticated, are not beyond the realm of local capacity. Nonetheless, most of the companies that have been selected will be from outside the country. To some extent this is understandable, as international organisations and development partners are often deeply involved in such programmes. However, when they have the power to dictate the contractors for projects, these international partners are also more likely to select foreign companies with which they have previous experience and a track record.

MARFO: The government has a responsibility to create an enabling environment, which has not yet been fully achieved in Ghana today. There are very few funds available to support small and medium-sized enterprises in the technology space, and there is a distinct lack of clear policies and guidelines to help ensure that tech companies can grow sustainably in Ghana. Countries such as Rwanda and India are positive examples of developing markets with fast-growing technology companies and start-ups. When comparing their policy environment to Ghana, it is clear that we can do more to create such an environment here. For example, having a five- or 10-year tax break for specific types of start-ups would go a long way in encouraging entrepreneurs to take more risks, as it would diminish the need to keep the pace of growth at a low level and leave more revenue to be deployed for expansion. All of this would enable these companies to grow in a sustainable manner.

On a positive note, the public sector is already very active in helping deploy technology as a means to drive health care expansion. This could be further accelerated by employing specific policies, such as mandating that players in the health sector go entirely paperless. In terms of drone regulations, the aviation authorities have proven to be quite open-minded and very collaborative in understanding the technology and its applications in the health care sector. This has helped create a clear space for unmanned aerial vehicles to operate commercially, and not limited this to line-ofsight drones, as is the case in many other countries.