Building Resilient African Digital Economies Post-COVID – Key Takeaways From Ghana

By Maeva Yrio

ATBN, together with the AfriConEU consortium of partners, is working to foster collaboration between African and European Digital Innovation Hubs (DIHs) and build a thriving EU-Africa innovation ecosystem. On May 28, we hosted our first African Digital Ecosystems roundtable event, focusing on Ghana. Ghanaian Digital ecosystem stakeholders were brought together to discuss how DIHs can help local startups and businesses harness the opportunities that have emerged from the COVID-19 pandemic and address the challenges they face. Below are some key takeaways from our panel discussion featuring Josiah Eyison, Co-Founder/CEO, iSpace, Gideon Brefo, Co-Founder, HapaSpace, Amma Sefa-Dedeh Lartey, Co-Founder, Social Enterprise Ghana.

How has COVID-19 impacted the Ghanaian Digital Innovation Ecosystem?

The COVID-19 pandemic has ushered us all into a transformative digital age. What do organisations and businesses need to do to survive in this context? According to Josiah Eyison: “Evolve or die”.

Panellists agreed that COVID-19 has had great positive impacts to a certain extent as it has pushed organisations to innovate and form partnerships. As Gideon Brefo put it, “innovation thrives well in chaos”. For example, digital hubs could shift some of their activities online by delivering virtual training and support for entrepreneurs. This, in fact, enabled them to reach even more people and enhanced knowledge-sharing. Many start-ups had to rethink their business models and partner with other firms to reduce costs and survive. The pandemic has also been a driver for digital adoption. With people spending more time online, the demand for data services and the internet skyrocketed, boosting certain sectors like data services, streaming, logistics, food, infrastructure and fintech.

On the flip side, increased demand for online services put a strain on the available infrastructure causing connectivity issues and limiting the ability of the ecosystem to fully harness some of these digital opportunities. COVID-19 also severely affected DIHs’ revenue streams with many hubs that rely on co-working space rental suffering significant revenue loss as working from home became the norm. Furthermore, the economic downturn resulting from the COVID-19 crisis has aggravated existing gaps in the ecosystem such as access to finance. Amma Sefa-Dedeh Lartey noted that businesses in Ghana have come under a lot of stress as they struggle to manage COVID-19-induced revenue losses but at the same time still have limited access to credit because of prohibitively high interest rates.

Impact on women and youth

The pandemic has had a dramatic impact on the level of participation in digital programmes for women and the youth.

The shift towards a virtual world made data services more essential but also constituted an additional barrier for the Ghanaian youth many of whom cannot afford it. “One of the things that needs to happen to drive digital innovation in Ghana is ensuring that the infrastructure is available and affordable” noted Amma. To overcome this issue, Social Enterprise Ghana partnered with a Telecom company to zero-rate their website and saw a significant uptick in the number of young people taking part in their online courses.

When it comes to women, a lot of progress has been made around DIHs supporting women-led enterprises and providing digital programmes targeted at women and girls. Josiah commented that before the pandemic, digital hubs and programmes provided an escape from household duties for young women and girls. However, now that many have had to stay at home, they are “back in the kitchen”. Additionally, many of them may not have the financial means to buy the data needed to access online programmes.

To continue supporting women during the pandemic, iSpace Ghana provided laptops and catered for data access to enable participants to continue with their digital programmes.

Impact on Funding and Investment

Overall, we have seen an influx of investments directed towards the African tech ecosystem during the COVID-19 crisis. According to one report, investment into African startups increased by 40% in 2020. However not every country or sector has benefited from this incoming capital equally.

Africa’s big four – known as Kenya, Nigeria, South Africa and Egypt – accounted for 77% of funded startups and 89.2% of total investment in 2020. The fintech, e-commerce, e-health and logistics sectors attracted most of the investments. Other sectors such as agriculture or education – for which there is a growing need among the Ghanaian population – seem to have been neglected by investors. This misalignment between the types of sectors receiving funding and local needs is seen to be a result of investment models that are not tailored to the local context.

It was noted for example that many investors – often not native from Africa – are implementing investment strategies coming from Silicon Valley without any regards to the country’s specific context and needs. According to Gideon, “They are interested in investing in products that they perceive to have demand and not necessarily what is needed locally”. Digital innovation hubs and ecosystem leaders therefore have a crucial role to play in terms of highlighting innovative ideas and start-ups that benefit their local ecosystems and facilitating investments into under-funded sectors. To address these challenges, Amma also emphasised the need for a catalytic capital approach which takes a long term view and focuses on developing the ecosystem rather than on short term returns.

On the positive side, COVID-19 has served as a wake-up call and catalyst for traditional investors to create products better tailored to the needs of SMEs. For example, Fidelity bank launched a Youth Fund, the Bank of Ghana developed crowdfunding guidelines and there are ongoing discussions about encouraging Ghanaian pension funds which typically invest in low risk government securities to channel their investments into the productive sector including SMEs. “The ecosystem has started to realise that things must change” concluded Amma.

How can DIHs play a more catalytic role in the digital ecosystem going forward?

The COVID-19 pandemic has underscored the fact that Ghanaian DIHs have a key role to play when it comes to catalysing growth and development in the digital ecosystem. For one, the pandemic has expanded the role of DIHs as they not only need to help existing digital startups to harness the emerging opportunities but also support non-digital businesses to digitalise. Josiah commented that “the role of hubs cannot be underestimated particularly in a continent where infrastructure is a problem”. Hubs exist to support local entrepreneurs by providing infrastructure and support through specific programmes and funding. It was noted that if it were not for hubs, many Ghanaian start-ups that are successful today would not have had the opportunity to pitch their ideas at international programmes and attract investors. However, DIHs need to be supported to play their role. New investments approaches need to be implemented to support DIHs more effectively. Hubs also need support to become more sustainable by developing alternative revenue streams such as consulting, software or financing services as well as developing their fundraising expertise and networks.