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HomeNewsZambia’s Africa tech hub moonshot lies in limbo

Zambia’s Africa tech hub moonshot lies in limbo

It was by multiple accounts an unprecedented development when, in early 2022, it was brought to notice that a fellowship of some top African tech leaders, the likes of Olugbenga Agboola, were quietly pooling efforts to turn Zambia, one of Africa’s least developed and most overlooked countries, into a regional hub of sorts

This elite group of entrepreneurs, under the aegis of the Zambia Technology Working Group, was reportedly treated with the Southern African country’s newly formed Ministry of Science and Technology to help create regulations that would aid African tech companies in seamlessly domiciling in or expanding to the market, enjoying low-tax incentives. 

An objective duly welcomed, it put Zambia in direct competition with already-established incorporation havens African tech startups frequent: Delaware in the U.S. and Mauritius, a subtropical island off the coast of southeastern Africa. 

Led by Perseus Mlambo, co-founder of Y Combinator and Tiger Global-backed fintech Union54, in alliance with Mwiya Musokotwane—CEO of Thebe Investment Management and the brains behind a currently-being-built $1.5 billion satellite town in Lusaka—the idea was one that quickly amassed acolytes. 

Spreading the word

Project Zambia was first mooted in 2020, but by the time it was revealed to the general ecosystem, it had drawn the interests of over 40 founders and organizations, chief of which are Chipper Cash, Flutterwave, Kuda Bank, Risevest, Ethereum Foundation, BongoHive and CCHub—all of whom are affiliated to the Zambia Technology Working Group. 

In the grander scheme of things, resolving issues with business licensing, immigration policies, local talent support, taxes, stock listing, and, of course, internet infrastructure, formed the major premises of the push.

Vitalk Buterin, Founder of Ethereum—the world’s second-largest crypto asset—who has visited the country twice (in 2019 and 2023), endorsed the endeavour, citing that the copper mining capital could as well become a chokepoint for crypto-powered services. 

The tech billionaire was bullish on Zambia’s chance to succeed where previous African tech hubs have come short. 

When Hakainde Hichilema became Zambia’s president in August 2021, somewhat inheriting a myriad of economic challenges from his predecessor, Edgar Lungu, he (an accountant) promised his administration would invest heavily in promoting technological development, supporting digital evolution and attracting foreign investments. 

During his inauguration speech, President Hakainde placed tech-driven innovation at the front and heart of his reforms. “Some of our key priority sectors that will drive economic growth and reduce poverty are technology, agriculture, financial services, health, education, and mining,” he said.

Amid the pandemic, the Zambian economy, infected, slid deep into recession. According to data from the African Development Bank, its real GDP contracted by an estimated 4.9% in 2020, after growing by 4.0% in 2018 and 1.9% in 2019. 

Also, Zambia ranks among the countries with the world’s highest poverty and inequality levels, a grim situation worsened by the outbreak of the pandemic. Projections suggest the economy will attain pre-pandemic levels in 2025. 

Is Project Zambia on hold?

Union54, a card-issuing fintech that is the first-ever Zambian startup backed by YC, serves businesses (including startups) from over 30 countries in the continent. 

In trying to understand these businesses, Perseus realized most of their markets were not developing as quickly as the founders had hoped. As such, startups were eager to relocate or expand to markets with the right geopolitics, growth prospects, and business environment. 

For instance, when Perseus first arrived in Zambia in 2015, there was virtually no entrepreneurial ecosystem. Founders had to travel outside the country to raise early-stage funding. 

“Speaking to stakeholders and reflecting on our own experiences in the country, we saw that Zambia had the ‘potential to become the Delaware of Africa’. Our lobbying was meant to convince the government that they could put in place some measures to ensure tech companies can thrive here,” he says on a call from Lusaka. 

But, as it appears, negotiations with the Zambian government as regards building on the idea have been relegated due to the leadership’s keen attention on efforts to restructure its debt load and traditionally transform its economy. 

After the global economy took a battering from COVID-19 in 2020, Zambia was the first African nation to default on loans, having failed to make a $42.5 million bond payment. Many Western experts blamed the continuous delays in agreeing with China, its biggest bilateral creditor. 

The situation has inspired the concerns of experts at the United Nations, who point to the lack of a “globally coordinated multilateral sovereign debt mechanism that places traditional and private lenders on an equal footing”. 

Despite being Africa’s second-biggest copper producer (after DRC), Zambia fiddles with a debt load equivalent to 120% of its GDP. At the end of 2021, the country’s debt stood at $31.74 billion, of which $17.27 billion was external. China, in question, held $5.78 billion of the external debt but denied any reconsideration. 

On the bright side, the country has been able to settle on a $6.3 billion debt relief plan with China and other creditors. 

Due to these circumstances, leaders have been quite preoccupied. As a result, everything they have been engaged in is laser-focused on debt, Perseus says, suggesting that discussions towards the moonshot have only but died down. 

Tech hubs, not unlike unicorns, are hardly built by accident; they require tons of innovative planning to pull off and [they] typically thrive on near-nonstop activities. 

“If a market [really] wants to become a hub, it needs specifics. Most people here are yet to comprehend the possibilities of tech since they are more taken with agriculture and mining. The government needs to reconsider their intentions to either work with young people or focus on their conventional industries,” he explains. 

Meanwhile, authorities seem more vested in advancing digital currencies, however with hyper-vigilance for fear of associated pitfalls. 

Vitalik Buterin visited Zambia (again) in February 2023 alongside Vicky Coleman, Yoseph Ayele, and other top Ethereum executives, to weigh in on policies vital for rolling out a CBDC and creating a judicious crypto legislation.

The allure’s not lost on anyone

Despite stalled talks, the digital potential of the Zambian market is not lost on anyone. With $19 billion in GDP and a population count of over 19 million, Zambia, save for its economy being historically driven by mining, is ripe for cultivation. 

Its demography is one of the world’s youngest in terms of median age, and its populace, much of which resides in urbanities, grows 2.7% year-on-year. As the large and yet expanding youthful populace comes of age, the entire demography will double in the next decade, resulting in further demand for jobs and digitized services. 

Landlocked between 8 different nations, the 60-year-old republic has a multi-market access hardly matched by its regional counterparts.

“Zambia has a geographical advantage. As a landlocked country with a sizable population, it makes sense for the country to look for ways to accelerate productivity, similar to what Singapore is doing. And technology is one viable way to do so,” says Adetola Onayemi, Founder and CEO of Norebase, a trade tech specialized in helping startups incorporate in Africa and elsewhere. 

In April 2022, Felix Mutati, the Minister of Science and Technology, launched the Zambia Inclusive Digital Economy Status Report, which revealed a digital economy score of 45%, and a digital divide of 47%. What’s more, about 56% of Zambians residing in ruralities are yet to be digitally included. 

It is on the tailwinds of the “untapped” nature of the frontier market that Kenya’s Wasoko (formerly Sokowatch), one of Africa’s fastest-growing tech companies, expanded to Zambia in May 2023. The $652 million retail tech [has] also earmarked a $1 million chest to invest in building a Southern African presence from Lusaka. 

According to Daniel Yu, Founder and CEO of Wasoko, Zambia has become increasingly exciting over the past 2 years given the new presidency, Hichilema’s business acumen, and the country’s involvement in the global green technology revolution.

“Lusaka is the largest city in Southern Africa, outside South Africa of course. Other cities in Zambia also have rapidly growing populations. Given it shares a border with Tanzania, our second-largest market, it is possible to use our existing supplier network to source goods into the country,” Yu explains on a call from Nairobi. 

While panegyrizing Zambia’s efforts, Yu remains more optimistic about neighbouring Zanzibar—a now-independent island in Tanzania—where the government has taken a more proactive approach to luring startups from across Africa into Fumba Town, a cosmopolitan tropic. 

The project, dubbed Silicon Zanzibar, has the interest of Pando DOA, a tech community comprising 70 founders from over 15 African countries. The organization’s member startups are cumulatively worth over $1 billion. 

“I am bullish on Tanzania’s outlook because of its [very] robust economy and inclusive leadership style. Zanzibar is better positioned to move quickly compared to other contenders, and its environment is earnestly ready for innovation. Zambia, to me, would be the next best thing but its shortcomings give Zanzibar a strong edge,” Yu says.

“The key question is: are you set up to be a base for pan-African tech firms? When it comes to this industry, the most critical factor is mobility, which Zambia currently lacks,” he adds. 

Perseus Mlambo, who has all but thrown in the towel on the Zambian project, admits that other contenders: Silicon Zanzibar and [even] Kenya—oftentimes called Silicon Savannah—are moving faster with establishing a continental tech hub. On its part, Kenya is one of Africa’s foremost ICT hubs, dating back to 2007 when M-Pesa was launched.

“Overall, I think startups are more inclined towards Tanzania because, at the end of the day, tech workers do not want to relocate to a country where they would be treated like second-class citizens,” he opines. 

Sated for the hunt

More than $10 billion in capital has slooshed into Africa’s startup pool since 2019. As this happens, The Big Four: Nigeria, Kenya, South Africa, and Egypt, have emerged as the most active tech markets in the continent having absorbed most of the incoming funding. The quad receives at least 80% of FDI into Africa. 

Zambia will face intense resistance from the Big Four, in addition to Mauritius, Delaware, and Silicon Zanzibar. It will also have to contend with the likes of Senegal and Tunisia, who have implemented Startup Acts to promote incorporation in their jurisdictions. 

Meanwhile, Nigeria, Kenya, Rwanda, and Ivory Coast have started processes to implement similar legislation. 

As Africa’s tech industry matures, startups would hunt harder for nesting grounds, where it is easier to set up shop, test solutions, launch, scale operations, and expand to other markets in the continent. So far, the search has led them towards safer havens abroad, leaving Mauritius as the only option closest to home. 

About 70% of African startups incorporated outside the continent have done so in Delaware; its low-tax play has garnered the area high demand. Some of the continent’s most successful tech ventures, particularly Flutterwave, Andela, and Paystack, were incorporated in the U.S. state. 

Since startups have operational entities on the continent regardless of their countries of domiciliation, it makes sense that the search for “a Delaware” on the continent is trending, Norebase’s Adetola Onayemi affirms. 

However, the good egg comes down to accessibility, affordability, and unification, in line with recent propositions of making Africa a single market. 

“In Mauritius, which I think has mostly served VCs and Funds, it has become expensive to send money in and out. The tax and business environment there is not friendly for foreigners, as such that companies are moving back [their] entities to Delaware,” Onayemi shares. 

“It is an open playing field. In the U.S., Texas, Wyoming, California, and Florida are the competition for Delaware. It’s a matter of who moves faster, not who came first, and it is no different in Africa. Tanzania might be moving faster, but Zambia [if properly executed] would be more ideal,” he adds. 

Sheer political will, market size, and receptiveness to technology will play critical roles in nurturing an environment that can cater to the unique needs of local tech ventures.