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The blog explores Zambia's potential as an emerging tech hub in Africa, focusing on regulatory advancements, political commitment, deal flow and private sector engagement.
How I See My Ecosystem: Zambia’s Growing Tech Scene
By Margaret Mandeya, Calvin Chitangala | Tue Sep 12 2023
How policies and the private sector are driving the ecosystem forward
In the heart of Southern Africa, a nation is paving the way for technological advances that could reshape its future. Zambia, known for its rich cultural heritage and abundant natural resources, is gaining recognition for its ambitious drive to position itself as an emerging technology hub within the African continent. With an increasing focus on innovation, entrepreneurship and regulatory reforms, Zambia is setting the stage to redefine its economy and empower its citizens. Delve into some of the reasons and learn more about Zambia’s growing tech scene in this Q&A with Calvin Chitangala, Renew Capital’s investment and project manager in Zambia.
Photo: Startup Converse - NyamukAfrica
Q. How is Zambia positioning itself to be a leading technology hub in Africa?
A. In terms of regulations and political will, Zambia's presidential cabinet is making significant strides in formulating a startup bill, aligning with market trends regarding startup acts. Over 16 African nations have been diligently advancing this initiative, with a noteworthy milestone being the enactment of the Nigerian Startup Act into law last year. Zambia being on this trajectory sets the tone for clear definitions of startups and SMEs, aiding regulatory interactions and fostering a favorable environment for startups. Switching focus to deal flow, Zambia ranks second in Southern Africa, following South Africa, in generating startup deals in the last decade. South Africa led with 536 deals, while Zambia recorded 50, suggesting a nascent ecosystem in Zambia. Among Entrepreneurship Support Organisations (ESOs), I am aware of about 30+ meetups/events that promote the startup ecosystem throughout the year, notably, the Zambia Business Angels Network which conducts frequent demo days that showcase pre-seed and seed deals. Additionally, NyamukAfrica/ITC has monthly startup converse events that demystify technical startup conversations. There are more ESOs backed by donor communities and corporations which add to the support of the ecosystem's growth. Considering these facets — regulatory advancements, political will, increasing deal flow, private sector-led initiatives for tech-enabled startups and an attractive macroeconomic environment — it's plausible that Zambia could emerge as a noteworthy African tech hub.
Q. What is one noteworthy tech sector emerging in the country?
A. We are seeing exciting trends in fintech in Zambia. A 2022 UNCDF study identified 57 companies in Zambia that identify as fintechs, compared to their 2018 study that identified 25. African fintech unicorns also are entering the Zambian market through various means, such as acquiring a local fintech or entering directly while going through the regulatory system. One example is Chipper Cash's acquisition of the local Zambia entity Zoona. However, regulatory risk tends to be the biggest hurdle for most fintechs in Africa and Zambia is no exception. Tech-enabled startups that have achieved product-market fit are providing solutions to fundamental African problems.
Q. What are some of the challenges you’ve witnessed in the ecosystem?
A. Internet penetration rate among our African population is still relatively low, however, growing steadily. As of 2021 individuals using the internet (% of the population) stood at about 21%. The Zambia Information and Communications Technology Authority (ZICTA) has provided an in-depth understanding of access and usage of ICTs among the Zambian population. Therefore, for most tech-enabled businesses, especially the ones with a B2C business model servicing the mass market, the use of ICTs remains a challenge for customer acquisition and retention. Other than that, among the ESOs, critical information still exists in silos. It would be highly beneficial to implement ESOs that provide comprehensive information and education to entrepreneurs throughout the nation, particularly those who do not have easy access to relevant news. In addition, it almost goes without saying now, that there remains a funding gap for SMEs and startups, especially for female entrepreneurs. The funding gap for SMEs in Africa is estimated to be over $90B. Additionally, the funding gap for female entrepreneurs is estimated to be around $42B. Traditional bank debt is generally not suited for the investment needs of early-stage startups seeking pre-seed or seed-stage funding, so most startups in Zambia tend to seek capital partners from outside the country. Lastly, there is a need for mentorship, capacity building and educational programs to help startups navigate the fundraising landscape, especially among young people.
Q. With the growing momentum and enthusiasm surrounding technology and innovation, what are your hopes for Zambia’s future?
A. Let me begin by discussing Zambia's recent economic history and its outlook for the short and medium term. In the wake of the challenges posed by the COVID-19 pandemic and the 2021 general elections, Zambia's macroeconomic landscape initially displayed unfavorable indicators around 2020. However, a more stable macroeconomic environment was anticipated post-2021, with the annual GDP growth projected to average around 4.5% throughout 2023-2025. This positive economic projection by the World Bank was updated around March 2023, it agrees slightly with the insights of the Bank of Zambia around mid-August 2023, that is, even though the Bank of Zambia’s Monetary Policy Committee advised that they expect the GDP for 2023 is likely to fall below projections due to contractions in the mining sector and slowdowns in the education and energy sectors, the Central Bank anticipates that the Country’s economic growth will rebound between 2024 and 2025, bolstered by the anticipated recovery in the mining sector and sustained expansion in the information and communications, financial and insurance, as well as wholesale and retail trade sectors. Furthermore, acknowledging inflationary pressures – inflation is projected to average 10.2% in 2023 and 9.3%in both 2024 and H1 2025, the Bank of Zambia Monetary Policy Committee opted to increase the monetary policy rate from 9.5% to 10%, in the immediate term.
Regarding investor appetite, the Zambia Impact Investment Climate Survey Report 2022/23 advised that 82% of Zambian impact investors expressed their determination to augment their backing for portfolio companies and actively seek out fresh avenues for growth; this investor enthusiasm and dedication remained steadfast despite the prevailing public apprehensions surrounding Zambia's debt burdens and economic hardships. In addition, regarding investor sentiment, the 2022 Bank of Zambia study unveiled that investor decisions to invest or reinvest in Zambia were primarily influenced by factors such as peace and security, market potential, robust infrastructure, and political stability. Among the government policies and initiatives, those perceived as most effective in promoting investment included the establishment of a favorable governance environment, economic diversification, enhancements to transportation infrastructure and facilitation of business connections.
Furthermore, a notable success under the new government is the successful negotiations of the country's national debt restructuring. It is anticipated that this restructuring will lead to benefits of an improved micro-and-macro economic environment, also, the Ministry of Finance anticipates this debt restructuring will generate over US$5.8 B in debt savings between 2023 and 2031, unlocking more resources for Government's developmental programs. Lastly, the startup scene is also looking promising, as the Government seeks to set up a Startup Bill, we hope this will lead to fiscal incentives towards startups in Zambia and perhaps more startup deal flow.
Renew Capital is an Africa-focused impact investment firm that backs innovative companies with high-growth potential. Renew Capital manages investments made on behalf of the Renew Capital Angels, a global network of angel investors, foundations and family offices who seek financial returns and sustainable social impact. For the latest on investing in Africa, subscribe and follow us at our social links below.
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