Ethiopia’s tech hopefuls

June 30, 2013

When it comes to technology and innovation, Ethiopia appears a long way away from the rest of Africa’s rising “silicon savannahs.”

The most advanced form of banking in Africa’s second most populous country is an ATM – there are no credit cards and no international banking systems.

This makes app stores like Google Play and Apple’s Appstore inaccessible.

Mobile money, which has taken off places like Kenya, has only just arrived, but with significant limitations.

Skype and other VoIP (voice over internet protocol) services are banned for business purposes.

With a lumbering government-owned telecoms monopoly, staggeringly low internet penetration (less than 1% of Ethiopia’s 85m citizens are connected), just 17% mobile penetration, and a very “security conscious” government approach to new technology and services, it’s not the most encouraging environment for small technology start-ups to grow.

But that doesn’t mean some aren’t trying.

“There are a lot of opportunities for techies in Ethiopia,” claims Markos Lemma, co-founder of iceaddis, Ethiopia’s leading technology hub, accelerator and co-working space.

“The middle class is increasing, the market is growing,” he says.

In recent years Ethiopia has become a model of rising Africa.

From a poster child for poverty and famine in the 1980s to an economy seeing an average 10% growth since 2004, the country is witnessing a remarkable turnaround.

Addis Ababa, the capital, is attracting investment and talent from around the world, and cranes and construction projects are now a hallmark of the city.

Yet much of this growth is from sweeping policy changes, government infrastructure projects, and big donor-driven or private investment programmes.

Iceaddis, which opened its doors in May 2011, is trying to change this.

It has become a home for start-ups, promoting local technology and focusing on young Ethiopian entrepreneurs and individuals interested in ICT, green technology, and the creative industries.

Originally designed as an art gallery by a Swiss architect, it is a striking mash-up of six interlocked shipping containers, located on the Ethiopian Institute of Architecture, Building, Construction and City Development (EiABC) campus, in the heart of the capital.

“In the beginning, we didn’t know what exactly what we were working on,” admits Mr Lemma, one of the four co-founders. “We were just bringing the community together to interact.”

Similar to other tech hubs in the region, like Nairobi’s iHub, or Uganda’s Hive Colab, iceaddis grew organically, starting with small events, workshops, and barcamps (tech-related developer meet-ups).

The goal was to connect bloggers and developers, bringing a hidden tech community together for the first time.

Eventually, the community grew; iceaddis secured more funding, moved into its own space, and developed a tiered membership.

They now have over 1,000 ‘white’ members, people who may not use the space everyday, but are part of the network.

Several times a year, iceaddis selects a few dozen start-ups and puts them through 12 weeks of business plan training.

At the end of the programme, several are selected to receive “incubation” at the space, and given resources to grow their ideas.

Unlike many other tech hubs in Africa, iceaddis isn’t just about apps. Plugging in to the surrounding architecture school, the community also highlights innovation in design, construction, and products.

During one week in March, students were learning how to design and build DIY skateboard ramps. A few weeks later, they were hacking android apps.

Yet the barriers to innovation for young Ethiopian entrepreneurs, regardless of industry, remain high.

“There is much willingness and interest from the government for entrepreneurship,” says Mr Lemma. “But there is still so much regulation and permits.”
Growing pains

Feleg Tsegaye is an American-born Ethiopian who previously worked in IT at the US Federal Reserve. He recently moved to Addis to found ArifMobile, a phone and sim card rental service for tourists, and knows these challenges well.

“People aren’t always sure of the laws. They seem fluid and changing depending on who you talk to,” he says of Ethiopia’s regulatory environment.

For example, only after multiple trips to the Ministry of Business to register his company did he discover business names cannot be adjectives.

Then, it took months to get an internet connection in his office thanks to notoriously slow state-owned Ethio Telecom.

In the World Economic Form’s Global Competitiveness Report 2012-2013, Ethiopia ranks almost dead last.

Of 144 countries, it’s ranked below 130 in technological readiness, competitiveness, and access to financial services and loans.

Perhaps one of the reasons for such a dismal competitive environment is when it comes to technology, the government is often both the biggest competitor and biggest client.

Most large companies are either state-owned, or partially state-owned, and there is a certain degree of distrust between private and public sectors resulting in the government taking a very security-conscious approach, according to Mr Tsegaye.

“Government is the prime consumer for services in IT, but they are frustrated, in part because their policies are inhibiting private sector growth,” he says.

Adam Abate, founder of Apposit, an information technology services company based in Addis Ababa, says that the government is by far his biggest client.

“We looked at private sector for a while and realised it’s not worth it,” he says. “Collecting, digitising, and maintaining information for consumers at scale is not easy.”

The most obvious opportunity in Ethiopia is that there’s still very little here”

Adam Abate Apposit

Mr Abate also notes the difficulties posed by the telecoms monopoly.

“It’s good for investing in infrastructure and for the future, but from an individual or business point of view, trying to get services out of them is a nightmare.”

All told, Ethiopia has a weak ecosystem for start-ups, says Mr Abate, making it difficult for young, inexperienced entrepreneurs with little capital. The odds are stacked against them.

Yet, he says, for those who manage, there is enormous opportunity.

“Infrastructure is … expanding at a rapid rate, and the most obvious opportunity in Ethiopia is that there’s still very little here,” he explains.

“Any business you can think of, you can start.”
Start at the beginning

One as yet unnamed startup is trying to develop an appstore specifically for Ethiopia that will charge users via premium SMS services, which will hopefully open up a space for local app developers.

Another company, Utopia, is developing an Android app for tourists that can be used offline.

Mekina, one of iceaddis’ most successful startups, has built an online marketplace for Ethiopians to buy, sell, and rent cars locally, a big coup given the government levies five different taxes for importing vehicles.

Still, like the current market itself, these efforts are small.

“People just aren’t consuming things online. They aren’t connected, and those who are, are just using Facebook,” says iceaddis’s Markos Lemma.

Yet entrepreneurs remain hopeful things will change.

The government is planning to build a $250 million technology park, Ethio ICT, although critics worry it’s another of Africa’s pipe-dream tech cities.

“There is high potential for techies to develop applications and technical solutions,” says Mr Lemma. “But we need more support, resources, knowledge.” A tech park probably won’t offer that.

With 85 million Ethiopians slowly becoming connected, if the government loosens its grip and becomes serious about supporting entrepreneurship, an Ethiopian tech boom may be on the horizon.

Even if internet penetration increases to cover even just 2-3% of the population, Mr Lemma says, “opportunities to improve business will improve greatly.”