Everyday we hear it, “Africa is going to have billion people below the age of 35 by 2035. and that young, ambitious population will focus on technology as a path to economic empowerment.” Investors from the west seeking to get in at the ground level, and positioning themselves in front of that potential market are pouring billions into the continent, supporting founders from Lagos to Kigali, to Nairobi to Johannesburg.
Yet beneath all the optimism lies a troubling reality: many African startups are not building on the continent. They are incorporated in Europe or the U.S.
Jumia for example has its headquarters in Germany, Flutterwave is in San Francisco, M-Kopa is based in London, Senegal’s Wave is headquartered in Boston. The list goes on and on. It has become a common trend now for African startups that to start looking for a Delaware office immediately they make a little money. They focus on processing payments offshore, serving global markets first. They believe in the “1 billion by 2035” gospel alright, but they are treating said 1 billion African Market as just another market to be exploited rather than an economic base to be built.
This trend is not new, but it is accelerating, and it raises important questions about the future of African innovation, sovereignty, and economic competitiveness. In other words what is the point of having a 1 billion people market and we don’t still have our own tech solutions? Why is it happening? What are the consequences? And who is responsible for changing course?
Why African Startups Are Building Away From Africa
Regulatory uncertainty and Fragmented markets
Africa’s regulatory landscape is a maze. Each country has different rules for business registration, cross-border payments, taxation, data protection, and talent mobility.
Aanu Odunaike, Senior Associate at Udo Udoma and Bello Osagie points out the numerous advantages that registering a startup in Delaware. For example, the State of Delaware allows a startup not to disclose its officers and directors, which offers a degree of discretion and privacy that a country like Nigeria cannot offer. Similarly Delaware corporations that operate outside the state are not subject to the state income taxes, which makes a Delaware entity easier to maintain. On the other hand a startup operating in ten African countries often deals with ten different compliance burdens.
Payment Infrastructure Gaps
The question of building in Africa always inevitability elicits a “you cannot have your cake and eat it too.” reaction from founders. As Jon Lubwama of Wazoplus puts it: “Payments across African borders are slow, expensive, and unpredictable.”
Many founders rely on foreign platforms simply because local systems cannot support continental scaling.” So in other words, the African tech ecosystems can either have more unicorns like Flutterwave or Moniepoint, or more tech startups domiciled in Africa. Africa’s legal, industrial and funding landscape does not have room for both. What would change that is consistent effort by governments in the long term, not just chest beating and patriotic slogans.
Dependence on foreign venture capital
Africa’s VC ecosystem is still overwhelmingly foreign. Investors often demand foreign incorporation, foreign bank accounts, and foreign parent structures—pushing African startups offshore. Akim Benamara , Editor of TechNews Africa for example points out that programs like Y Combinator mandates startups participating in its accelerator program to be based in certain locations like the Delaware, Canada or Cayman Islands. Given that there are no local alternatives to Y combinator, African startups have no option but to follow the money out of the continent.
Infrastructure Challenges and Talent mobility restrictions
Even Electricity, internet reliability, cloud computing costs, and logistics make it difficult to build at scale on the continent. Africa has not built the level of infrastructure that tech startups need to properly grow. Luwamba points out further: “Even when startups manage to scale the hurdle of legal and financial regulations and that of infrastructure and costs, There is also still the issue of hiring talent. work permits, licensing, and recognition of qualifications vary widely across Africa, slowing cross-border hiring.
The Clock is Ticking
A music journalist friend of mine once shared an insight about the Nigerian music industry during a conversation with me that has helped me to understand the impact of Africa not having ownership of its own innovation.
“ We are being priced of our own music talent. How many Nigerians can afford to go a Wizkid concert, or Asake, or even Burna Boy? Even beyond concerts ticket prices, how many of these people even live in Nigeria and engage with the culture that they are representing with their music? I am not trying to tell anyone what to do with the rewards that comes with their talent, but how many of these Big3 or 4 or whatever Big number they are nowadays have supported initiatives that empower actual Nigerian music artistes and music professionals rather than just spraying money in clubs or doing social media giveaways?”
My friend may have been venting about the music industry, but it applies to the tech ecosystem as well. When our flagship startups are not based on the continent, the tax revenue, intellectual property, high-value jobs, and capital retention all shift offshore, the core digital infrastructure remains outside Africa, and our 1 billion youths remain consumers rather than creators, African success stories generate wealth mostly for foreign investors. The ecosystem further weaken when startups are not physically grounded in African cities, and leading tech hubs lose competitiveness and risk becoming talent exporters, as the talent inevitably follow the startups out .
What Can Be Done About it?
African governments must start to look at other jurisdictions to see what they are doing right. There is a strong need to harmonize regulations, fix the power and broadband systems, simplify taxes, digitize services, support R&D, and incentivize local hosting. The African Union and the various regional blocs are already onto a good thing with the AfCFTA.
If well implemented, the provisions of the AfCFTA could create a unified African digital market that will eliminate the friction that pushes founders abroad.
From the African investors and the big African tech companies side, local capital must take ownership by strengthening VC participation and encouraging pension funds to allocate to tech. They can also support new startups through procurement, infrastructure sharing, and acquisitions.
Furthermore Universities and research institutions must invest in R&D and innovation hubs. Such that the talent pipeline problem that drives startups out of Africa can be solved.
As for tech founders themselves, there is a need for collaboration rather than competition, lobby for better regulations, and build long-term African-focused companies.
For so long, African has remained a continent of consumers, its best talent extracted and consigned to the economic crumbs of better developed nations. Tech has finally given us a chance to catch up and assert our own identity. There is no other area where Africa’s youthful population can currently assert its competitive advantage better than in the field of tech talent and innovation. With these in mind African startups not building on the continent therefore threatens Africa’s economic sovereignty and stifles its potential. The continent has the talent and markets, but must build the will and infrastructure to ensure Africa becomes the default place to innovate, not the last resort.
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