By Rafiq Raji, PhD
Cheap talent, large market
Lagos as a technology opportunity has to be seen from the angle of talent and market. According to the Global System for Mobile Communications Association, there are more technology hubs in Lagos than in any other city in Africa. Much of the tech industry in Nigeria, at least 70 percent it is reckoned, is in Lagos. Compared to other tech hub cities like Cape Town, Johannesburg, Nairobi, and Kigali, Lagos differentiates itself in terms of potential market size. With a startup ecosystem valued at $2 billion, it is the most valuable African tech city, overtaking Cape Town, Johannesburg and Nairobi. In 2016 for instance, the Lagos tech scene got most of the $109.37 million in start-up funding for Nigeria, more foreign capital than any of its African rivals. (South Africa secured $96.75 million and Kenya got $92.7 million in tech startup financing in 2016.)
The amount of funding is not necessarily reflective of activity, however. Taking a median estimate, about 500 startups worthy of note are probably active in Lagos. Compared to Cape Town, which has more than 1,200, the Lagos tech scene, when looked through the activity lens, is still quite small. The lesser activity versus higher funding suggests there are many more opportunities that probably do not get funded. Looked at another way, the opportunities that eventually bear fruit tend to be hard-won.
Tech companies in Lagos are beginning to realise the need for cost efficiency and patience. Take the case of Konga, the Nigerian online retailer; it could not boast of 200,000 active customers in a country of almost 200 million after operating for four years and spending a lot of money on advertising. So yes, the opportunity exists but it is not easily won either. Despite this, some indigenous companies are making headway. An online retailer that did win in Lagos and is succeeding across the continent, is Jumia, the parent company of which was valued at more than $1 billion as early as 2016. Established four years earlier in Lagos, the Africa Internet Group, which set up Jumia, is Africa’s first unicorn, a tech company valued at more than $1 billion. Other successes are MainOne, a wholesale internet service provider with a submarine cable of its own that connects South Africa and a couple of West African countries with Europe via Portugal; Paga, a mobile money service provider; SystemSpecs, an e-payment company; and Computer Warehouse Group, a technology provider to the banking sector. These are a few exemplars of what is possible.
Incidentally, tech talent is relatively cheap in Lagos. Software engineers working in Lagos earn only 70 percent as much as their counterparts in Cape Town and Johannesburg. The increased interest of tech giants like Google, Facebook, and Microsoft in Lagos, is on the back of the recognition of the latent potential in such a large local market. With proper training, support and opportunities for international practical experience, many of the already quite tech-savvy talent pool could do much more.
The author, Dr Rafiq Raji, is an adjunct researcher of the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. This article was specifically written for the NTU-SBF Centre for African Studies
Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/smart-lagos-4-status-prospects-opportunities/