Supporting Africa’s startup sector: ESTDEV’s development cooperation projects in “the land of opportunity”

Africa is the world’s youngest continent, vibrant, rapidly developing and full of entrepreneurial youth seeking solutions to local and global challenges. However, the growth of the startup sector is not a given; bureaucracy, limited business support, and difficult market access hinder development. This is where the Estonian Centre for International Development (ESTDEV) sees opportunities to create partnerships, increase competence and match ideas with investors to support African startups as they grow and develop. 

According to Kristel Rillo, ESTDEV’s advisor for Innovation and Entrepreneurship, a development cooperation project is usually the first step, as Estonian businesses and African startups can test the waters for potential collaboration, build trust and initiate joint commercial projects that have a high impact on local communities and economic benefits for both Africa and Estonia. 

What does the African startup landscape look like through the eyes of local and foreign partners? What opportunities does Estonia have to contribute to development in Africa, and what do Estonian companies gain from working there? We sat down with Kristel Rillo (KR) to discuss lessons learned and predictions for future cooperation. 

1. What are the most interesting things you have learned from working with the African startup sector? 

KR: The African startup landscape is very diverse. Each country has its own unique characteristics, but one common theme stands out: the large number of young people and the resulting abundance of IT talent. In most African countries, over 60% of the population is under 25, making the continent a hub for young people with technical skills. Africa has a large number of talented developers, engineers, and entrepreneurial young people who are devising technological solutions for both local and global problems. 

On the other hand, several recurring challenges have been noted in the African startup sector. 

Team composition and skills. Often, startups have strong technological talent at their core but lack business development and management skills. One reason many local startups fail is an unbalanced team. There may be a very entrepreneurial IT expert, but the development of a business model, marketing plan, and team management often takes a back seat, making it difficult for the company to grow. 

Business formality and bureaucracy. The informal sector plays an important role in many African countries, frequently preferred over formal business models Many startups operate informally and postpone the creation of a legal entity. Moving into the formal economy is a major step, hindered by factors such as high taxes, a complicated business registration process or the required qualification certificates, which are difficult to obtain. Such bureaucratic red tape and a weak business environment inhibit the creation of new companies and innovation. In other words, the rules may be in place on paper, but their practical implementation is lacking, which is why many promising businesses are not run on a formal basis and lack opportunities for commercial growth and attracting investment. 

2. What have African organisations themselves identified as development needs for the startup sector? 

KR: Startup sector promoters in African countries, which includes government agencies, local hubs and startup communities, have identified a number of specific needs and bottlenecks that require attention. 

Putting policy into practice. In many countries, policies and regulations are adopted with great pride, but they are often not effectively implemented, resulting in a lack of consistency and oversight. This gap between what is written down and what is actually done slows down the development of the startup sector, as it appears that the necessary policies have been put into place by decision-makers. 

Bureaucracy and business environment. The local business climate is not conducive to the birth or growth of small startups. Starting a business is slow and arduous, and enterprising citizens often see no value in it, instead facing high taxes and other obligations. Such bureaucratic obstacles hinder the growth of innovative companies from the outset and deter investors. Simply put, the startup sector needs a more user-friendly and entrepreneur-friendly business environment to thrive. 

Raising investor awareness. Too often, Africa is seen as a high-risk investment destination despite its immense growth potential. To challenge these stereotypes, African organisations themselves must be proactive. One of our partners, Smart Africa, has taken it upon itself to change the narrative, highlighting the region's success stories and depicting Africa as “the land of opportunity” alongside the more widely known risks. 

Too many entrepreneurship games or hackathons and too few incubators. In recent years, Africa has seen numerous hackathons and short-term accelerators that provide promising ideas a wider platform and offer prize money. However, they do not necessarily guarantee long-term growth. There is a pressing need for incubators that provide startups with consistent mentorship, resources and market entry support. Without such ongoing support, there is a risk that startups will jump from programme to programme and receive prize money but never advance to the next stage of growth, innovation or job creation. 

Intellectual property and research cooperation. One area of concern is the weak links between universities, researchers and the private sector in developing innovation. In several countries, there are common practices or even official rules that state that if something is invented within the framework of university studies or in cooperation with a university, the intellectual property rights belong to the university. This reduces the motivation of entrepreneurs to cooperate with higher education institutions and prevents the creation of science-based startups. Furthermore, African countries lack a robust intellectual property protection framework. To support knowledge-intensive innovation, cooperation between universities and startups needs to be strengthened. Clearer agreements are also required so that inventors get a fair share of the commercialisation of inventions born at the university. 

3. It’s clear there are many challenges. What can Estonian organisations do in cooperation with Africa? 

KR: Estonia may be geographically remote and have a small population compared to most African countries, but our startup sector has characteristics that make cooperation highly valuable. Estonian startups are known for their global mindset. Since our home market is small, many Estonian startups are immediately ready to expand to other countries. In Africa, the focus is primarily on the local market when creating solutions. Often, people become bogged down by local problems, such as limited market or infrastructure issues, which ultimately slow down the development of entrepreneurship and innovation. 

Bolt is a global success story from Estonia. The company operates successfully in Europe and has also expanded to several African countries, becoming one of the leading ridesharing and courier platforms in these regions, according to techtour.com. With an example like this, we can encourage African startups to think big and look beyond their home market. 

“Through development cooperation, we support the creation of business networks and the growth of local entrepreneurial capacity. These projects are a good opportunity for Estonian companies to do a ‘market test’, check out the situation on the ground and initiate relationships that can later grow into business partnerships.” 

Kristel Rillo,  ESTDEV’s advisor for Innovation and Entrepreneurship

4. In addition to sharing global ambitions, what else does Estonia have to offer Africa? 

KR: One of the principles of Estonian development cooperation is to share our knowledge and experience in areas where we are strong. Estonia is recognised for its e-government solutions, e-services, and cybersecurity, all of which are crucial components of a modern business environment. 

For example, ESTDEV contributes to the development of e-governance solutions in several African countries (digital services, data exchange platforms, etc.), which also creates a more favourable environment for the emergence of startups. Many Estonian cooperation projects in Africa focus on areas such as entrepreneurship training, the involvement of women and young people in technology and the creation of digital infrastructure. Through development cooperation, we support the creation of business networks and the growth of local entrepreneurial capacity. These projects offer a valuable opportunity for Estonian companies to conduct a 'market test', assess the local situation, and initiate relationships that can later develop into business partnerships. Development cooperation projects in the startup sector include, for example, joint programmes, mentoring schemes or pilot projects, where Estonian and African startups and incubators operate side by side. 

The ultimate goal is to establish stronger, internationally oriented African startups through these projects, along with mutually beneficial business ties between Estonian and African entrepreneurs and investors.

5. How important are sustainability and green issues for the African startup sector? 

KR: The green transition and sustainability are undoubtedly important areas for African countries. Many countries have adopted green transition plans and emphasise that innovation must support sustainable development. The question is, instead, whether this priority is also reflected in practice. Funders of development cooperation projects, such as international donors and the European Union, are increasingly using their programmes to set green goals for startup support programmes, including energy efficiency, the circular economy, and climate change mitigation. If donors’ conditions include green issues, then the corresponding activities are carried out within the project. However, if there is no external pressure, green transition initiatives at the national level tend to remain on paper or drag on. 

6. In which sectors in Africa is green innovation a priority? 

KR: Green issues are most prominent in areas critical to the economy and the living environment. Energy is undoubtedly a priority, including expanding access to electricity while transitioning to cleaner energy sources, such as solar, wind, and biogas. Transport is another area where green solutions are actively supported, such as electric transportation in cities, more efficient logistics, and the digitalisation of public transit. In some countries, the mining sector has also begun to adopt a more environmentally sustainable approach, taking into account climate impact and community well-being. But again, the question arises: how much is actually being done differently? So far, the green issue has often been addressed in a "top-down" manner, directed from above. Strategic goals have been set, but there is not always demand or pressure from below, from companies and consumers, to keep up the efforts. 

7. How realistic is the green transition in Africa? 

KR: Local experts argue that the green transition in Africa must be implemented in a practical manner, making it an integral part of every sector rather than a separate goal pursued only when a foreign partner demands it. Today, it can be confirmed that so-called "hot areas" have developed across the African continent, where both startup activity and investments are concentrated. 

Fintech. Financial technology is undoubtedly the driving force behind Africa's startup landscape. Access to financial services has long been a challenge in Africa, as a significant portion of the population remains outside the reach of traditional banking services. Startups are filling this gap with innovative solutions, including mobile payments, digital wallets, crowdfunding, alternative lending services, blockchain-based payment solutions, and more. Since the launch of the legendary M-Pesa mobile money service in Kenya, the fintech sector has expanded rapidly across Africa. 

Agritech. Agriculture is the backbone of the economy and the primary source of employment in many African countries. Therefore, entrepreneurial interest in agricultural innovation has grown and is continuing to grow. Agritech startups are developing various solutions, including smart field management systems that help farmers increase yields (e.g., sensors and data analytics to monitor soil moisture or nutrients), supply chain platforms that connect farmers and markets, insurance products that provide weather resilience, and satellite-based monitoring services. As the population grows and climate change puts pressure on traditional agriculture, agritech is seen as having enormous potential to ensure food security. 

Edutech. Africa is the youngest continent in the world, which is why accessibility to and the quality of education are crucial. Educational technology startups have set out to solve this challenge by developing e-learning platforms that deliver high-quality learning content over the Internet to areas where there are no competent teachers or physical schools. Also, mobile apps have been designed to help young people acquire new skills (language learning, coding, etc.) independently or playfully. Digital infrastructure and the so-called paying customer are, of course, separate topics, but the need for and interest in edtech solutions are quite large. 

Jobtech. A very exciting and new niche for me, which my Zambian colleagues introduced me to, is jobtech, or job creation platforms. This term brings together all digital platforms and solutions that help people create jobs, find work and work more effectively. In other words, jobtech is the “future of work” in the digital age. In the African context, where youth unemployment is a critical problem, jobtech as a sector has enormous potential. This includes, for example, taxi platforms and courier services, job search and recruitment platforms, as well as freelance and temporary/reserve worker platforms, online courses and skills portals that offer vocational training or IT training so that young people can acquire skills required in the labour market and thereby increase their employment opportunities. 

Of course, there are other important sectors in the African startup ecosystem, including healthtech and e-commerce. 

8. As we wrap up our chat, let’s discuss ESTDEV’s participation in the European Digital and Green Transition Joint Initiative, focusing on the development of the African startup sector. A €600,000 call for proposals is underway to attract a partner. What do we hope to achieve? 

KR: The larger goal is to create a cooperation platform where African startups and Estonian partners can develop new cooperation models, exchange experiences and develop skills, and help investors find reliable partners. From a development cooperation perspective, this means that we invest in the process of co-creating partnerships, from designing programmes with locals to meet real needs, providing mentoring and business development incubators and supporting African startups’ first attempts to enter the market. If these projects are successful, they will give rise to further, hopefully commercial, forms of cooperation that do not require development cooperation. 

Estonia is a small donor, and we cannot afford to waste resources. We need to ensure that each project evolves into something sustainable. If the Estonian startup community and African startups find common ground and learn to trust each other through this programme, then development cooperation will become a means to lay the foundation for joint Estonian-African projects that have a high impact and are economically beneficial for both African countries and Estonia.