Issue 6 / Play

January 01, 2019

From the Silicon Savannah to Sheba Valley

Scott Malcomson

Kenyan and Ethiopian entrepreneurs are building homegrown tech scenes—with and without the help of their governments.

The Kenyan tech scene was born in pain.

On December 30, 2007, Ory Okolloh was blogging as quickly as she could. A Nairobi-based lawyer and investment adviser, Okolloh was writing about the recent presidential election—which the incumbent, Mwai Kibaki, had just won amid allegations of fraud. The election had been violent. The post-election was going to be worse.

“I can barely breathe,” Okolloh wrote, “I’m so upset at the circumvention of democracy.” A few days later, as clashes continued between the ethnic group aligned with Kibaki and those that opposed him, Okolloh blogged about the deteriorating situation in Nairobi. “I hang out with people on both sides yesterday evening at different times and you cannot have a civil conversation if you’re not on the same side,” she wrote. “It is really very scary... I felt like I was on the set of some bad movie about ethnic cleansing.”

Soon after, Okolloh decided to leave the country and wait out the violence in Johannesburg. The number of murders would rise above a thousand: hacked, shot, burned alive. It was a lasting shock to a generation used to being shocked. Okolloh agonized over leaving Kenya, but felt she had to put her child’s safety first. Still, she wanted to find a way to help. From Johannesburg, she wrote:

Google Earth supposedly shows in great detail where the damage is being done on the ground. It occurs to me that it will be useful to keep a record of this, if one is thinking long-term. For the reconciliation process to occur at the local level the truth of what happened will first have to come out. Guys looking to do something—any techies out there willing to do a mashup of where the violence and destruction is occurring using Google Maps?

Over the weekend of January 5-6, 2008, two software developers teamed up to answer Okolloh’s call. One, Erik Hersman, had been raised in Kenya but was then based in Florida; the other was a Kenyan based in Alabama named David Kobia. Together they built a website called Ushahidi, which means “testimony” in Swahili. Gathering data from Kenyans and NGO workers and anyone else who seemed credible, Hersman and Kobia developed a crowdsourced map of the post-election violence. On January 9, Okolloh introduced it to the world:

Last week, in between nightmares about where my country was going, I was dreaming of a Google Mashup to document incidents of violence, looting etc. that have occurred during the post-election crisis. Today, Ushahidi is born.

Ushahidi went on to become a great success story for Kenyan tech and an inspiration to entrepreneurs across the continent. Its tools for incident reporting have been deployed around the world, often for the purposes of election monitoring, crisis response, and human rights reporting.

Soon after launching the site, the Ushahidi crew started a tech hub in Nairobi called iHub. Within a few years, every major African city seemed to have a tech hub of its own, if not several. These ventures in turn built on the success of M-Pesa, a mobile payments system launched in 2007 by the Kenyan telecom Safaricom. M-Pesa revolutionized African banking and, like Ushahidi, quickly went global.

The Kenyan tech scene, soon dubbed the “Silicon Savannah,” had arrived.

Leapfrogging Politics

The story of Ushahidi illustrates an important point about tech in Kenya, and in much of Africa. Tech is a metaphor as well as a business. It’s a metaphor for a future that is not only prosperous, but also free from politics. African tech promoters often talk about “leapfrogging” to accelerate development: for example, by skipping fixed phone lines and going straight to mobile. The biggest leapfrog of all would be to skip over corrupt states and parasitical elites to a post-political internet where Africa’s large and underemployed youth population might have a shot at escaping poverty.  

But politics has proved hard to avoid. Even as a desire to transcend politics fuels the fascination with tech, politics finds ways to reassert itself. “Technology, especially digital technology, and politics are inseparable,” Nanjala Nyabola tells me. A leading Kenyan public intellectual and author of the Digital Democracy, Analogue Politics: How the Internet Era Is Transforming Kenya, Nyabola says that tech is often seen as something that “can cure the problems of Kenyan politics.” It’s a promise that tech can’t possibly keep, however: “Unless there is a political change, tech won’t fix it. You’ll just end up chasing your tail.”

This dynamic is far older than the Silicon Savannah. Indeed, Kenyan tech has long been shaped by its complex relationship with Kenyan politics.

In early 1994, three young Kenyans—two at MIT, one at Harvard—started Africa Online, which would become the leading internet service provider (ISP) on the continent. Initially, the Kenyan government opposed the internet altogether. The state-owned telecom monopoly took out a full-page advertisement in 1995 warning entrepreneurs that offering internet access amounted to resale of services and was therefore illegal. It targeted the internet partly to protect its turf, partly to control political speech in an unstable country, and partly because it could hardly keep up with the demand for fixed voice lines, let alone internet service.

Yet the Kenyan state’s hostility to the internet didn’t kill Kenyan tech. In fact, it may have served as a catalyst. As the Kenyan consultant Muriuki Mureithi wrote in 2016, Kenya’s digital success was shaped by “government-imposed barriers that spawned innovations.”

For example, in 2000 several Kenyan ISPs formed an internet exchange point (IXP) in order to connect their networks. The state telecom considered this move illegal. A week later, the state regulatory agency sent officers to literally unplug the IXP. Yet over the following year, the ISPs built relationships with the regulators. The state telecom was struggling to maintain its fixed lines: if it couldn’t provide adequate service, the ISPs argued, then it shouldn’t have the power to prevent other companies from offering alternatives.

This point of view started to make sense to the regulators, who began to explore undermining the state telecom’s monopoly status. By 2002, the ISPs had won. They got their IXP licensed, just in time for the arrival of General Packet Radio Service (GPRS) technology, the first system that enabled mobile internet access. Because access to mobile internet ran through the ISPs, they gained serious leverage over the state telecom. The internet came to Kenya through cell phones: today, Kenyans get online mostly through mobile devices.

Kenya’s leapfrog to mobile internet was driven not just by technology, but politics. It wouldn’t have happened if Kenyan ISPs hadn’t skillfully exploited a power struggle within the state brought on by the hopelessness of existing telecom services.

Today, the Kenyan state has officially embraced its tech sector. The Silicon Savannah is good for the government brand: it makes the state seem youthful and forward-looking. Even Ushahidi and iHub, born in revulsion at election-related violence, now receive government funding. The government also fuels the hope that tech will somehow provide, through the magic of internet entrepreneurship, some significant portion of the jobs that Kenyan young people need.

Uber for Ambulances

If an earlier generation of Kenyan technologists was forced to circumvent the state, the new generation is being asked to do the state’s job.

I saw this dynamic at Nairobi Innovation Week, an annual tech conference. It took place in the gleaming new Chandaria Centre for Performing Arts—financed by the industrialist Chandaria family, of Gujarati descent—in the equally gleaming, equally new University of Nairobi Towers. A crowd of young entrepreneurs made their pitches to a room of investors, as the government’s cabinet secretary for information and communications technologies, Joseph Mucheru, looked on.

One pitch was for a company that would help girls understand menstruation and have access to pads. (The cofounder talked about a 25-year-old woman “who didn’t know menstruation was normal. She thought it was just her family.”) Another was for an SMS system to circulate study aids by phone, given that schoolkids can remain illiterate even after several years of attending public school. The founder hoped that telecoms might subsidize the rates so the service cost could be held at $1 per month. Another startup would provide help with “soft skills” like mastering email in order to boost employment. Then there was an “Uber for ambulances” so people might avoid having to take taxis to the emergency room. The seed money being sought was usually in the $10,000 range.

I began to hope the minister might simply get up and apologize for a government that was looking to penniless young entrepreneurs to provide, some day, basic social services. It wasn’t clear that even these tiny projects would be getting any funding—or that the government would take anything more than a spectator’s interest.

Much of the funding for Kenyan tech comes from non-Kenyan sources. Kenyan tech draws heavily from philanthropists and so-called “impact investing” funds. Ushahidi and iHub, for instance, were financed mainly by American philanthropists. And the design for M-Pesa came from a project financed by the UK’s Department for International Development, as the mobile payments system was seen as a way to provide the advantages of banking to the unbanked and to enable microfinance.  

The founders who attract investment are often not African themselves. A 2017 study by Village Capital found that 72% of startup investment in 2015-16 in East Africa went to three companies: M-Kopa (a solar power company cofounded by the same Nick Hughes who pioneered M-Pesa), Off-Grid Electric (founded by three Westerners, two with Oxford MBAs, who had an interest in social entrepreneurship), and Angaza (a solar company based in San Francisco with an office in Nairobi). The report found that “investors are only investing in founders from the US or Europe or who attended a prestigious university.”  

Anywhere in the world, investors usually invest in founders who look like them, which tends to perpetuate inequalities. But it isn’t as though that 72% of startup investment is crowding out other capital. There are African venture capitalists, but African investors have more lucrative and safer options in a capital-poor region — investing in urban real estate is the main one, a sector with high profits and relatively weak foreign competition. For African tech to grow, African capital might need to rearrange its priorities a bit.  

The state can help, whether with tax incentives, educational initiatives, infrastructure investment, or simply by staying out of the way. Kenya, like Nigeria and other major African states, is now officially pro-tech and pro-internet, not least because tech provides hope for the young and the prospect of outsourcing some (already missing) public services to the private sector. But state commitments to tech are very thin, and states’ willingness to keep from interfering in internet speech is getting weaker.

Welcome to Sheba Valley

Driving between downtown Nairobi and the airport, you see occasional flashes of white light. You are being photographed. Terrorism is a very real danger in Kenya and the state and its partners—Safaricom again—have been happy to work with both China and the United States to use advanced technology to improve surveillance in the city. Counterterrorism, for now, is that rare area where the two tech superpowers can agree that spending large amounts of money in the poor world on up-to-date technology is a good thing. For once, worries about technology transfer don’t arise.

Upon arrival in Addis Ababa, the capital of Ethiopia, the pace slows a bit. A visa costs $50 in cash. Ethiopian birr are not convertible, and the country faces a grave shortage of hard currency. Once I had paid, the customs official looked awkwardly away. “I can give you a receipt,” she said, “but I don’t have a pen.”

Ethiopia and Kenya are the giants of East Africa and the Horn but in many ways are opposites: an authoritarian, vestigially Marxist state isolated from global markets versus a multiparty democracy with a relatively light-touch state and strong foreign investment. Yet both have robust tech scenes and ambitions. If tech is going to transform East Africa it will have to do so in both places, as dissimilar as they may be.

In some ways traveling from Kenya to Ethiopia is like going from the West to China circa 1995. With 100 million people, Ethiopia has more than twice the population of Kenya. The government recently embarked on reform after decades of stifling political speech, jailing opponents, and making its biggest decisions in secret. Blue Soviet-era Lada taxis still cruise the streets. With a development policy based on cheap labor and low-value-added manufacturing for export, the economy, fueled by government spending based on debt, has been among the fastest-growing emerging markets, if from a very low starting point. (Kenya’s GDP per capita is about twice that of Ethiopia.) Addis’s tin-roofed center is ringed by acres of new, quickly built apartment blocks.

Addis is bustling but it’s a hollow, rattling bustle. Many of Ethiopia’s universities barely function. The sole, state-run telecom struggles to address its backlog of phone-line requests. The internet cable is poorly maintained, and only businesses or the wealthy can afford to bring a line in and pay the high rates. Internet access for everyone else is through cell phones, but that too is iffy. When the government worried about political unrest in 2016-17, it cut off mobile access to the internet—and even, for a while, the fixed lines. When it worried about kids using the internet to cheat on exams, it cut it off for a week. When I was there, the prime minister had resigned so another state of emergency was declared and the internet got cut off.

This can make tech entrepreneurship difficult. Still, a tech startup scene has taken root in Addis, known as “Sheba Valley.” An Ethiopian expat coined the phrase, as a reference to the Queen of Sheba mentioned in ancient sources from the Torah to the Koran. The Ethiopian royal family claims descent from her, and her name functions as a kind of mega-brand: for example, Ethiopian Airlines calls its frequent-flyer program ShebaMiles.

Keeping the Power On

To reach the offices of Apposit, one of Sheba Valley’s leading startups, I made my way along Addis’s main thoroughfares to a cafe which was said to be next to the building that housed the company’s offices. The cafe reference was important because, to the limited degree that Addis has street numbers at all, no one seems to know them. After dozens of conversations and an exploration of two other buildings, I found the air-conditioned, buzzing offices of Apposit.

“We started just less than ten years ago,” Eric Chijioke, Apposit’s head of technology services, told me in his glass-walled office. “The three founding partners, myself, Adam [Abate] and Simon [Solomon], we had all worked in Ethiopia on a project the Kennedy School was running, building out the government’s financial systems.” Chijioke and Abate had gone to school together at Brown; Chijioke got a bachelor’s in mechanical and electrical engineering, while Abate’s degree was in economics and development studies. Harvard’s Kennedy School was executing the project for Ethiopia’s government on behalf of Western government funders.

More than half of the enterprise-level work in Ethiopia, according to Chijioke and three other Ethiopian tech people I interviewed, is governmental. The government finds it hard to run its own IT systems, so it farms the work out to contractors. But there are neither enough vendors nor enough work to sustain a competitive market, so the government in effect sets the prices. One of the many challenges of building tech for the government, says Chijioke, is the extreme variability of state infrastructure:

The systems that we built, and that still run, they needed to take account of the fact that it’s a distributed platform that’s supposed to run right down to the local government area level. But at the local government area, the actual functioning of the infrastructure is at a highly variable level, from nothing—you know, paper and pen—to computers that might run a few times a day to a few times a week, to some offices that might be highly automated and have satellite connectivity. You have to build for this: everything from zero to high-spec, everywhere in between.

Apposit’s leading project isn’t government-related, however. It’s in mobile finance. Apposit’s main client is Pagatech, a company that aims to build an M-Pesa-style mobile payments system for Nigeria. Pagatech is Chijioke’s responsibility. He got involved with the company early on: “I knew the founder — a gentleman named Tayo Oviosu. He’s an impressive guy — he went to business school with my younger brother, at Stanford, and he was thinking of starting up the business and he needed some technical advice.”

Apposit started out serving Pagatech when the company was still small. They did such a good job that Pagatech was willing to grow its developer team in Ethiopia rather than start a new one in Nigeria. “All of the developers and database engineers are based here,” Chijioke said. “On that particular team we have close to 30 people, and this is high-skilled jobs. Everyone on the team is Ethiopian except myself and one junior architectural engineer. The biggest problem is sometimes, for political reasons, the internet might be disconnected.”

Feleg Tsegaye, who runs Deliver Addis, Ethiopia’s largest e-commerce startup, also works at the mercy of an insecure, sclerotic, and capricious state. When the first internet shutdown came, Deliver Addis had to reconfigure its entire business to work offline, via text messaging. During another emergency, it had to configure its own email service. “Most people here don’t use the internet on a regular basis, besides Facebook and social media,” Tsegaye said. “There is not an impression that actual commerce is done via the internet, so the government doesn’t expect blocking it to have a great impact on businesses.”

To press their case with the government, Ethiopian tech companies have formed lobby groups—one for hardware, another for software—and startups have organized themselves around a handful of small institutions, all of which receive some funding from governments abroad, including RENEW, an American impact investing firm that backs Deliver Addis. The last time the government shut down the internet, beginning in October 2016, some 200 tech businesspeople met with the communications ministry to argue that technology, and the internet in particular, might actually have something to offer for the Ethiopian economy.

It promises to be a long battle. For now the government has placed its bets on manufacturing parks, complete with tax breaks and special immigration offices. Foreign companies, mainly Asian-owned, take advantage of low wages and the tariff-free access that manufacturers from Ethiopia, as a less-developed country, have to Western markets. But the inputs, such as those needed for making textiles, are often not from Ethiopia, and neither is most of the intellectual, manufacturing, or financial capital. Not even all of the labor is Ethiopian; managers and supervisors are usually Asian.  

Still, even though the Ethiopian government has prioritized manufacturing, it hasn’t entirely neglected tech. Around 2002, the government announced it would be building an industrial park for tech companies. Sixteen years later, it is just opening—and there hasn’t been much take-up. Kenya built something similar, with roughly similar results.

The real flagship for Ethiopian tech startups is iceaddis. Like Nairobi’s iHub but about one-twentieth the size, it has an open workspace with young people working on laptops, whiteboards, a tiny kitchen, and a purposeful hum. When I was there a group of Seattle high-schoolers were visiting. I met with iceaddis’s energetic head, Markos Lemma, born and raised in Addis, who had learned his English, he said, “from Hollywood movies.”

Lemma had just come from a long meeting with a government minister. “My argument is always that you can’t really have sustainable development without encouraging innovative and high-risk businesses, because those are how you compete in the future,” he told me. “How much capacity you have for producing technology is the best way to measure countries’ potential to grow. When I talk to ministers now they also understand there is a need for entrepreneurship.” And yet: “They don’t see the internet as the main accelerator of growth; it’s more like a threat, because it connects people.”

Running With It

All of Africa’s governments are facing a demographic explosion that they don’t know how to handle. “The internet” is a way to offer a bright future that would otherwise be hard to promise.

At the same time, states find censorship and surveillance hard to forego. Ethiopia is a good example. Its new government under Abiy Ahmed has encouraged the tech sector but, faced in August 2018 with unrest in the east, resorted to blocking the internet. Such a move inflicts a high economic cost: the Brookings Institution estimates that internet shutdowns in Africa cost $7.4 million per day.

The bright side is that today’s tech entrepreneurs know that they have to engage in politics in order to not be destroyed by it. African tech entrepreneurs are tough. As Nanjala Nyabola says, “We’ve managed to build exciting lives despite the challenges, and when you look at the tech space it is really evidence of a society that refuses to give up on itself. Give us a little space and we will run with it. Because we are so used to having no space at all.”

Scott Malcomson is director of special projects at Strategic Insight Group and the author, most recently, of Splinternet: How Geopolitics and Commerce Are Fragmenting the World Wide Web.

This piece appears in Logic's issue 6, "Play". To order the issue, head on over to our store. To receive future issues, subscribe.