Untapped potential for software in Africa, venture capital needed to unlock opportunity

A report of the United Nations’ Conference on Trade and Development (UNCTAD) makes clear that a big untapped software potential exists in many African countries. UNCTAD identifies limited access to venture capital as a main barrier to the growth and development of the software and IT services industry in Africa. In your experience, do you agree with this conclusion or feel there are other elements at play?

The recent “Information Economy Report” of UNCTAD states there is room for developing countries, including countries in Africa, to make better use of their software potential. Worldwide spendings on computer software and services amounted to an estimated $1.2 trillion in 2011. However, the combined spending in Africa on computer software and services came to only 1 per cent of the world total (see figure 1). When looking at the distribution of ICT spending per region, it becomes clear that African consumers also spend less on software and services as a share of their overall ICT spending. For example, in North America computer software and services make up 43 per cent of all ICT spending, compared with only about 11 per cent in Africa. Such low ratios signify limited software use, which makes it hard to make progress towards an information society, the Report says.

Within countries, also in Africa, there are significant differences in terms of software spending and exports (figure 2). In Cameroon and Egypt both domestic software spending and exports of computer software and services are low. But in other African countries, including Kenya and South Africa, domestic software spending is high and exports low, indicating scope for an expansion of exports, the Report says.

Figure 1. Computer software and services spending, by region, 2011. Source: UNCTAD

Figure 2. Computer software and services export and spending, 2010, low- and middle-income economies

Barriers to growth

What are the main barriers to the growth and development of the software and IT services industry in Africa? According to the Report, the main barrier in the Middle East and Africa is the limited acces to venture capital, followed by the lack of qualified human resources and the lack of government procurement of software and IT services.

Table 1. Main barriers to the growth and development of the software and IT services industry (share of respondents mentioning factor). Source: UNCTAD-WITSA Survey of IT/Software Associations, 2012.


There are of course also many African success stories that have found a way to succeed despite these challenges. Many of the VC4Africa entrepreneurs work around these barriers every day.
What are your experiences and what do you think needs to be done to unlock the potential of software in Africa? We welcome the VC4Africa community to add experiences below. (When not yet a member, you can join the VC4Africa community here)