Tech54 – Dakar’s digital destiny

This April on Tech54, the bi-monthly newsletter from the African Business magazine and Briter Bridges, which covers all the major startup stories and giving unparalleled industry insight on Africa’s budding tech scene, we bring you the Tech54 selection of the latest stories on the VC4A blog. Let’s take a deeper look at deals happening in the Senegalese tech industry.

Senegal’s tech sector serves one of the region’s largest and most dynamic economies. Although tech-enabled solutions are not quite as widespread as in some anglophone African countries, Senegalese citizens can now send money, order a cab and buy groceries on their phones. Last year, Senegalese startups raised $151m, according to a report by Africa: The Big Deal – compared to just $11m in 2017, this is a sign that the scene is rapidly developing. However, founders say that a lack of funding in the local marketplace remains a perennial issue, driven by francophone Africa’s wider isolation from heavyweight tech investors and big ticket sizes.

A good measure of the growth in Senegal’s tech sector is the recent influx of ride-hailing apps. Only a few years ago, it was impossible to order a ride from your telephone and commuters would have to haggle with the ubiquitous yellow cabs. The market now includes Paris-based Heetch, Russian firm Yango, and Algerian ride-hailing app Yassir.

Malick Diagne, Heetch’s country manager, tells Tech54 that there is huge space for growth in the market and the firm has outgrown growth expectations since it launched in Senegal in early 2022. “We actually had to change our target,” he says. “When we first entered, our numbers were very small in terms of projection. We underestimated demand in the market. In June last year, we realised that what we predicted was small and we actually added to our budget.” He says that Senegal’s youthful and tech-savvy population has provided ample space for all players to grow.

founders of Julaya company

Mathias Léopoldie and Charles Talbot, co-founders of the Julaya brand, with Édouard Mendy of Chelsea Football Club and the Senegal national team

The government’s introduction of the Startup Act in 2019 was a concrete sign that the current administration has taken the tech sector seriously. The Act aims to improve the regulatory environment for tech firms by creating a legal framework for the registration and labelling of Senegalese startups. It also created a resource centre dedicated to tech-companies, and a package of incentive measures like low taxation for startups, access to mentorship, free training and other growth measures. A $50m fund called the Délégation Générale à l’Entreprenariat Rapide des Femmes et des Jeunes (DER) has also been established to catalyse entrepreneurship among women and young people in the country.

Matt Sellar is CEO of Mbay Mobility, a startup that is introducing electric vehicles (EVs) to the market. He says that it is relatively easy to set up a company in Senegal and the government has introduced a few key measures to help entrepreneurs. He is attempting to replace Senegal’s taxis with climate-friendly alternatives. The firm will start with a business-to-business model, selling EVs directly to logistics companies that can buy the vehicles outright. It will then target individual taxiowners by setting up partnerships with banks to lend money to drivers to purchase the vehicles. Sellar hopes to scale up in the local market and then roll out the EVs across other markets such as Côte d’Ivoire and Ghana, with a combined total market value of $29bn.

Indeed, as francophone markets grow in maturity its startups are beginning to scale across borders. Mathias Léopoldie, co-founder of Julaya, a startup that processes payments for African businesses, says that Senegal was the obvious choice for expansion after growing in Côte d’Ivoire.
“We launched in January 2022 and it was very easy: it took only two months, because it is in the same monetary union,” he says.

“In terms of tech, it’s much more developed than Côte d’Ivoire, with mobile money and companies like Wave featuring regularly in people’s lives. There’s also more competition between startups in Senegal than in Côte d’Ivoire. “And the government has provided useful inputs like the DER.”

As a result, Léopoldie says that Senegal has already come to represent around 40% of Julaya’s portfolio in just one year, compared to five years of operations in Abidjan. The downside of the Senegalese market, however, is that margins are smaller, Léopoldie says. The agricultural prowess of Côte d’Ivoire means that it is one of the few African countries with a positive trade balance, which has a positive knock-on effect throughout its economy. Senegal, on the other hand, has relatively low domestic production, which weighs on the economy by increasing the need for imports.

But the main problem for homegrown startups in Senegal, especially in the early stages, is the lack of finance. Sellar of Mbay Mobility says that there is a distinct lack of local angel groups that can provide early-stage ventures with the capital needed to get them off the ground. He adds that suggested solutions to the problem, such as the Club des Investisseurs Sénégalais – a private sector body that was created in 2018 to make transformative investments in the local economy – have not yet lived up to the hype, making very few investments since it was created. In terms of fundraising, startups in francophone African countries have a difficult time securing big ticket sizes compared to anglophone equivalents.

“The number one reason is the language barrier,” says Léopoldie. “When you say ‘Senegal’ to a US investor they will not know what you are talking about. This is a big problem in terms of finance.” The World Bank and other institutions are helping to create new instruments and funds to channel more investment into start-ups throughout francophone Africa. There is traction, given the size of the opportunity, but with peers Ghana, Nigeria, Kenya or South Africa all highly active, much work remains to get the word out.

Tom Collins

For more news from Senegal, including an exclusive interview with President Macky Sall, visit our Senegal dossier and subscribe to the Tech54 newsletter here.