Undoubtedly, we are all living in unprecedented times. Many governments are dealing with the health and economic impact of Covid-19 in different ways, and only time will tell which strategy is the most effective one.
However, when it comes to start-ups, one can’t help but wonder about the current situation. There are endless reports on how the tech ecosystem in the Middle East and Africa (MEA) region contributes directly to the combat against Covid-19 pandemic.
Fintech companies in Kenya and Ghana are providing contactless payment solutions. E-commerce platforms across the MEA region are supplying clients with any kind of essential goods, helping them to stay at home. Innovation coming from edtech start-ups has been crucial during the lockdown and will have a huge impact on the future education of our children. In fact, many countries have defined digital transformation as a centrepiece of their post-Covid socioeconomic development strategy.
UAE minister of economy Sultan bin Saeed Al Mansoori has underlined the importance of innovation as a key support for the economic recoveries throughout history while committing to digital transformation based on 5G and tech developed by start-ups.
Digital ministers from Togo and Guinea, meanwhile, recognise the need to prioritise digital connectivity and governance in close collaboration with start-ups and civil society. Other experts see Covid-19 presenting a ‘wake-up call’ for the manufacturing sector to start the digital transformation into industry 4.0 by accelerating innovation and using tech on every step of the value chain.
The question is: are these high expectations towards tech start-ups matched in investment in and support for this immensely vulnerable sector? The latest report from Arabnet and Wamda indicates that 71% of the start-ups in the Middle East and North Africa (MENA) region are seriously impacted by the pandemic, with 50% only holding enough liquidity for the next six months.
In March, the start-up data platform MAGNiTT was already reporting a devastating 67% decline in investment deals in the MENA region, while the accelerator AfricArena expected a drop of $800m of tech and start-up funding across Africa in 2020.
Being well aware of this situation, governments in the region are explicitly mentioning start-ups and entrepreneurs as targets for their stimulus packages. However, a closer analysis unveils measures such as waiving governmental fees, delaying payments and discounts on rents and licensing fees, which are too high in first place. Sustainable changes, mixed with credible and tangible financial support, are needed to preserve start-up and tech ecosystems of the MEA region.
Otherwise, highly dynamic and mobile talents – along with their ideas – will move to places where they are welcomed with open arms, financing, low living costs and development perspectives that they simply cannot refuse, given the potential long-lasting economic impact of Covid-19 in this region.
Mazdak Rafaty is managing partner of Ludwar International Consultancy and SME adviser to the joint Emirati-German Chamber of Commerce. E-mail: email@example.com