Via the Realistic Optimist, a look at Ghana:

While not the largest African country by size nor by population, Ghana is a country of symbols. Ghana was home to the powerful Ashanti Empire, and was the first sub-Saharan African country to gain independence from colonial rule in 1957 under the leadership of pan-African icon Kwame Nkrumah. While Ghana’s 2020 presidential election included some controversy, the country is often cited as being one of Africa’s best functioning and stable democracies, alongside the likes of Botswana and Cape Verde.

In economic terms, the country has a relatively diversified economy, and is known for its strong gold and cocoa resources. Demographically, the country is young and boasts a 79% adult literacy rate. Internet penetration stands at 46.5%.

“With a population of about 31 million people growing at 2.2% annually, Ghana is currently the 13th most populous African country.  Approximately 57 % of its population is under the age of 25, a sign that Ghana and other African countries will supply a disproportionate percentage of the world’s working-age people in the coming years.” – Tech Cabal

Ghana’s start-up ecosystem is often hidden behind the massive media hype surrounding Africa’s “big four”, namely Egypt, Nigeria, Kenya and South Africa. Ghana’s funding numbers definitely fall short of the big four, but that isn’t to say the Ghanaian ecosystem doesn’t deserve attention.

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Local successes

While not hosting any unicorns yet, a couple Ghanaian start-ups have already made a definite dent in the ecosystem.

The first one would be PEG Africa (although founded by two Australians, kind of a “Jumia” type situation) , an asset financing company which provides solar energy products to off-grid customers. The company operates on a pay-to-go model, enabling customers in Ghana, Côte d’Ivoire and Senegal to access solar energy products affordably. It has raised more than $50 million to date.

The second notable local success comes in the form of mPharma, which offers solutions to health insurance and pharmaceutical companies to make it easier for patients to afford their medications. The start-up was crucial in helping the Ghanaian government distribute Covid-19 tests and vaccines. mPharma recently raised a $35 million Series D financing round, which will allow the company to triple its talent pool and invest in the start-ups data infrastructure, as well as expanding into new markets.

Other Ghanaian start-ups (non-exhaustive list) who have achieved significant traction include:

• Esoko: A technology and deployment company helping nonprofits, agribusinesses and governments digitize data collection and service delivery projects.
• AgroCenta: An online platform that connects all the stakeholders in the staple food value chain from smallholder farmers, partners, logistics suppliers, off-loaders to buyers under one umbrella for effective trading.
• Zeepay: A growing fintech focusing on digital rails to connect digital assets.
• Dash: An alternative payment network with connected wallets allowing a mobile money user to transact with a bank account would fix this problem. They just got in trouble with Ghana’s financial authorities after raising a $32.8 million Series A.
• Ozé: A platform that equips small business owners in Africa to make data-driven decisions to improve their performance, tap into networks, and access capital.

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Ecosystem layout

The Ghanaian start-up ecosystem is more laid out than other hyper-clustered ecosystems such as Egypt. Indeed, on top of the capital city of Accra, other cities such as Kumasi and Tamale are entrepreneurially active, a good way to distribute start-up innovations across Ghana’s sixteen regions. However, ecosystem actors say that most of the decisions and activity takes place in the South and Accra especially, leaving the North a bit isolated.

Similar to nascent ecosystems such as Palestine, much of the incubators/accelerator programs are run and financed by international aid organizations and foundations (whether or not that’s a positive is a topic for another time).

“Unlike most Africa tech ecosystems, the Ghanaian startup ecosystem is not centralized in one area, making it unique and, importantly, specializing in capacity building rather than trying to replicate an existing ecosystem model. We have, for example, Kumasi Hive focusing on hardware startups, iSpace focusing on female entrepreneurs and social impact startups, and The WorkShed, based in Tema, supporting creative startups. This ensures the talent pool is spread across the nation and forces startups to work together and also create products that are not location-based” – Josiah Kwesi Eyison, co-founder and CEO of iSpace

A range of incubator/accelerator programs exist, going from public, to corporate, to private ones. These include the likes of MEST, iSpace, Kosmos, Kumasi Hive, Ghana Tech Lab, Soronko Academy, Accra Impact Hub and Founder Institute Ghana to name a few. Important to note is the Ghana Hubs Network, an initiative aimed at connecting all tech hubs in Ghana.

In terms of investment, Ghana sees activity from pan-African and international VC’s but also hosts a couple local firms and investors such as Golden Palm Investments and 4DX Ventures. The country still lacks a good quality angel network though, with many local HNWI’s (High Net Worth Individuals) preferring to invest in bonds, real estate, or overseas instead of in start-ups.

Government involvement

Although we don’t have time to go over all of pro-innovation government initiatives, which often confusingly mix SME’s and start-ups, I will focus on two of the Ghanaian government’s pro-start-up initiatives.

The first if the National Entrepreneurship and Innovation Program. The NEIP is often seen as the landmark government effort to support innovation in the country. It was done in coordination with the hubs network we touched upon earlier. Under the initiative, which seeks to support both SME’s and start-ups, entrepreneurs have access to four key pillars:

1. Access to funding
2. Access to market
3. Business advice/mentorship
4. Tax holidays

According to their website, NEIP has created more than 92,000 jobs and funded more than 9,350 businesses to date. However, NEIP is far from sufficient when it comes to the actual needs of start-ups on the ground.

The second initiative I want to touch upon is the upcoming Ghana Start-Up Act, which is, for now, referred to as the Start-Up Bill as it hasn’t been passed yet. Following the example set by Tunisia and Senegal, Ghana has been working towards the drafting and implementation of their own national start-up act.

The premise of a start-up act is relatively simple: set a number of clear requirements for companies to qualify as a “start-up”, in order to then them offer a plethora of advantages such as financing, market access, tax holidays, public procurement, bankruptcy/IP government support, etc… The necessity for a start-up act is often bought about by the confusing “pro-innovation” policies which incorporate both SME’s and start-ups, two extremely types of businesses which require very different legislative support.

In Ghana’s case, the “technical working committee” responsible of drafting the act is made up of a variety of ecosystem actors, including members of i4Policy, which contributed to the development of multiple start-up acts across the continent. The idea of the act itself was kickstarted by a nationwide research tour called 25 Days of WoW (an event covering all the hubs across the regions in 25 days), which was created by Josiah Kwesi Eyison of iSpace and the then chairperson of Ghana Hubs Network, Gideon Brefo.

The committee is taking a bottom-up and collaborative approach to the development of the act, focusing both on what worked in other countries and what could best support the ecosystem in Ghana. The Bill is still in draft mode, but the committee’s goal is to make it a reality this year.

On a regulatory perspective, important recent events include the Bank of Ghana’s fintech sandbox, as well as the recent legal actions taken against Ghanaian fintech start-up Dash.

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Ghana’s strengths

While Ghana’s ecosystem hasn’t posted cataclysmic funding numbers such as Egypt and Nigeria, the country possesses a couple advantages that others in the region don’t.

First, Ghana has a breadth of good quality universities, producing a number of highly-skilled youth and alimenting the national talent pool. However, there is still a severe mismatch between graduates’ skills and start-ups’ needs. This is one of the reasons why a large proportion of funded Ghanaian founders have studied abroad. One of the goals of the Ghana Start-Up Act would be to create linkages between the academic and university world through technology transfer initiatives for examples.

The country’s stable political climate and ongoing democratic transitions also attract a number of big corporate actors to the country. Indeed, Twitter chose Ghana as the HQ for its Africa operations. Google also chose the country to launch its Accra AI Lab.

In terms of what sectors Ghanaian start-ups excel in, one could cite agtech (agriculture technology) and fintech (financial technology) as the country’s two main moats, although Ghanaian start-ups innovate in a diverse range of sectors from healthtech to logistics.

Another one of Ghana’s advantages is the country’s prominent “soft power” in the diaspora engagement field. Indeed, Ghana’s government has been active in engaging its diaspora, both immediate and a couple generations down such as the African-American population with initiatives such as the “Year of Return”.

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Funding numbers

As stated before, Ghana doesn’t compare to the big four in terms of funding numbers. More worryingly, it hasn’t experienced much growth in its funding numbers in the past couple years. In 2021, the top 10 most funded start-ups in Ghana raised $110 million, or 94% of all start-up funding for the year.

However, it has seen an increase in the number of start-ups being funded, hopefully presaging more activity in the coming years. Big raises in 2022 such as mPharma’s $35 million Series D, Float’s $17 million recent raise and Dash’s massive $32.8 million Series A are a testament to that upwards trend.

“Ghana’s top deals echo the current sector focus in the country – fintech led this year (2021), making up 44.4 % of funded startups and 51.4 per cent of total funding (US$10,143,000). There hasn’t previously been a notable focus area in Ghana, so much as individual stand-out rounds, so this year is the first where a sector-preference is clear.” – Disrupt Africa

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Ghana’s weaknesses

All is not rosy however. As we’ve touched upon on the previous point, Ghana’s funding has been stagnating, increasing a bit at best over the past couple years (although this looks like it’s changing in 2022). There is also a skill gap between the academic and the start-up world, with graduates lacking skills such as business acumen or “soft skills”. Organizations such as HackLab Foundation are working to fill that gap.

Low levels of early-stage financing are still an issue for the ecosystem. This lack of local early-stage funding is due to a miscomprehension of the venture capital asset class amongst traditional investors as well as early-stage founders themselves. Prohibitive and constraining business procedures such as minimal capital requirements for foreigners, which require hundreds of thousands of upfront capital, make founding start-ups very restrictive.

While women participation in start-ups is higher than in many other countries worldwide, it is still far from gender parity. In Ghana, 22.2% of funded start-ups have at least a female co-founder compared to 32.2% in Kenya and 13.3% in Tunisia.

Conclusion

Ghana gets less attention from the other big African tech ecosystems due to its smaller size and the lack of massive exits such as Nigerian Paystack and such. However, start-ups such as PEG Africa and mPharma are having a massive impact on tens of thousands of people. “Exits” or “valuations” shouldn’t always be the sole stick by which we measure the health of start-up ecosystems. On that topic, I highly recommend this great article by Jumanne Rajabu Mtambalike.

The country’s attractiveness towards foreign corporations might also be something to capitalize on as more and more international investors get involved in African start-ups. Just as non-European firms generally open their first European office in London, foreign VC’s could choose Accra as their base for African investments. This would undoubtedly benefit the ecosystem as a whole and turn into a continental (even global) start-up leader.