In today’s free market economy, start-ups are just as important as fresh air is for breathing: investors who specialise entirely in newly founded companies, government subsidies for start-ups or start-up awards with high prize pools – these are just a few examples supporting this thesis.
Especially since we at fairafric are a start-up in the chocolate industry, we follow the developments in the scene with great interest. Due to the business, social and collegial connections to Ghana, this is a good motivation to take a closer look at the start-up scene. Does a start-up scene even exist in Ghana? Is it supported by the government? All this and even more will be explained in the following blog article.
The development of the Startup-Scene by numbers
The Investment Report Africa indicates the investment achieved by african countries in different business sectors annually. As the 2019 report points out, Ghana has landed a total of around US$ 60 million for eight start-up companies. The report also reveals: Two companies are cleary outshining the others, raising more than 50% of the total funding. The solar energy company PEG Ghana and the digital health start-up mPharma received the most capital with 25 million US$ and 13.5 million US$ respectively.
The overall result gives hope for the future. A raise in funding of more than 300% compared to the results from 2017 is a much needed hint about a perhaps bright future. This exceptional rate of growth is the reason why Ghana is ranked fifth compared to other countries on the continent. Only the much more populated South Africa, Kenia, Nigeria and Egypt are still ahead of Ghana.
The platform VC4A , which calculates the risk capital of Ghanaian start-ups, has researched that in Ghana more than 70% of the start-ups create an average of eight full-time jobs. It has also discovered about 60% of these workers are between 18 and 35 years old.
Ghanas key to success is its people
Where does this success in the startup sector come from? Several factors are playing an important role in this case. First, Ghana’s population is young, more than 50% of the citizens are between 15 and 40 years old. Thus the will to stand on their own two feet through innovation and entrepreneurship is a characteristic that runs through the entire age group. Second, a high number of well educated and qualified workers, as well as an open-minded approach to new technologies also plays a major role in this context.
Finally, the high Internet and mobile phone penetration rate should also not be underestimated.
The German non-profit organisation Enpact e.V. published a report back in 2019 which analyzed a large number of African cities, such as Accra, Lagos and Nairobi, regarding their start-up friendliness. Accra scored well above average in the areas of human capital and macro conditions.
The reason for this: Accra is home to a very large number of highly qualified workers. The quota of women is also very high, which speaks for good and open educational opportunities. The good evaluation of the macro conditions can be explained by the stable political situation – Ghana is a democratic state.
“For founders in Ghana, it is very, very difficult if you don’t really put your heart into it” – Nelson Boateng, founder of recycling company Nelplast
Ghana’s tech startups are making a difference
Ghana’s start-up scene is developing exceptionally fast. The capital Accra is an oasis for the tech industry: it is home to numerous tech and IT companies as well as hubs and incubators.
The Meltwater Entrepreneurial School of Technology (MEST), which was founded in 2008, is also located right in the heart of Accra. The school offers comprehensive IT training, financing and mentoring opportunities to software startups. Furthermore the MEST is internationally well known and connected.
The demand for young technology companies in Ghana and on the entire continent is growing, especially among foreign investors, since progress in the tech sector can generate significant economic success.
The fast developing Tech-scene in Ghana has has also been noticed by the world-famous Silicon Valley. As part of their “AI-first” campaign Google opened its first Artificial Intelligence (AI) Research Centre in Accra back in April 2019 – the first ever in Africa. The AI Centre works with universities, startups and government agencies to develop solutions for challenges in healthcare, agriculture and education. In the future, critical decisions and challenging situations could get solved by the support of technology and computers.
It is hardly remarkable that the Palo Alto-based Founder Institute -which has branch offices across every important city around the globe- also opened an office in Accra in 2019. To this day, the Institute has helped more than 4,000 companies in over 180 cities to set up their businesses and has raised more than US$900 million. The estimated value of these companies is at around 20 billion US$.
The Founder Institute supports companies in the following way: With its own step-by-step programme, the Institute guides new businesses through the challenging first steps. Training, mentoring and a worldwide network of support are also provided to the founders.
A story of success revolutionizes Ghana and the continent
A company currently causing a buzz beyond the borders of Ghana is the Accra-based pharmaceutical start-up mPharma. Founded seven years ago by Greg Rockson, the founder’s story is as interesting as the start-up itself.
Born in Ghana, he moved to the USA at the age of 18 to study medicine, but quickly changed his plans because he was fascinated by the pharmaceutical industry. “Why become a doctor and save a few lives when I can save so much more that way?” said Rockson.
The company’s goal is to make pharmaceuticals on the continent more affordable and accessible. Currently, pharmaceuticals on the continent are still very expensive, denying access to a large part of the population because they cannot afford the medicines. These high prices arise because there is no mass production of the medication. The company’s plan includes providing increased certainty to suppliers.
mPharma provides capital and increases the volume of orders, which means pharmaceuticals can be sold at cheaper prices. The company has long since convinced renowned investors of its potential. The CDC Group, which is a development organization in the United Kingdom, and the well-known Silicon Valley investor Jim Breyer are just a few of those who have committed themselves to mPharma’s mission.
The company has recently been very present in the national and international press thanks to the appointment of Helena Foulkes, former president of CVS (the largest pharmaceutical company in the USA): The experienced businesswoman joined the board of directors of mPharma in May 2020. Since 2015, the company has raised more than 40 million US dollars in various financing rounds, which it has used to buy Kenya’s second largest pharmaceutical chain Haltons.
As a result, mPharma has been able to expand its number of branches from 17 to 30. The company’s own software, which significantly improves inventory management, is now used by over 250 pharmacies in West Africa. mPharma is a great example of how innovation can not only identify a problem, but also create a solution to it through a clear concept.
Green start-ups on the rise in Ghana as well
Not only in Germany the increasingly serious situation of climate change and the growing awareness of the current situation in world politics is leading to the formation of social start-ups. A large number of start-ups are created by the desire to strive for more sustainable solutions for urgent issues such as poverty, climate change and discrimination. In Ghana, the number of start-ups in this sector is also increasing. The entrepreneurial spirit mentioned above and the growing awareness of sustainable issues leads to groundbreaking and promising projects.
Koliko Wear combines entrepreneurial spirit with sustainability
One example is Ghanaian start-up Koliko Wear, which produces shoes from old jeans, furniture covers and the rubber from discarded car tires. Founded by Ghanaians Peter Anowie and Kwabena Obiri Yeboah with the goal of producing first-class shoes and at the same time minimising the impact on the environment in the long term.
The company takes an unusual but admirable path: that one day its employees will create their own businesses. To ensure that this “dream” can eventually become true, Koliko Wear is committed to providing its employees with the necessary know-how.
Koliko Wear thus has a positive influence in several areas: Upcycling old second-hand goods protects the environment, as the materials are not simply burned, but are processed into high-quality and stylish shoes. In addition, poverty is successfully addressed, as the company offers young people in the region a secure income, enabling them to significantly improve their living situation.
“I think the scene is growing in the right direction. The surrounding is right, we have a good mix of local talent and experienced returners from abroad. “ -Andrew Quao, one of the founders of e-health startup Red Bird.
Support still leaves a lot to be desired
Unfortunately, Ghana still has very few support centres that are specifically aimed at start-ups. As the hub network, which is operating all over Africa, has found out: Ghana was home to approximately 27 hubs in Ghana which supported founders with their first steps into the chaotic startup life. As already mentioned, the capital Accra offers many opportunities, which is why most of the support centres are located in the capital. There are additional support centres in Kumasi and Takoradi.
Fortunately, the Ghanaian government led by President Nana Akufo-Addo has taken action and has been supporting entrepreneurs since 2017 through the National Entrepreneurship and Innovation Program, NEIP for short. Due to this actions, 5 million Euros or 30 million Cedi were distributed to 3000 start-ups in the preceding year.
The aim is to motivate the high percentage of young people in the population to push their own spirit of innovation and develop their own businesses. This is supposed to prevent high youth unemployment.
In general it can be said that Ghana offers a very attractive environment for founders. The population is young and in a pioneering state of mind, more and more international investors are finding their way into the country and the support by the government is getting better and better. However, further support centres should definitely be established in Ghana, as these support start-ups not only financially, but also pass on experience and knowledge. The combination of financial support and knowledge transfer is elementary and helps to guide the companies through the first steps of founding a business. There are some things money alone cannot buy.