Why Is the Tech Market Tanking?
By Ojuolape & Abraham.
With the recent events in the tech industry, one word comes to mind: chaos.
Whether it’s horrible bosses & where to find them, the wave of massive layoffs or the most recent Silvergate Bank debacle, there’s no shortage of drama in the tech scene: in Nigeria, in Africa, globally and probably the entire Milky Way galaxy.
So what the heck is going on?
Join Ojuolape & her guest, Abraham, an independent digital economy researcher and technology journalist/commentator.
*This transcript has been edited for length and clarity.
Ojuolape Kuti: I’ll start with what we’re all thinking: is the tech ecosystem always this chaotic?
Abraham Augustine: Haha well, I guess you could say it’s more like a cycle. The tech ecosystem, as we know it today, is relatively new.
There’s a lot of acceleration in the ecosystem because of the venture capitalist model of business, where there’s an incentive to make profits and make it fast. Unlike SMEs that grow 1-2% yearly, a VC-backed company might want 25% monthly. It’s reminiscent of the 2000 dot-com bubble or the 2008 crisis. Between that time and now, things have been relatively less dramatic and quiet.
But with this acceleration and growing attention came the saying, “tech is the new oil”. The problem with hype, however, is that it’s hard to live up to. When anything goes mainstream, there’s the tendency to find bad actors who misbehave. We’ve seen stories of founders overspending on personal expenditures while making minimal revenue.
The current issues in tech are not unique to Africa, however. It’s a global thing. In all fairness, factors beyond our control also contribute. For example, there was the zero-interest rate by banks, which allowed investors to borrow and invest, knowing they wouldn’t have to refund the bank with interest. This deepened in 2020, creating a pool of funds that needed an outlet for profits. In the last two years alone, Africa has raised more money than the past few years combined. Putting money into tech in Africa was relatively cheaper (exchange rates, cheaper capital etc.).
But then, the Feds raised rates. You can imagine what happened next.
Ojuolape: I find it interesting that you mention how Africa got a lot of attention there. Practically, is tech really doing anything for Africa?
Abraham: I’d say overall, it is, and it’s a net good. Are there areas to be criticised? Sure.
Take Kenya, for example, with M-Pesa (a mobile banking service): it’s not without its flaws, but it also meets needs.
Beyond financial inclusion, we’ve seen the impact on food & agriculture, recreation and government services. In Rwanda, it’s easy to access government services online, reducing the surface area for corruption because it’s automated.
Ojuolape: Do you think the African market is well primed for more seemingly complex concepts like web3 & AI?
Abraham: The broader thing is that we must be ready even if we’re not. With AI, for example, it’s coming, it’s here. For web3, Africa is not only prepared, but we’re already players. Although careful with crypto, I’m a fan of stablecoins and what they can do when done right.
Stablecoins help with cross-border payments but with limitations because that problem is fundamentally political. Because of the instability of policies (financial or otherwise) that tends to be common in African countries, it also means if I were a Ghanaian, I wouldn’t want to hold Naira as it fluctuates in value. A stablecoin is not a magic wand that can wave that away.
Ojuolape: Asides from fintech, what other industries do you think need attention?
Abraham: While it’s true fintechs shouldn’t get all the attention, they’re more VC-backable. Here’s what I mean: these startups tend to scale faster. An example is putting capital in a farm prone to excessive pre- and post-harvest food losses, which can never be recovered and slow down overall company growth.
But there are other types of funding available for these other industries.
Also, VCs don’t fully understand how these other spaces work in Africa. Excel sheets are easier with finances and not so much for solving how an unplanned tropical storm in Malawi can disrupt farming activities.
So we can complain, or we can go help with the understanding of these markets.
Ojuolape: What are you excited about or looking forward to in the African tech space?
Abraham: I’m interested in how the food market space shapes up. In East Africa, there’s a growing use of agents for e-commerce.
I’m also looking forward to overall digitisation: agriculture, supply chains, education, etc. It’s all a work in progress.
Ojuolape: Bonus fire section: what’s something you’ve been loving recently? (song, article, book, podcast etc.?)
Abraham: The Key Man: How the Global Elite was Duped by a Capitalist Fairytale by Simon Clark and Will Louch is one book that helped me see the world of finance for what it is and introduced a much-needed dose of scepticism/ cynicism to my formerly rose-tinted glasses. Highly recommend.
Find Abraham on Twitter.
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