This is what the ‘capital and resources’ landscape looks like in Zim, are startups/innovators being funded?

We can unpack a lot from the ITU/Potraz event where people from various backgrounds explored why there hasn’t been that much innovation in Zimbabwe. They called this process, ‘mapping the digital innovation profile of the country.’

One area of concern, one that we talk about a lot, is that of capital and resources. Talk to any entrepreneur; nine times out of ten, they had to bootstrap their capital. It is usually meagre capital as very few have enough resources to start with.

The financial system does not finance ideas, which is understandable, really. There needs to be a culture of investing in startups in this country and it’s not banks that will lead that. Organisations like Dream VC are trying to train more people to be venture capitalists.

So, what does the landscape look like when it comes to capital and resources in Zimbabwe? Let’s go through the pillars that ITU uses, looking at the current state and areas that need improvement.

Availability of investment for the private sector

• Capital is limited and tech innovation is not a priority for most companies
• Not much tech innovation, telcos are responsible for the little there is
• Organisations are deemed to consider innovation as a cost rather than an investment
• Large organisations only invest in their own innovations
• Stakeholders outside the private sector are not aware of the investments within the private sector
• In most companies, investment in technology equipment tends to be reactive rather than proactive
• Low budget allocations to CTOs/IT departments

Government funding

• Government direct financial institutions (think Infrastructure Development Bank of Zimbabwe) have contributed less than US$21m in startup funding
• The Zim govt funding small businesses through SMEDCO (Empower Bank)
• Not enough information on SMEDCO released by govt – no one knows its full impact and reach, earnings and less still, repayments
• Potraz utilises part of the Universal Service Fund (USF) to fund hackathons and competitions
• Potraz launched the $25m ICT Innovation Drive back in 2017 but details on the programme are lacking
• Some winners of the hackathons Potraz funds with USF funds do not end up receiving the promised funds. Some of those that get it, complain that they don’t get enough to finance a business
• On the whole, the govt could do with a little more transparency

Foreign Direct Investment

• Zimbabwe does attract FDI but in mining and select industries only
• Very little, if any, funding in tech
• The “Zimbabwe is open for business” campaign which attempts to market Zim as a good investment destination not successful. Tough economic conditions and policy instability scare off potential investors. Sanctions, racism and regional politics don’t help either.
• Zim still trying though, taking the begging bowl to international forums like the Dubai Expo
• Zimbabwe Investment and Development Authority (ZIDA) facilitates the direct investment
• It is not clear how much they have facilitated

Availability of funding for digital startups and SMEs

• Almost all startups are funded by personal funds/savings
• The financial sector is not anchored within the international finance industry to leverage and provide adequate funding to Zim businesses. Only locally generated funds are available
• Some banks provide funding but demand for collateral and other traditional guarantees excludes many startups
• Banks fund traditional enterprises and are yet to adjust their criteria to fund true innovation
• Microfinance institutions are too traditional to understand startups and so reluctant to take on the risk of funding them. Some offer short-term loans
• Youth innovation programmes and Empower Bank offering loans to SMEs
• SMEAZ Savings and Credit Cooperative Society enables members to get quick short-term loans
• There are a few angel investors but they lack visibility and only those with personal connections ever come across them
• Private investment is rare and often requires giving up a large share of company equity to access
• Funding for some stages of entrepreneurship (Series A/B, VC etc.) is not available or lacks visibility

International funding

• Though limited, there is some funding from international organisations
• There is limited awareness in the country of these opportunities
• A few Zimbabwean innovators are receiving grants through participation in international competitions
• The following organisations avail funding opportunities to Zimbabweans in some capacity – UNDP, UNESCO, EU, VC4A, Jack Ma, Tony Elumelo, Google, Korea Funding Trust, World Bank, USAID, SNV, Royal Academy of Engineering and more

Availability of investment in research

• Min of ICT offers funding through the Research Council of Zimbabwe
• Various organisations offer funding for specific areas e.g.; ZETDC funds research on smart grids and green energy, the Regulatory Board of Energy funds research on solar and battery systems, IDRC from Canada funds biotech research in Zimbabwe etc.
• There are funds for research from UNICEF, WFP, WHO and NGOs
• Potraz funds research in ICT but is not transparent enough on how those programmes go
• University innovation hubs fund some research
• The universities themselves, at least some, claim they get enough from the government to meet all their needs
• The private sector channels its resources towards its own research, not much is known about those efforts
• There isn’t enough collaboration between universities and the private sector to properly fund research
• The SME sector is focused on survival and not research, for the most part

Resources to build ecosystem supports

• Some hubs have had to cut back on programs due to a lack of funds
• Some hubs finance their work by offering consultancy services
• Some hubs/communities rely mostly on member subscriptions and are struggling
• The government allocates most resources to mining, agriculture and industry
• There is limited support for startups, and even when it’s garnered is only given through programmes and within limited timeframes
• Many held the opinion that there is enough funding to subsist but not to grow

That’s it

Most of this sounds ‘obvious’ and not newsworthy to those that are plugged in. If you feel that way then I guess the exercise did capture the actual state of this ecosystem accurately. If you find yourself disputing most of the points above then the opposite is true.

Please do let us know your own experiences in the market.

Also read:

Potraz and the UN’s ITU hosting a co-creation workshop to assess how Zim can promote innovation

Day 2 of Potraz/ITU event and the state of the ecosystem that should drive innovation is mapped