GEN BOTSWANA BOOTCAMP
Early Stage Funding Botswana
16 June 2021
Address by Marie-Francoise Marie-Nelly, World Bank Regional Director for the SACU Countries
Thank you very much for the opportunity to address you today on “Early Stage Funding in Botswana”. I would like to congratulate Mooketsi Bennedict Tekere and GEN Botswana for convening key stakeholders in the entrepreneurship ecosystem to mobilize support for entrepreneurs. This could not be timelier at a moment when the issue of Jobs and Economic Transformation is central for green, inclusive, and resilient growth to recover from the devastating impacts of COVID-19. The World Bank is very pleased to support this and other activities that contribute towards bringing together the entrepreneurship ecosystem actors, not just from Botswana but also from the Southern African region more broadly. In particular, I am very keen to see greater interactions and collaboration between the Botswana ecosystem and those of Lesotho, South Africa, eSwatini and Namibia, the countries that I cover in my current portfolio.
The topic of this edition, namely addressing the challenge of energy through startups, is very timely as we all recognize that Botswana has enormous potential for solar energy, and we agree that rebuilding after the COVID-19 pandemic has to be green. I think that the Botswana startups can look at the possibility of developing innovative small schemes to provide effective off grid solutions for remote areas.
Let me also use this opportunity to underline the collaboration between the Government of Botswana and the World Bank Group on the implementation of the reforms under the country’s Economic Recovery and Transformation Plan (ERTP) to strengthen private sector development and ensure that social spending reaches the poorest and the Batswana most affected by COVID-19.
Coming now to the entrepreneurship ecosystem, we have been following Botswana’s ecosystem very closely. As many of you know, Botswana is notably the top ranked entrepreneurship ecosystem in SSA according to the 2019 Global Entrepreneurship Index (“GEI”). Its current rank of 51 out of 137 puts it is ahead of South Africa (58) and Namibia (62). Digital entrepreneurship enabled growth is a key priority for Botswana’s government as outlined in the National Entrepreneurship Policy (NEP), SmartBots, and the Botswana E-Commerce Strategy. In line with Botswana’s 2020 Economic Recovery and Transformation Plan (“ERTP”), SmartBots is engaging the private sector to leverage digital technologies for public sector transformation, co-create data driven products and services, and provide knowledge and tools to build a competitive workforce. Such engagements, if implemented effectively, have the potential to significantly transform digital business and entrepreneurship in Botswana and rest of Southern Africa.
As we think about Botswana’s entrepreneurial ecosystem, we need to focus on the broad spectrum of support that firms need along the lifecycle: from ideation to pre-incubation to incubation to seed and growth for scale. Established tech giants such as Facebook, Apple, Google, and Microsoft, all started as startups that over time, grew into multi-national corporations. Oftentimes when we speak about entrepreneurship, we focus on early-stage support but in addition to this it is critical to have a longer-term view.
We are in the process of completing a digital economy assessment for Botswana which also includes the topic of digital business. There are emerging findings in three key areas that are critical for the growth of the Botswana entrepreneurship ecosystem.
First: Improving access to the right types of skills. Digital Skills ensures countries have a digitally savvy workforce to build robust digital economies, competitive markets, and to enable individuals to access digital services and information efficiently and safely - whether its basic digital skills or more advanced skills such as coding and App development; including business and managerial skills including understanding of how to build financial forecasts.
While Botswana has various education and training policies designed to support digital skills development and ICT in education, they tend to be disjointed and not anchored in an integrated and comprehensive policy framework. This has resulted in education and training institutions working in siloed approaches to prepare and deliver digital skills in education programs. There is therefore an opportunity to expand the range of digital skills provided to Botswana’s children to allow them to flourish in an increasingly digitized society. Several initiatives are underway to enhance school connectivity and improve digital skill programs across the country. For more advanced skills there is a range of university programs and rapid ICT skilling programs in Botswana, including a growing number of private providers and corporate partnerships.
We believe there are a number of practical ways to engage the private sector and support their enabling environment, including last-mile incentives to enable affordable coverage, more efficient infrastructure sharing schemes, and creating a clear and predictable division of labour between State Owned Enterprises and telecom companies - leveraging their comparative strengths. Indeed, very often two critical issues are poor connectivity and unaffordable prices of data.
Second: Deepening regional and international linkages and ecosystem collaboration
A small ecosystem like that in Botswana can benefit from regional and international linkages through access to consumer markets, technical and financial partners and knowledge and experience sharing opportunities. One such example where The World Bank along with other strategic partners is supporting this narrative is through the execution of the Southern African Corporate Innovation Challenge which is currently underway. This is an initiative under the Southern African Startup Network project to identify and connect a group of small businesses across the Southern Africa region to corporate innovation opportunities and potential investment. We have 12 well known multinational corporates committed to help in providing market access and potential investment. Please allow me to take this moment and encourage all entrepreneurs in Botswana to apply and potentially benefit from this method of growth scale.
Access to Finance
The good news here is that we are seeing continued increase in deal volumes on the continent “In 2020, the African Tech ecosystem is still inexorably accelerating, with 359 equity rounds (+44% YoY*)” *refers to tech & digital VC equity deals above US$ 200K. YTD (End-March) recorded Funding stats: 100+ startups have closed funding rounds worth $550m (+48% more than 2020 as of end of March). South Africa continues to lead the pack in the Southern Africa region having raised $259m equity funding in 2020.
As some of us here may be aware that earlier this year in February, our team organized an incredible webinar with all the 5 countries focused on Early Stage Finance, this event formed part of the many initiatives intended to extract insight from investors across Africa and abroad on challenges when looking for startups to invest in, particularly in Africa.
This event also included an entrepreneur by the name of Obi Ozor, founder of Kobo360 who recently made headlines across the continent as he, alongside his business partner managed to raise over USD30 million in investment for their tech startup.
As any entrepreneur may tell you, raising funds is no easy exercise, and so although this story of Kobo360 may be encouraging, it is important that we take lessons from it, one of which is that, if you are looking to build a multibillion dollar business, you need to be investing your time in solving a multibillion dollar problem.
The government of Botswana has taken a strong lead in providing capital to early-stage businesses in the form of grants and loans. As a result, there are various grant funding mechanisms for ideation and incubation stage digital entrepreneurs. Entrepreneurs are able to access pre-seed (ideation) and Series A (expansion) financing rounds.
For the next stage of growth, Botswana must also develop private sector funding. This includes angel investment, seed capital, and of course venture capital. It is envisioned that the emergence of angel networks, such as Angel Network Botswana, will fill this critical financing +gap, while funds such as the BIF currently target growth-oriented startups.
Moving forward, in consultation with various ecosystem players, the World Bank is supporting the establishment of a Southern Africa Startup Community to bring together ecosystem actors in each of the countries to facilitate knowledge sharing, collaboration, and partnerships.
The Regional Startup Community can be a catalyst to provide access to financing at scale; as well as convene technical, business, and other non-financial support services to entrepreneurs to help them grow from post ideation phase to revenue generating. The community can also be a catalyst to convene access to information and networking opportunity resources especially amongst the segment of disadvantaged entrepreneurs.
Such a community can help to develop young entrepreneurs dedicated to making an impact through their initiatives, women in rural and township areas. This is paramount to help build a pipeline of small businesses focused on financial inclusion and diversity. The community could help:
Entrepreneurs to network and have easier access to markets
learning, knowledge, training, coaching, mentoring,
access to incubators
Access to funding and investment funds.
In conclusion, we would like to support the establishment of a sub-regional public-private digital community for innovation and entrepreneurship collaboration, knowledge and resource sharing, and matchmaking amongst and between the ecosystem actors in South Africa, Botswana, Namibia, eSwatini and Lesotho. We believe having a digital community will be a step in the right direction to bring together some of the highly fragmented support programs that exist in the market and support identifying synergies for ecosystem players to work together and promote inclusivity (from a diversity and gender perspective) and most important create a healthy pipeline of investible ventures. From my own experience, I have seen that this is possible in the Maghreb region where a regional startup network has achieved several successes in enhancing support to young entrepreneurs as well as contributing to the policy reform agenda. I believe that this is certainly possible in Southern Africa given the wealth of talent and resources in the ecosystem.
To close off in the words of an entrepreneur originally from the Maghreb Region who joined the panel of one of our recent regional early stage finance webinars: “If you have a choice between building a physical business and digital business, choose digital… If you have a choice between building a business around people or around an idea, choose the people! …because ideas change and will evolve, especially in early stage!”