Are Govt’s COVID Relief Plans For African Startups Dead On Arrival?

By  |  July 19, 2020

The month of April was just winding down when Startup Genome — the US-based global entrepreneurship research organisation that may be under-representing the African ecosystem — issued a report highlighting the impact of the devastating pandemic and government policies on startups.

The report surveyed up to 1,070 startups from 50 countries around the world, though, as is probably typical with Startup Genome, only about 22 of those startups were from Africa. 

However, ignoring those ‘diversity-poor’ numbers, for now, the report had it that while other startups generally had or expected policy aids amid the pandemic, 57 percent of African startups —  surveyed from Egypt, Algeria, Ghana, Kenya, South Africa, and Guinea — had not been helped by policy measures and were not expecting any such assistance.

That percentage could mean a lot of things but it generally boils down to one thing; that the majority of African startups do not see themselves as part of the government’s economic relief plans despite being just as severely hit by the pandemic.

In truth, there haven’t been that many significant policy reliefs specifically targeted at helping startups in Africa through the storm — especially since such measures are generally focused on battling hunger and hardship among the large impoverished population in these parts.

But even when African governments have appeared to try to specifically assist startups with some form of support, a cursory look ultimately shows little progress has been made, as the moves being talked up haven’t quite been matched by the necessary implementation.

In Nigeria, for instance, the recommendations in the #Tech4covid report drawn up by some of the country’s tech leaders in just 2 days, at the behest of the National Information Technology Development Agency (NITDA), are yet to be implemented adequately — more than 3 months after the agency first requested the action plan to support Nigerian startups in these times.

One of the champions of the “pro-startup COVID intervention,” in the person of tech veteran/angel investor, Tomi Davies, recently expressed concern that the #Tech4covid committee may have gone the way of typical government committees by becoming “a cul de sac where good ideas are lured into and quietly strangled to death.”

Once the pandemic struck, the global economy suffered as entire industries and businesses were crippled while lockdowns and other restrictive measures were in place.

To cushion the effects of economic fallout, governments across the globe set aside financial and structural palliatives to support individuals and firms. Among the most common palliative measures adopted to date are tax breaks, grants, and loans.

On the African continent, various governments — including those at the helm of affairs in key tech startup hubs like Nigeria, Kenya, and South Africa — have since announced various types of support for small businesses. 

But it seems tech startups are not on the priority list, or maybe they are at the bottom of the list. And that’s because very few of the support measures talked up are specifically tailored to the needs of startups as they mostly hover around tax breaks rather than meaningful input.

In Kenya, there has been a reduction in PAYE tax, value-added tax, and company income tax. Similarly, the Egyptian government, in addition to its USD 6.13 Bn fund to stimulate the economy, has cut the preferential interest rate on loans to SMEs, industry, and tourism, from 10 percent to 8 percent.

Furthermore, the Ghanaian government has committed USD 100 Mn to the COVID-19 response, setting aside some of that sum to support SMEs and employment. Nigeria, on its part, announced a USD 136 Mn for SMEs and tech-enabled businesses. Also, repayment dates for taxes were deferred, though no tax break was announced.

In addition, South Africa launched the Unemployment Insurance Fund (UIF) and special programs from the Industrial Development Corporation, to help distressed individuals and companies.

South Africa’s new loan guarantee scheme will also enable companies with revenues below a certain threshold to obtain loans from banks. Plus the South African Revenue Service (SARS) is accelerating tax credits, to allow SMEs to defer certain tax liabilities.

At best, all the above-mentioned developments are inherently broad or vague measures that are expected to accommodate startups in some way. But the real ‘startup-specific’ measures covering such areas as startup funding, support for tech hubs, and business continuity, are still either lacking or may have reached a dead-end.

Featured Image Courtesy: The New York Times

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