UNDP on how local investors can play a key role in building Africa's next unicorns

The United Nations Development Programme (UNDP) has announced a groundbreaking initiative aimed at nurturing Africa's next unicorns by encouraging local investors to step up and lessen the continent's reliance on foreign investments. CNBC Africa's Fifi Peters spoke with Eleni Gabre-Madhin, UNDP Chief Innovation Officer at the Dubai Expo, where she outlined the key elements of the program. Gabre-Madhin explained that the initiative, named Timbuktu, is focused on creating a private sector-driven ecosystem with a mix of public and private funding. The primary goal is to capitalize on the already emerging success stories in Africa's tech landscape, with seven unicorns having emerged in the past four years. However, she emphasized that a significant portion of the funding for these unicorns has been sourced from foreign investors, with a considerable amount of the talent base also originating from outside the continent. To address the gaps hindering the growth of a robust African innovation ecosystem, Gabre-Madhin highlighted three key areas that need attention. First, she emphasized the importance of bridging the gap between academic knowledge bases and industry collaborations, similar to the symbiotic relationship seen between Stanford University and Silicon Valley. Second, she pointed out the need to nurture pools of local talent, including universities, hubs, and accelerators, to ensure they are aligned with the innovation ecosystem. Lastly, she stressed the necessity of providing early-stage risk capital to startups, as opposed to relying solely on grant funding, which hampers their ability to scale effectively. One of the critical challenges highlighted by Gabre-Madhin is the reluctance of local institutional investors, angel investors, and private equity players to invest in African startups due to perceived risks. Drawing parallels with Israel's successful venture capital industry, she proposed a catalytic approach to incentivize domestic investment in startups. By kick-starting a domestic VC industry with public funds and gradually transitioning to private co-investors, Africa could replicate Israel's rapid growth in the tech sector. Moreover, Gabre-Madhin emphasized the need to capitalize on early successes in the African tech scene, citing examples like the founders of Flutterwave and Chippercash potentially reinvesting in new ventures. By creating a cycle of success and encouraging founders to become angel investors, a self-sustaining innovation ecosystem can be nurtured on the continent. In terms of sectors ripe for innovation, the UNDP initiative plans to focus on key areas such as FinTech, AgriTech, EdTech, HealthTech, Energy, Clean/GreenTech, Smart Cities, Mobility, and Creatives. These sectors will be strategically mapped to thriving hubs in cities like Lagos, Accra, Kigali, Nairobi, Cape Town, Casablanca, and possibly Abidjan, to maximize the impact of the venture funds being set up. Overall, the UNDP's Timbuktu initiative marks a significant step towards creating a sustainable and inclusive innovation ecosystem in Africa, with a strong emphasis on empowering local investors to drive the continent's tech revolution.