African Union Launches Startup Policy Framework to Drive Innovation Across Africa

Jul 22, 2024 08:15

Accra, Ghana, July 20 - In a groundbreaking move to drive innovation and entrepreneurship across Africa, the African Union (AU) and its partners, including Google and Africa Practice, have launched the AU Startup Policy Framework and Model Law.

This comprehensive initiative aims to tackle the challenges hindering startups in Africa by providing principles, recommendations, and specific sample clauses to guide AU Member States in developing or updating their national startup legislative and regulatory frameworks.

The Policy Framework and Model Law, developed in collaboration with Google under its Memorandum of Understanding with the African Union Commission, seeks to harmonize approaches to enabling startups and innovation in line with the AU's broader harmonization objectives.

Speaking at the launch during the African Union 6th Mid-Year Coordination Meeting, H.E. Albert M. Muchanga, AU Commissioner for Economic Development, Trade, Tourism, Industry, and Minerals, expressed optimism about the new prospects for the continent. "We are excited about the new prospects for our continent unlocked by the adoption of the Startup Policy Framework and Model Law, which is set to leapfrog the startup ecosystem in Africa. Small and medium-sized enterprises, including startups, represent most businesses in all sectors and are the primary source of job creation," Muchanga said. He highlighted the significant role startups play in the digital economy, employing 34,000 people across the continent, but noted that only seven out of 1,000 unicorns globally are in Africa. This is largely due to complex regulations, limited funding, a scarcity of skilled labor, and fragmented markets.

"The framework is expected to unlock some of these hurdles and set a strong foundation for the growth of Africa's startup landscape, projected to expand to USD 10 billion by 2056," Muchanga added. He emphasized the need for governments to enable capital flow for the burgeoning ideas coming out of Africa, noting that by 2050, the continent will account for 25% of the global population. "We need to create an environment that enables these innovative minds to catapult the continent to economic prosperity, and this framework is what enables this," he said.

Google's Regional Director for Sub-Saharan Africa, Government Affairs & Public Policy, Charles Murito, noted the disparities in global venture funding. "Africa receives a disproportionately small share of global venture funding. In 2023, the continent raised a total of USD 4.5 billion from 545 disclosed venture capital deals, reflecting a 30% decrease in value and a 31% decline in the number of deals compared to 2022," Murito said. He highlighted the underrepresentation of female-led ventures, which received only 16% of the funding in 2023, marginally up from 11% in 2020, and the concentration of funding in specific sectors and countries, with Nigeria, Kenya, South Africa, and Egypt receiving 62% of the total deal volume.

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Murito emphasized the need for diverse funding flows and support for startups led by women and youth. "The framework outlines principles derived from successful models and is a call to action to ensure that startups -- particularly those led by women and youth -- can be better supported," he said.

Marie Wilke, Chief Innovation Officer at Africa Practice, described the adoption of the Startup Policy Framework and Model Law as a transformative phase. "We must maintain momentum behind engagements with regional economic communities (RECs), regional organizations (ROs), and member states to update and enact regional legal frameworks and national laws. Innovation is as much about finance and people as it is about drive," Wilke said. She stressed the importance of joint and decisive efforts to support small and new businesses, paving the way for "The Africa We Want."

The AU Startup Policy Framework and Model Law represent a significant step towards fostering a conducive environment for startups in Africa, aiming to address regulatory and funding challenges, and ultimately, to promote sustainable development, technological growth, and enhanced research capabilities across the continent.

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African Union Launches Startup Policy Framework to Drive Innovation Across Africa