IN a significant step to foster innovation and entrepreneurship across Africa, the African Union (AU), in collaboration with partners including Google and Africa Practice, has introduced the AU Startup Policy Framework and Model Law. This initiative aims to address the challenges hindering startups in Africa by providing a comprehensive set of principles, recommendations, and policy innovations. The framework includes sample clauses to guide AU Member States in developing or updating their national startup legislative and regulatory frameworks.
Launch event
The launch took place during the African Union’s 6th Mid-Year Coordination Meeting, which gathered representatives from the AU, Regional Economic Communities, Regional Mechanisms, and AU Member States. Albert M. Muchanga, AU Commissioner for Economic Development, Trade, Tourism, Industry, and Minerals, expressed optimism about the framework’s potential to transform Africa’s startup ecosystem.
‘We are thrilled about the opportunities this framework unlocks for our continent,’ Muchanga stated. ‘Small and medium-sized enterprises, including startups, are the backbone of our economy and a primary source of job creation. Startups in the digital economy alone employ 34,000 people across Africa. However, with only seven out of 1,000 global unicorns located in Africa, we face significant challenges such as complex regulations, limited funding, a shortage of skilled labour, and fragmented markets. This framework aims to address these hurdles and lay a solid foundation for the growth of Africa’s startup landscape, projected to reach $10bn by 2056.’
Muchanga emphasised the importance of creating an enabling environment for innovative minds to thrive, noting that by 2050, Africa will account for 25 percent of the global population. ‘Governments need to facilitate capital flow for the burgeoning ideas coming out of Africa. This framework is a step towards achieving that,’ he added.
Google’s commitment
Charles Murito, Google’s Regional Director for Sub-Saharan Africa, Government Affairs & Public Policy, highlighted the disparity in global venture funding received by Africa. ‘In 2023, Africa raised $4.5bn from 545 disclosed venture capital deals, a 30 percent decrease from 2022. Female-led ventures received only 16 percent of the funding, slightly up from 11 percent in 2020. Additionally, funding tends to concentrate in fintech and specific countries like Nigeria, Kenya, South Africa, and Egypt, which received 62 percent of the total deal volume,’ Murito explained.
Murito stressed the need for the framework to address these funding disparities and support startups, particularly those led by women and youth.
A call to action
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 in engaging with regional economic communities, regional organisations, and member states to update and enact regional legal frameworks and national laws. Innovation is driven by finance, people, and determination. The future of Africa’s small and new businesses depends on our collective efforts to support them,’ Wilke said.
The AU’s new framework aims to harmonise approaches to enabling startups and innovation, aligning with the broader objectives of the African Union. It is seen as a crucial step towards achieving sustainable development and economic prosperity across the continent.
This initiative holds the potential to inspire a new wave of growth and innovation, ensuring that Africa’s entrepreneurial spirit is nurtured and its startups are given the support they need to succeed.
