Cybersecurity in Africa- Risks and Opportunities

Remarks to International Development Partners’  Conference, London, 19 June

INTRODUCTION

C5 is a specialist global venture capital firm focused on cyber, cloud and AI. These 3 areas are closely intertwined and we call them collectively the secure data ecosystem.

When we think about investing in Africa we see on the one hand exciting opportunities and on the other hand challenging cybersecurity risk.

As you will see from my remarks the opportunity outstrips the cybersecurity risks. The cybersecurity risks can be mitigated by determined action, good policy and by building partnerships and coalitions for safety and security.

 

OPPORTUNITY

Africa is the future in the 21st century. It is the only continent that will produce a billion young people by 2050. Africa continues to have some of the world’s fastest growing economies. We are only at the beginning of a process of integrating markets across Africa under the leadership of the Africa Union (AU). We are just at the beginning of the continent’s digital transformation with internet penetration at only 25 percent across the continent vs 50 percent worldwide.

C5 sees exciting opportunity in the digital transformation of Africa. We invest in African technology entrepreneurs in several ways:

 

  1. C5 Accelerate, our startup platform, scales startups from across Africa in our two accelerators in Washington and Bahrain. Examples of successful African startups on our platform include:

Anona, a blockchain base startup that connects East African farmers directly to the food retailers in Europe and the US; Dropque, a talent platform from Nigeria that helps young people to find employment; Superfluid Labs, an AI startup from Ghana that helps African businesses utilise the power of AI to increase profitability.

 

  1. The C5 Peregrine Partners Fund, a late stage investment fund, specifically invest in partnering with fast growing cloud-based technology companies to invest and grow in Africa and the Middle East. ParcelNinja, a cloud-based warehousing company in South Africa is a good example.

 

  1. C5 Cyber Partners I and II Funds cybersecurity portfolio companies support their clients with products and services in the African markets. A good example is the ITC Secure that provides cybersecurity advice to International Development Partners and its portfolio companies.

 

  1. C5 runs a global innovation challenge in anti-corruption called Shield in the Cloud. In the 2017 challenge we awarded the prize for the most innovative startup to Ushahidi, a Kenyan startup that promotes transparency.

 

Africa has an opportunity to leapfrog by leveraging cloud infrastructure in a similar way to the mobile phone revolution that started in the nineties. From 1998 to 2017 the SIM card population in Africa grew from 4M to more than 731M SIM card users. This transformed every aspect of business across Africa and added 2-3 percent of economic growth as mobile phone penetration increased exponentially.

As a result, today Africa is the most advanced economy in mobile money in the world. President Ramaphosa of South Africa recently presented the visionary idea of building on this vibrant mobile money economy to leapfrog to a continental digital currency. Such a bold move can further help to grow inter-African trade, stimulate economic growth and provide transformative poverty alleviation.  In a similar way, only the digital economy holds the promise of scaling access to education for Africa’s young people.

The World Bank this year recognised this strategic opportunity with its investment initiative focused on growing the digital economy in Africa.

It is possible that Africa’s KINGS- Kenya, Ivory Coast, Nigeria, Ghana and South Africa- can help drive the growth of the digital economy across the continent. These 5 economies have the following attributes in common – underwater sea cable connectivity, emerging ecosystem, startup hubs with a focus on consumer and fintech, leadership that champions the growth of the digital economy and good policy.

Venture capital has a critical role to play. Venture is the life blood of the digital economy. Africa lags behind global VC funding. Global VC investment last year totalled USD 167 billion and Africa’s share was a very modest 250M.

 

RISK

We have, in the past few weeks seen the dramatic headlines of several high-profile hacks in South Africa. This is, however, not a challenge peculiar to Africa. More than a billion individuals had their personal information compromised in 2017. In every minute on the internet, there are at least two worldwide hacking incidents.

It is a common global challenge to secure the new digital world we are creating for our children.

An investor in African assets however faces several significant cybersecurity challenges:

  1. Transnational crime. The displacement of the narcotics trade from Latin America and Asia to Africa as the principal smuggling route to Europe and the US continues to distort African markets. In the wake of the narcotics trade have come several other areas of criminal activity including sophisticated cyber criminals.
  2. A lack of local and regional service providers. Worldwide there are more than 22,000 cybersecurity service and product companies but less than 10 percent has a presence in Africa. The ones who do often provide legacy products rather than being at the cutting edge. Africa needs more local cybersecurity entrepreneurs.
  3. Good cybersecurity is dependent on good policy. Although the Africa Union has drafted a comprehensive cybersecurity convention, only Senegal to date has implemented the convention. The majority of countries have no cybersecurity laws or regulations.
  4. Lack of state infrastructure. Cybersecurity requires a public and private partnership. With the majority of African governments lacking trained staff and national capabilities, the private sector may have to make a bigger contribution initially to help kick start national capacity building on scale. In terms of international law enforcement partnership this may well become an area of training as important as counter terrorism going forward.

In conclusion, we all need to contribute to help ensure the opportunity of the digital economy in Africa continues to outpace the risks of cybersecurity. This responsibility lies at all levels- the individual, the enterprise, the state and the AU. Only a collective effort will enable Africa to have the full fruits of its digital economy’s promise.

Andre Pienaar

London June 2018