Why East African integration is good for your startup

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Much of the talk at the recent Connected East Africa event, recently expanded from a purely Kenyan affair to one covering issues affecting the whole region, was of economical integration between the country’s involved.

The primary news from the event was the planned expansion of the One-Network-Area – introduced last year to lower roaming charges on calls and SMSs between Kenya, Uganda, Rwanda and South Sudan – to data and mobile money.

Integration is gathering pace in other areas as well. Last month the presidents of Uganda, Rwanda, and Burundi visited Tanzania to oversee the beginning of construction of the Central Corridor railway line, which aims to link the region’s landlocked countries to the important port at Dar es Salaam. Moves are also afoot to remove non-tariff trade barriers.

From a geopolitical point of view, the benefits are clear. But businesses in the region will also stand to benefit, not least East Africa’s growing startup ecosystem. How exactly will the region’s integration help your business succeed?

A bigger market

Most African markets are fairly small, either in terms of the sheer number of people within a given country or the limited spending power of the bulk of these populations. The youth of services such as e-commerce and taxi apps also means uptake is often slow, with startups in sectors such as this aware that it is often likely to take years to gain enough popularity to make their solutions sustainable and profitable.

Here is where regional integration comes in. If the member states of the East African Community (EAC) can limit the bureaucracy and tariffs on trade within the region, then the potential market for startups, whether Kenyan or Burundian, becomes larger. In the past, red tape and levies have made trade between the region’s nations difficult. If these restrictions can be removed – or at least heavily limited – the potential customer base of the region’s startups will grow. Feeling the pinch from having your market limited to 45 million Kenyans? Imagine the benefits of also being able to easily do business with 49 million Tanzanians, and 37.5 million Ugandans. Suddenly your scope for success is much wider.

Receiving and making payments

Money is central to startup success, and indeed central to the East African integration process. We can talk about expanding a startup’s market size all we like, but if it is then impossible to make or receive payments between countries, the benefits are lost. Just ask Kenyan music streaming startup Mdundo, which recently had serious issues with a local service provider when attempting to make payments to its Tanzanian artists.

Various aspects of the region’s ongoing integration should ease these issues. The expansion of the One-Network-Area to mobile money already makes it easier to pay and receive payments from agents on the ground. The region is also seeing a gradual move towards mobile money interoperability, whereby money can be transferred to any mobile money account regardless of what company that account is held with. Tanzania has led the way on this with interoperability within its borders, and it should soon be extended to allow, for example, a user of Safaricom’s M-Pesa to send cash to a user of Tigo Pesa in Tanzania. Imagine the possibilities.

Fixing the logistics problem

There have long been several logistical difficulties for businesses in the region. Again, it is all very well having your potential market expanded to include all citizens of the EAC, but if poor logistics stop you from reaching those people, there will be no benefit. Regional integration should help with this too.

The new Central Corridor will allow for easier transportation of goods (and human resources), as will the Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) project. In terms of internet connectivity, Kenya and South Sudan have signed a memorandum of understanding (MoU) to connect the two countries by fibre-optic cable, which will in turn connect South Sudan to the undersea cables. Gradually, both in a physical way and through the internet, the region is becoming more interconnected. And this will only help East Africa’s startups connect with and deliver goods and services to the larger markets offered by regional integration.

Staffing your startup

In a similar way the growing integration of the East African member states creates a larger market for startups to cater to, it also creates a larger pool of skilled individuals to staff startups. The skills gaps – especially in terms of software developers – are well documented in East African countries as they are across the continent. But the easier movement of people from, say, Uganda to Rwanda engendered by regional integration gives founders more options when it comes to finding capable staff. Can’t find a developer in Nairobi? No problem, advertise in Kampala.

Together we’re stronger

An East Africa working together economically and producing startups that can sell their solutions to the whole region will also have a bigger impact internationally. If the governments of the EAC – which has a combined population of 120 million people – can speak with one voice, the region will be in a much stronger position to negotiate more hospitable trade scenarios with other African countries, as well as non-African ones. This can only benefit small businesses, which often feel the pinch most when it comes to duties. And if East African startups can begin catering for a market of 120 million rather than just the populations of their individual countries, the region will become a more attractive destination for international investors who could perhaps for now be put off by the limited market sizes.

For now, it is only baby steps, with regional integration is progressing. And for all the reasons above and undoubtedly a few more, this can only be a good thing for East African startups.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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