Whether or not you believe in the theory of evolution, you can’t deny that some of its concepts are fascinating. One example is convergent evolution— the process by which different species in different parts of the world evolve similar traits independently. For example, sharks and dolphins have akin streamlined body shapes and fins for swimming, despite coming from very different evolutionary lineages. This same concept is playing out before our eyes in Africa. But this time, it’s not about animals. It’s the business ecosystems evolving in similar patterns.

Africa has often caught the same fever of tech waves in the past. And when you realise that policy innovation is also contagious, the saying that “Africa is a country” might not sound so strange anymore. In recent years, adopting startup acts has also become a pattern. A startup act is a piece of legislation meant to create an enabling environment for high-growth technology-enabled businesses, i.e. startups. It aims to create a framework that helps solve problems around funding, infrastructure, and uncertain policies.

Tunisia was the first African country to launch a Startup Act in 2018. Senegal followed suit in 2019, paving the way for many others to propose startup bills. This move by both countries helped others gain clarity on defining a startup. Tunisia labels a business a startup if:

  • The company has not existed for up to eight years,
  • The company has less than 100 employees,
  • More than two-thirds of its shareholders be founders, angel or hedge fund investors,
  • It has an innovative business model, preferably technologically based, and
  • Its activities significantly contribute to economic growth.

Also, Tunisia’s Startup Act pioneered the culture of providing incentives for startup founders and employees. Its framework gives an eight-year tax break, salaries for founders in the first year of running the startup, one year of leave for employees looking to start a business, and exemptions from capital gains tax for investors.

Ghana, Rwanda, Ethiopia and Uganda were also among the first countries that announced talks about creating a Startup Act. But last year, Nigeria became the next to sign a Startup Act into law. This took them ahead of Kenya, whose parliament has approved its Startup Act since December 2021 but is still awaiting a presidential signature. Then in September 2022, the Democratic Republic of Congo followed suit, with President Felix Tshisekedi signing it into law.

Cote D’Ivoire, the most taxed nation, recently joined the bandwagon, announcing that a startup act is in the pipeline. And in its announcement, it mentioned studying Tunisia.

Why is this trend becoming so popular in Africa?

The easiest answer is that African tech has reached a fast-growth trajectory in recent years. There is more willingness among Africa’s young population to either start tech careers or businesses. At the same time, funding is pouring in like never before. So it was only necessary that lawmakers and regulators position themselves for this reality.

But the other, less discussed answer, is that Africa needs startup acts more than anyone else. Africa is not the only place where tech is popular. African countries don’t even rank among the world’s top ten nations for tech. Yet they seem to need this form of regulation the most.

What’s interesting is that startup acts are not so popular outside Africa. You are more likely to see it in “smaller” economies looking to foster growth. Laws that contain startup-friendly policies have been the norm, with notable examples in France, India, and Israel. But policy frameworks which specifically target high-growth startups are not many. Italy was the first country to enact a startup act in 2012, and it’s just one of three countries outside Africa to have done so. Others include Argentina (2017) and the Philippines (2019).

In Africa, businesses often have to compete with the market alongside external forces like policies and infrastructure, which, ordinarily, shouldn’t be too much of their business. There is also the problem of regulators playing catch-up with innovators, which can stall growth.

This brings us back to the evolution theory mentioned earlier. Convergent evolution occurs because different species face similar environmental pressures and constraints, and therefore evolve similar solutions to these challenges. That’s what we’re seeing across Africa. The problems, in most cases, are either the same or have a semblance. And seeing that Tunisia’s move led to an 80% increase (PDF) in revenue for startups signals that they might have figured out the answers.

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