Tech
Cryptocurrency Surprise! Ethereum Founder Vitalik Buterin Backs Zambia’s Bid to Become Africa’s Tech Hub
Zambia may be better known for copper mining than cryptocurrency, but a group of young entrepreneurs are trying to reinvent the country as an African tech hub, with the support of Ethereum co-creator Vitalik Buterin.
Startup founders from the southern African country and abroad are talking to the government about creating a regulatory and business environment that would attract more tech companies and capital. The group is hosting a conference in Lusaka, the capital, in May to hammer out detailed policy proposals that they say will see Zambia succeed where previous African tech hubs have faltered.
“Ultimately it’s about being welcoming,” said Mwiya Musokotwane, an early supporter of the project and the son of Finance Minister Situmbeko Musokotwane. “If the policy doesn’t really live up to the expectations of the people, there won’t be anyone.”
Buterin, who helped create the world’s second-largest cryptocurrency in 2013, expressed his support in a virtual meeting with Zambian President Hakainde Hichilema earlier this year. That followed a 2019 visit to the country as a guest of Mwiya, who wanted him to see a new charter city outside Lusaka that is also positioning itself to attract businesses.
“I was struck by the desire of everyone I met to do great things,” the cryptocurrency pioneer said in an interview.
The talks are another sign of Africa’s recent burgeoning role as a startup hotbed, particularly in the fintech and e-commerce sectors. Companies that provide financial services to the continent’s millions of unbanked but online people are attracting the attention of foreign investors, particularly from the United States, with African companies raising a record $5 billion in 2021.
Companies such as Nigerian payments firm Flutterwave Inc., whose latest $250 million fundraising round valued the company at more than $3 billion, are also interested in increasing their presence in Zambia, Mwiya Musokotwane said.
Campaign for employment
For Hichilema, attracting tech companies could be a way to deliver on one of his key campaign pledges: increasing employment. More than one in four Zambians under 24 have no income, according to data from the International Labour Organization, and the ratio has been worsening since 2013. The president’s commitment to solving the problem played a major role in his election victory in August after five previous failed attempts.
He has since created the Ministry of Technology and Science as part of an initiative to support the sector and help ease dependence on copper, which accounts for 75 percent of export earnings. The government is eager to consult with entrepreneurs on policies that appeal to the tech industry, including tax incentives, according to Jito Kayumba, Hichilema’s special assistant on economic and development affairs and a former director of Kukula Capital, which invests in young Zambian companies.
“We want to have a much more open approach,” Kayumba said in an interview from Lusaka. “You can’t milk a cow that is not fully developed.”
First to arrive
Perseus Mlambo, originally from neighboring Zimbabwe, was an early mover. He started the payments platform Zazu Africa Ltd. in Zambia five years ago, a business that now accounts for half of Mastercard Inc.’s transactions in the country.
Last year, it went on to raise $3 million from investors led by US fund Tiger Global LP for a new venture called Union54, a company that allows companies to issue their own debit cards without going through a bank. Tiger, the investment firm of billionaire Chase Coleman, has also backed Flutterwave and has been involved in talks about the Zambian hub.
“Copper is old and boring,” Mlambo said in an interview from Belluno, north of Venice, Italy. Governments “risk missing the proverbial boat by investing too much in mining and not enough in software. Technology uplifts multitudes and the barrier to entry is very, very low.”
But ultimately the success of the project will depend on legislation.
Zambia needs to improve the ease and cost of obtaining work permits, according to Wiza Jalakasi, a Malawian-born vice president of global developer relations at Chipper Cash, another Africa-focused fintech startup. And Mlambo said he’s been waiting for a residency permit to be approved since September.
However, the nation that has changed its ruling party three times in three decades already has progressive regulation of financial services, which makes it attractive, Jalakasi said.
“It’s not the biggest market in the region, but you can test things very easily,” he said. “It will only get better over time as these policies are implemented.”