I'm not too fond of forecasts partly because they are rarely accurate but mostly because many experts revel in their limelight. 20/20 vision of the future is impossible, given the complex business environment. But taking a shot won't hurt.
In 2020, globally, the digital economy is poised for dramatic changes on three fronts; 1) taxation, 2) valuation, and 3) growth. On taxation, the tenor was set in the year 2019 by Frances move to impose a 3% digital services tax on Big US tech companies, with a threat of retaliation in the form of higher tariffs on French exports to the US. Not surprisingly, Amazon cried foul, pointing out the element of “double taxation.” Google and Facebook levied similar outcries. This trend is gaining traction in Africa, with several governments considering the imposition of digital taxes on digital companies (Kenya, Uganda) absent any credible preferential treatments for small digital firms.
On valuation, WeWorks likely punctured a big hole in the “Unicorn bubble” with significant implications on the classic unicorn valuation model for the foreseeable future. In Africa, the abnormally quick withdrawal of Africa’s only Unicorn, Jumia, from some key emerging markets coupled with its disappointing performance, may portend slightly more difficulty in funding rounds for the tech startup scene on the continent.
Lastly, the two trendsetters, taxes, and valuation will significantly impact the growth of aspiring digital startup firms. For starters, taxes on digital advertising will likely degrade profit earnings and revenue models of many startup firms, especially those domiciled in Africa’s nascent digital innovation clusters. The amounts angel investors are willing to disburse in every financing round are based mostly on fast-growth strategies and how the startup leverages tech-based innovation to achieve fast-growth. The two, fast-growth strategies and tech-based innovation tend to be mutually exclusive. More so, Africa’s innovation in key digital cost drivers, logistics and overheads, hasn’t come of age. It is difficult to imagine “fast-growth” of the Jumia shade, without a dramatic drop in the delivery cost of goods to shoppers. Some watchers believe there is scope for consolidation in the global logistics industry.
2020 promises to be a more challenging year for the tech-startup scene. Twitter’s CEO, Jack Dorsey, has pledged to move to Africa. Maybe, his “star power” status will inject some energy into the tech startup scene. We will be watching it.
A Happy new year to you all.