Shimeles Gebremedhin CEO, eTech
As Ethiopia prepares for increased digitalization, a slow increase in investment in innovation and technology is evident. Being the first digital company to ever go public in Ethiopia, eTech is working where public awareness towards the use of technology is still inching forward. Yet, the startup has managed to involve more than 525 shareholders to raise ETB200 million in paid-up and pledged capital. EBR’s Addisu Deresse talks to Shimeles Gebremedhin, CEO of eTech, about the challenges and prospects facing his company and the sector in general.
How was eTech conceived and realized?
The initial idea to establish eTech was conceived on May 16, 2020, but it was legally registered on September 15, 2020. At the time, the world was in a Covid-19-induced lockdown. Ethiopian IT experts were gathered to discuss how we can assist businesses that had been impacted by the pandemic. A group of ten technology experts came up with the idea of using crowd funding [to raise the start-up capital needed to establish the tech-company] and we raised about 75 million in paid-up capital. We floated 20Pct of an ETB1 billion dream capital which we envisioned. And it took roughly two months to raise ETB75 million of that, which was enough to start with.
Our main goal is to provide end-to-end technology solutions. We discovered during our feasibility study that most private ICT companies of the past 15 years have not been successful. So, we went public at Skylight Hotel on January 14, 2020 to involve as many local and diaspora Ethiopians as possible. During this launching, we got well-deserved attention from the then Minister of Technology and Innovation as well as from the Information Network Security Agency (INSA).
Tell us more about eTech’s business model?
eTech is a pioneer technology company to go public. It plans to engage in businesses beyond borders. Going public requires building a circle of trust for not only raising finance but also involving experts in that particular endeavor. For an ICT company, going public is highly advisable as it can also be a source of foreign currency. There is no large ICT company in Ethiopia that has the capacity to compete in international bids or even for local projects whose budget sometimes goes into millions of dollars.
How much is the company worth right now?
Now, eTech has over 500 shareholders. It floated ETB200 million share units, of which ETB75 million has already been raised. Some foreign investors were interested to invest in our company. We believe Ethiopian companies should first get stronger financially and professionally before opening up the sector to foreign investors. We believe that professionals in the sector must also be owners of the business.
It has been a year now since your company was launched, what have you achieved thus far?
For eTech, 2020/2021 has been a year of laying foundations. Besides registering profit within the first year, our company has undertaken an ambitious range of strategic preparations, and decisions that are transforming eTech in every dimension. We have been collecting as much information as possible to penetrate into the market.
We have been actively working on software development and infrastructure implementation projects. We have a competitive advantage in these two sectors. We have developed electronic health management solution (eHMS), electronic share management system (eShare), electronic voucher distribution system (eEVD), credit & saving portal (eKuteba), and an enterprise resource management (ERP) system solutions that has a high demand in Ethiopia.
Fintech and e-commerce is the other area that we are emphasizing and want to promote to the public in the next few months. We will shortly introduce two new e-commerce platforms, eNiged and Discount System, which we plan to avail to the public soon.
We have also started our own core banking solution with our credit and saving portal and microfinance system. We intend to develop similar solutions that will streamline the complete business process of any organization. Our main goal is to develop solutions that suit Ethiopians’ needs while lowering costs and avoiding purchases in foreign currency. Thus far, we’ve developed six essential platforms that can be used by companies. We’re expecting to release additional offerings this month. As for infrastructure, given that it is the backbone of the technology sector, we are currently working on a large project that will provide a data center and network implementation.
Since cyber security knowledge of the public and hands-on experience in the market are limited, our cyber security department is working to raise public awareness and empower experts with our networks abroad.
Your company’s goals will overlap with the financial sector which is criticized as seriously lacking innovation. What role could you play to bridge that gap? Why is there a dearth of innovation in the financial sector?
Ethiopian banks have a history of adopting technologies from overseas. Innovation is not always creating something new. Modifying an existing technology to adhere to local culture, language, and norms is also innovation. The banking industry has a huge demand for IT products and services, but the old habit of acquiring foreign products and services has created a gap. Hence, our products are developed based on other countries’ banking rules and principles. This raises the challenge of compatibility and customization.
Building fintech products is not as easy a job as developing other solutions as it requires tangible experience, exposure, practice, and strong security. To bring innovation that is practically helpful for the industry, the central bank should also give priority to local developers.
Cyber security is now the new front for competition among nations as well as a soft spot for infiltration. Ethiopia is opening the telecom sector and other previously closed-off areas to foreign investment. Are we prepared for the risks?
The liberalization of the telecom sector to foreign investors has its own advantages in terms of improving service quality, technology transfer, and generation of foreign currency. However, it also brings security issues. Cybercrime is even a threat to well-developed nations who have worked and invested in the endeavor a lot more than us. I strongly advise the government give unfettered attention to the matter and educate the public on how to use technology safely.
The startup ecosystem is still in its infancy in Ethiopia. Startups with promising potential still have miniscule access to finance. What do you think is the role of eTech-type companies in creating horizontal collaboration with startups to better utilize potential at the grassroots level?
The younger generation has a creative attitude but a limited grasp of business logic and finance. Considering this, eTech has established a framework of interaction that allows it to maintain well-managed, legally enforceable, and highly effective relationships with individuals and institutions. The framework will aid in the identification of areas for collaboration as well as the development of legal and operational elements for their implementation. This will also aid in the expansion of our services in other continents.
Any talent that identifies with eTech’s goal and vision is addressed by our engagement and partnership model. This mentality and approach of collaboration comes from those with extensive business expertise and a track record of accomplishment. This year, we’ve set aside a budget of ETB85 million to develop a platform that brings together innovative minds and financing agents. We began this initiative by offering recent graduates the opportunity to develop their creative abilities.
Outsourced government projects act as a springboard and catalyst for tech companies to take off. How do you evaluate the government’s tradition of outsourcing and collaborating with companies like eTech?
Public institutions do not have a choice other than outsourcing tech projects. If they dare to do it themselves, they would miss their core objectives because it’s not their prime competence. It is natural for these institutions to outsource innovation and technology projects to tech companies while they focus on their primary objectives. In the US, almost all big public projects are outsourced.
Whenever projects are outsourced to foreign companies, public institutions must be careful to decide on the manner in which data is provided. Also, the capacity of companies must be vetted when outsourcing projects. Sometimes, local companies with limited potential are awarded big projects who then struggle to deliver. This then gives weight to the misconceived argument that local firms should not generally be outsourced to.
Of course, working together with the public sector is the only way to ensure the achievement of the goals we set earlier. Improving the nation’s transport, health, and food systems is part of our social responsibility. Participating in public projects has a value of great significance.
Social media is becoming both a place for business and a source of national security threats. Recently, the government vowed to launch its own social media platform. Is that achievable?
Social media is an opportunity. As it stands right now, if Ethiopia is going to embark on developing its own social media platform, we need to make sure it will not be another platform to spread hate along ethnic, religious, and political lines as well as against minorities. We also have to make sure this platform will penetrate into the global community. Chinese platforms, for example, are being used elsewhere. Similarly, Telegram, the Russia-made platform is globally popular. If Ethiopia can develop something that spreads globally, I would consider that a rebirth for this nation.
The technology behind developing a social media platform is not that sophisticated. It doesn’t require new innovations and is doable. We can just copy the platform and customize it. But, we have to make sure if this actually is something we want to do at this point in time. If not social media, we can at least work on localizing our email platforms. We can take China’s long path, which went through a series of small steps before launching.
We shouldn’t rely on foreign platforms. What we have seen with the #NoMore movement, the fact that these voices are being silenced on Twitter and other platforms tells you that we cannot pursue our interests on platforms owned by foreigners. These innovations should also be supported by a prudent policy. China disallowed Facebook through policy.
We are all responsible towards this. The government has the responsibility to design a policy to govern the sector. Private sector actors, like us, might help in developing platforms and then citizens will need to support what’s made in Ethiopia after launching.
The Ethiopian government seems to be championing the idea of a more digitalized society in terms of financial transactions and other public services. Is that practical in a society with minimal digital literacy?
It is an issue, of course. But when you see the young boys and girls, it’s clear that it is about to change sooner than later. The older generations are not less aware of technology, but rather they underestimate its advantage. It is more of the lack of satisfaction than of awareness. The current generation, on the other hand, is highly tech-oriented. So, the challenge is bridging that gap for full-scale digitalization.
Educating the public on the advantages of tech-based services should be a high priority. Take the banking sector, for example, they introduce lots of tech-based services. But, they don’t teach the public about the technology. They must invest in public education platforms first. They simply bring internet and mobile banking and just drop them on the public with little or no investment in familiarization. In parts of the world with highly-developed innovation and technology experience, investment in public education happens to a great extent.
This investment by the financial sector in educating the public will encourage increased financial inclusion which is to the benefit of the banks themselves. The public cannot use what it does not recognize.
The government should bring digitalization to the center of every conversation. It must enforce the use of technology with the right policy. No doubt, the public will catch up to tech-based services. Ethiopians in other parts of the world effectively use technology to better serve themselves.
Do you envision a digitalized Ethiopia soon or later?
I have high hopes that a digitalized Ethiopia will be realized sooner than you think. Ethiopia has gone ten years ahead in just the last three years alone. If we can keep the momentum, it will happen sooner. Sometimes, digitalization can just happen in an instance, like what happened during Covid-19. We have seen public offices managing their meetings and trainings using tech-based platforms. These are the same institutions that had very little, if any, prior relation with technology. Thus, technological advancement might happen overnight.
As CEO of a company that has invested heavily with high hopes and is facing current challenges, do you fear additional obstructions?
The issue of instability was one of the challenges we considered upon establishment. We have put the socio-political landscape as a factor in both the establishment and success of our company. It was a pandemic season when we were preparing to establish the company which gave us the opportunity to consider many possible challenges that we could face going forward. But, we were committed to not be held back by challenges. We are aware of the socio-economic challenges; we are also well aware of the opportunities that come with the pandemic and the government’s attention to innovation and technology.
eTech services will not be limited in Ethiopia. We are currently working to open a branch office in the US and plan to provide software development services overseas. We hope this will bring jobs to Ethiopia through enterprises searching for cheap outsourced services.
As I look into the future, I see more opportunities than challenges.
We see innovative young Ethiopians trying make a mark in the digital world. What do you advise those startups?
Technology is a blessing. A person with a laptop and an internet connection can change a lot. But, technology needs patience. The first thing I would advise young technologists is to be patient and look at things in a different way. Also, once the innovative ideas are conceived, they don’t need to implement them by themselves only.
There are a lot of ideas that don’t leave people’s laptops because the owners don’t go out and look for support. People hide their ideas for so long that they become obsolete or other people come out of nowhere to implement them. They also need to understand that being a successful technologist doesn’t correlate to success in the business world. Business and technology need two separate mindsets. They have to consider collaborating with people in the business world to fully materialize their ideas.
Tech businesses are not capital intensive. You can achieve a lot with limited resources. So young people with the right set of skills and mindset can sell their services and ideas from their home to the rest of the world. EBR
10th Year • Jan 2022 • No. 103