By Nnamdi Odumody
The Emirate of Abu Dhabi has launched ‘’Hub71’’, a 520 million AE Dirham ($142million) initiative by His Highness Sheikh Khalid Bin Mohammed Bin Zayed Al Nahyan, a member of the Abu Dhabi Executive Council and Chairman of the Executive Committee. Also, a 535 million AE Dirham ($146million) fund will invest in technology businesses established in Hub71, bringing the total government investment in the Abu Dhabi tech sector to 1 billion AE Dirham.
Hub 71 was established by the Abu Dhabi government to transform it from its hydrocarbon economic dependent status to a destination of technology innovation, in collaboration with global technology giants like Microsoft and IBM. It is a key initiative of Ghadan 21, the government economic accelerator programme in line with the UAE Vision 2021.
’’Innovation, research, science and technology will form the pillars of a knowledge based, highly productive and competitive economy driven by entrepreneurs in a business friendly environment where public and private sector form effective partnerships. We want all Emiratis to make a valuable contribution to their nation’s growth by building their knowledge and applying their talent with innovation and drive’’ outlined by Sheikh Mohammed Bin Rashid Al Maktoum, Prime Minister of the UAE and Emir of Dubai.
The plan is to make the United Arab Emirates, the most innovative Arab country, with an estimated investment of 14 billion AE Dirhams in Innovation, 7 billion of which is allocated for Research and Development, to become an innovation-driven economic power like the Asian Tigers, Switzerland, Sweden, Denmark, and Germany.
From April 28th 2019, the 535 million AE Dirham fund will co-invest with VCs in Hub71-based tech startups through a government matching scheme, as well as, invest in first-time fund managers to support their establishments and growth in the Emirate. Hub 71 will also offer fully subsidized housing, office space and health insurance for seed stage tech companies, while 50 percent subsidy packages will be available for more established tech ventures.
The three pillars which will ensure the success of Abu Dhabi’s tech ecosystem – capital, business enablers and strategic partnerships – will come together in a triple helix courtesy of Hub71. Its partners include Mubadala Investment Company, Microsoft and Softbank Vision Fund, and will work with the Abu Dhabi Global Market on the initiative.
Abu Dhabi currently offers a two-year startup license for $700 which includes visa for up to four employees and has no office space requirements. In Africa, with the exception of Rwanda and Mauritius, there are no state-led initiatives to boost technology innovation in their economies with incentives to attract entrepreneurial talent from across the globe.
Nigeria, an oil rich country like the UAE, has lessons to learn in economic diversification through investment in creating an innovation ecosystem. A roadmap had already been shared by Tekedia on possible way forward.
To create such enablers in Nigeria, I propose the following specifically for the VC sector:
Government should offer new VC (venture capital) firms in Nigeria a ten year tax incentive on profits if they have asset base of at least $50 million and will deploy the capital in Nigerian startups within 10 years.
Offer new VC firms in Nigeria the opportunity to repatriate 100% of profit within ten years. That will help the country to attract foreign investors to make Nigeria home.
If we have this type of incentive, we will see many VC funds making Nigeria home to explore opportunities in Nigeria and continental Africa. That influx of capital will have many multiples of benefits to our economy, our people, and the Nigerian technology space. Most especially our tech firms will stay home.
Yes, we have a tax problem but the VC industry is not going to fix that for us since it is not one of the areas where we have been unable to appropriately collect taxes. There is no tax avoidance in the sector because none exists at the moment in the VC sector. The goal of this incentive is to explore how to deepen our capabilities to ensure that future companies are created in Nigeria. Our Vice President has been working on improving the business ecosystem in Nigeria; making it easier for startups to receive capital would go a long way. A new tax regime for investors, especially at the early stages, would be strategic for the nation.