Daily Archives: March 7, 2015

Separating Hype From Reality in the Fizzy World of Africa Start-Ups – VC4Africa Survey Findings [analysis]

It’s hard separating hype from reality in the current African start-up sector so it’s always good to get some facts to hang on to. VC4Africa’s latest annual study Venture Finance in Africa 2015 provides a useful look at a key part of this fizzy sector. Russell Southwood spoke to researcher Thomas Van Halen about what it all means.
VC4Africa is a site that promotes linking investors to African start-ups in that graveyard of all entrepreneur hopes, the so-called equity gap between US$50,000 and US$2 million. It has gone from being a rather unpromising looking LinkedIn group in Spring 2008 to becoming a significant investment “dating” mechanism.
Its annual survey is based on a survey of 1,300 entrepreneurs on its website platform, of whom a respectable 19.8% (257) responded to a questionnaire. It is as Van Halen puts it:”A nice snapshot of our target group … 80% of our members have IT related products and services. Farmers producing agricultural product won’t be on the platform.” The sample is fairly well balanced between companies in the start-up and growth stages: 57% of the ventures are in a startup phase where 43% are in a growth stage.
It represents a very useful description of the sharp-end of the African start-up sector. Their start-ups are spread across 16 areas (in declining order): Computer Software (24%), Internet (21%), E-Commerce (17%), Agribusiness (17%) Education (14%), Media (12%), Professional / Diversified Services, Health Services, Clean Technology, Financial Services, Food & Beverages, Renewable Energy, Telecommunications, Computer Hardware, Leisure, Transportation, Import/Export, Retail Construction and Real Estate.
This represents an impressively wide spread of industry sectors and the fact that e-commerce is in the top 3 shows that it is firmly on the agenda to happen in Africa. Thirty percent of the registered ventures have an explicit social mission and could be qualified as a social enterprise. This represents both the laudable desire to address the development issues of the continent but also the impact of donor funding. The cruel question is how many start-ups would address these issues if that money was not on the table?
So where are the biggest geographic clusters of start-ups?:”Most of the companies come from Kenya, Nigeria and South Africa but there’s a growing number of them from Ghana, Egypt, Tanzania and Uganda.” And what does Van Halen think are the conditions that produce these clusters?:”Culture? Incubators and accelerators? It’s a hard question to answer. More and more success stories lead to new angel investor groups in these areas and this (in turn) makes people want to work on new products. It happens by example.”
Leaving aside North Africa, this geographic distribution of countries almost perfectly mirrors a listing that combines highest GDP per capita and population size. On that basis, the missing countries in terms of number of start-up respondents are Angola, Ethiopia and Sudan.
Angola and Sudan might be explained by the impact of oil on the expectations of the young and relatively unsupportive Governments. Ethiopia is constrained by the hopelessly unsympathetic environment of Government policy and an inefficient telecoms monopoly which makes anything online difficult. For me one surprise is Zimbabwe (only 2 respondents) which seems rich in certain kinds of cultural and media start-ups but again start-ups there operate in a difficult economy.
But the unsaid thing is that the start-up clusters happen in economies that are large enough to have three things1) significant numbers of mobile broadband and internet users; 2) a middle class of some significant size; and 3) larger companies that might support B2B type applications.
Smaller countries that lack these things find it hard to create the soil in which to grow start-ups. From my recent visit to Mali, the interview I did with Rene Gaudin of co-working space Jokko Labs describes some of constraints for start-ups working without these things.
Fernando de Sousa, Microsoft (which is significantly involved in this space) identifies the difficulty of trading across countries as a significant barrier and by implication one that affects smaller countries disproportionately. It may only be just over an hour by plane to Dar es Salaam and Uganda but it always surprises me how many Kenyan start-ups stick to their home turf. And this happens in one of the better-organized African trading spaces, the East African Community. Likewise, too few South African start-ups go north.
In terms of jobs, survey respondent companies had created an average of 5.7 jobs per company with a total of 1011 by the end of 2013. The projected jobs by the end of 2015 was estimated at 4,176, over four times the current level. 70% of the companies have generated revenues but they were not asked about levels of profitability, something that should have occurred with the earlier respondents who have been around since 2010.
On the investment side, the survey showed that US$26.9 million had been raised through a combination of founders, internal and external capital. The responses seem to indicate that those who went through accelerators or attended accelerator events had raised significantly more capital.
So what did Van Halen think caused African start-ups to fail? This was not in the research but on an anecdotal basis, he felt that there was often something wrong with the team that sometimes led to conflicts with investors.
Another barrier is not understanding what’s involved in getting investment, something that VC4Africa was set up to overcome:”There’s a gap between the moment when the venture registers and when it’s ready. We are working with Orange and Citibank to raise the quality of ventures through virtual incubation programmes. We provide help to them to tell their story and write investor briefs.”
To know more about VC4 Africa programmes, click on the link.

Thabo Mbeki Bags Awolowo Leadership Award

Former South African president, Thabo Mbeki, yesterday at the Muson Centre, Lagos, bagged the 2014 Obafemi Awolowo Prize for Leadership Award for his contribution to the end of apartheid and the development of the southern African country.
The award was established last year by the Obafemi Awolowo Foundation to encourage, recognise, reward and celebrate excellence in leadership.
The executive director of the foundation, Dr. Olatokunbo Awolowo-Dosumu, in her welcome remarks, said Mbeki was recognised for his involvement in the anti-apartheid struggle from the age of 14 and the catalyst role he played in globalising the message until victory was achieved.
“He went to use his opportunity in high office to actualise core South Africans. Today, he remains a respected and credible voice globally,” Awolowo-Dosumu noted.
The former South African president, in his acceptance speech, acknowledged the role that Nigeria played in the struggle to end apartheid.
He however, added that he was “deeply pained by the needless diplomatic row between Nigeria and South Africa.”
He said: “This is not an occasion to address parochial issues of inter- state relations, however, I must say that I am personally pained when I heard or told stories of unnecessary petty conflicts between Nigeria and South Africa. Neither of our people nor Africa as a whole are enemies.”
Mbeki, who was accompanied by his wife, also said that he was inspired by the struggle for the independence of African countries by late Chief Obafemi Awolowo and other leaders.
“With all humility, I want to sincerely thank the foundation for honouring me. It is humbling to be associated with one of the greatest African leaders of the 20th century. We were very fortunate growing up in South Africa, as our liberation movement was exposed to the struggle elsewhere in the continent. We knew of Chief Awolowo and other African leaders who stood up to speak for the emancipation of our continent from colonial rulers,” Mbeki said.

Thabo Mbeki Wins Obafemi Awolowo Prize for Leadership

Former South African President, Thabo Mbeki, has called on African leaders to emulate the late sage, Obafemi Awolowo, and make themselves role models for the future generations of Africans who would help confront the challenges facing the continent.
Mr. Mbeki was speaking to an audience at the Muson Centre, Lagos, Friday after he was presented with the Obafemi Awolowo Prize for Leadership.
He said Mr. Awolowo was a “strong defender of the liberation of the African continent and a role model that inspired later generation as they aspire to build the Africa of our dreams”.
“We need change agents,” Mr. Mbeki said. “The Obafemi Awolowo of our day to nurture a million new Obafemi Awolowo. Awolowo came across as a leader of great integrity. He set himself as an exemplary leader. What we learned from Awo legacy will help us to confront our cotemporary challenges.”
Mr. Mbeki is the second recipient of the award after Nobel Laureate, Wole Soyinka.
“African leaders need to draw inspiration from former African leaders like Awo,” he said.
Mr. Mbeki said he has been “deeply pained” by recent diplomatic squabble between his country and Nigeria.
He said both countries should be united and help the African Union confront what he described as the new scramble for Africa.
“This is not an occasion to address parochial issues of inter- state relations,” he said. “However, I must say that I am deeply pained when I heard or told stories of unnecessary petty conflicts between Nigeria and South Africa. Neither of our people nor Africa as a whole are enemies.”
Narrating how he first came to Nigeria in 1971 as the first African National Congress, ANC, delegation to the country during the dark days of apartheid, he said his trip to Nigeria for the award was like homecoming to him.
He reminisced on his experience in Nigeria with famous people including Afrobeat legend, Fela Anikulapo-Kuti. He thanked Nigeria for providing shelter and for helping with the education of ANC activists during the apartheid era.
He said African countries should build strong institutions “to help overcome our problems and attain the progress that we seek”.
The Obafemi Awolowo Prize for Leadership is created by the Obafemi Awolowo Foundation in recognition of excellence in leadership.
The chairman of the Selection Committee of the awards, Emeka Anyaoku, former Commonwealth Secretary General, said after a rigorous selection process of nomination, Mr. Mbeki was the unanimously chosen by members of the committee as deserving of the award this year.
“I believe he was eminently qualified to receive the award because through his political career and in particular as president of South Africa he demonstrated those value of which Chief Obafemi Awolowo was known for: consistency, principled, integrity, respect for the rule of law and policies that look after the masses of the population,” he said.
“The legendary introduction of universal primary education by late Chief Obafemi Awolowo and in South Africa and Thabo Mbeki during his time as president of South Africa focused specially on empowering the black South Africans who had for generation denied the right of economic opportunity by the apartheid regime. Chief Awolowo in his various writings told us of the benefit of pan-Africanism and Thabo Mebiki himself is a great symbol of pan-Africanism.”
The executive director of the Obafemi Awolowo Foundation, Olatokunbo Awolowo-Dosumu, thanked Mr. Mbeki for his contribution for helping to dismantle apartheid. She said Mr. Mbeki started his anti-apartheid struggle at the age of 14.
“He went to use his opportunity in high office to actualise core South Africans. Today, he remains a respected and credible voice globally,” Mrs. Awolowo-Dosumu said.
Eminent Nigerians including President Goodluck Jonathan, who was represented by his Chief of Staff, Jones Oladehinde Arogbofa, former Head of State and Chairman of the event, General Abdul salami Abubakar, former Minister of State for Defence, Musiliu Obanikoro, a leader of the Niger Delta, Edwin Clark, former Ekiti State Governor, Kayode Fayemi, attended the event.

'African Solutions to African Problems'

FOREIGN Affairs Minister Simbarashe Mumbengegwi said Zimbabwe will advance the African cause and help find solutions to problems affecting the continent during its tenure as African Union chair. Officially opening the sadc Council of Ministers meeting in Harare yesterday, Minister Mumbengegwi said Harare remained committed to the furtherance of both regional and continental unity.
The Council of Ministers meeting sought to prepare an Industrialisation Strategy and Roadmap as directed by the sadc Heads of State Summit held in Victoria Falls last year.
The roadmap would be presented to the sadc Extra Ordinary Summit to be held in Harare next month.
In his address, Minister Mumbengegwi thanked sadc for supporting Zimbabwe’s African Union chairmanship bid in light of relentless and needless vilification of the country by the West.
“During our tenure, we will always put at the forefront, our guiding principle requiring us to provide African solutions to African problems, he said.
“We also remain committed to working with the region to further regional and continental unity and to advance our common cause on the broader international arena.
“Let me express my deep appreciation and gratitude, on behalf of His Excellency President Robert Gabriel Mugabe and the Government and people of Zimbabwe, to their Excellencies, Heads of State and Government of the sadc region and the people of sadc, for the honour and trust you bestowed on the Government and people of Zimbabwe and on President Mugabe by supporting Zimbabwe’s bid for the position of chairmanship of the African Union.
“We owe this honour to the invaluable support of our regional organisation, sadc, which has remained solidly in support of Zimbabwe even in the face of sustained efforts by some Western countries to discredit the country’s leadership and destroy her economy in an effort to achieve an illegal regime change in our country.”
Minister Mumbengegwi said he was happy with the peace prevailing in the region.
He hailed regional countries that recently conducted elections in line with sadc guidelines.
“Though there are still a few pockets of insecurity in sadc, I am very much encouraged by the level of political maturity that the region continues to exhibit,” he said.
“We pay tribute to the people of Botswana, Mozambique, Zambia and Lesotho for the smooth and peaceful elections held in those countries towards the end of last year and at the beginning of this year.”
He said the peaceful nature of the polls confirmed the existence of democratic principles in the region.
sadc Executive Secretary Dr Stergomena Lawrence Tax highlighted several developmental projects being undertaken under the auspices of the regional bloc.
“Within the framework of the Regional Infrastructure Development Master Plan, the Project Preparation Development Fund has been operationalised during the year, with one project being approved for grant financing, namely the Mozambique-Zimbabwe-South Africa Transmission Inter-connector, and seven more projects admitted in the pipeline and are being appraised,” she said.
“In addition, water supply and sanitation projects have been prepared, and the Zambezi Basin Commission was launched, hosted by the Government of Zimbabwe.
“In the area of ICT, commendable progress has been made with the roll out of Digital Terrestrial Migration equipment given the looming ITU switch-over deadline of June 17, 2015.”
She said food security in the region was expected to remain less during the 2015-16 marketing year due to poor rains in most parts of the region.

Investment Deals Top U.S $1,6 Billion

Investors are warming up to opportunities in the country and Government has so far entered into agreements worth approximately $1,6 billion, while others are in the pipeline as efforts to turnaround the economy gather momentum, Finance and Economic Development Minister Patrick Chinamasa said on Thursday.
Minister Chinamasa said this while responding to a question by Chegutu West legislator Cde Dexter Nduna on what Government was doing to attract investors from BRICS countries — Brazil, Russia, India, China and South Africa.
“The effective implementation of Zim-Asset depends on harnessing domestic and international institutions,” he said.
Minister Chinamasa said a number of agreements had already been signed with some institutions in the BRICS countries, among others.
He said the deals included $533 million for the Kariba South Hydro-Electricity expansion project, $154 million for the Victoria Falls Airport runway and terminal building, $218 for NetOne expansion, $100 million for medical equipment and $144 million for rehabilitating Harare water and sewer reticulation that have been secured from China Eximbank.
Minister Chinamasa said Russian investors had invested significantly in the Darwendale platinum project.
The others include, $98 million that has been secured from Brazil for agricultural equipment, $28,6 million for Deka Pump Station in Hwange and $294,2 million from the European Union, World Bank and African Development Bank.
Apart from the above deals, the minister said there were other ventures that were close to fruition and they included the Hwange Thermal Power Station Phase 7 and 8 expansion, rehabilitation of the Harare Thermal Power Station and joint venture agreements for the construction of Kunzvi Dam, dualisation of Beitbridge-Harare and Harare -Chirundu highways and the Batoka Hydro Electric project.
“The above measures are some of the measures that Government has put in place to ensure that Zim Asset succeeds. Government will put in place measures to attract bilateral and multilateral funding from BRICS countries or any other institutions to ensure the success of Zim Asset,” he said.
The minister said Cabinet had also approved the Joint Venture Bill that would regulate joint ventures that locals could enter into with foreign partners.
Minister Chinamasa said the visits by various business delegations from Europe and other parts of the world, was also testimony of the confidence investors had in the country.