Why We Remain Bullish About Africa

Last week I was privileged to deliver the keynote at TechCabal’s “Bullish on Africa” conference.

Besides the fact that it was such an ambitious event, I also got a chance to anchor a fireside chat with the insightful Amandla Ooko-Ombaka who authored the famous Mckinsey Report on “Tackling COVID-19 in Africa.”

The stark picture it paints is best summed up by the following excerpt:

“For Africa’s economies, the implications of these challenges are far-reaching. A slowdown in overall economic growth is already being felt, and this is acute in hard-hit sectors such as tourism. Many businesses, particularly SMEs, are under significant cost pressure and face potential closure and bankruptcy. That is likely to lead to widespread job losses. At the same time, the pandemic will impact productivity across many sectors. Closures of schools and universities could create longer-term human capital issues for African economies — and could disproportionately affect girls, many of whom may not return to school. Not least, the crisis is likely to reduce household expenditure and consumption significantly.”

In addition, anecdotes from various tech hubs regarding our hostile regulatory landscape and other bottlenecks have caused us to question our investment thesis at Ventures Platform.

Why should we keep investing in Africa?

Or more aptly, why did we recently announce investments in Tambua Health, FunnelJoy, and Brass?

When the Coronavirus hit earlier this year, it upended the global economy. As a consequence, less than two months later, with only 61 confirmed COVID-19 cases in Africa, the United Nations Economic Commission for Africa (UNECA) revised the continent’s growth projections downwards to 2%. Amandla’s report goes into even more detail of the impact of this growth contraction and the likely bleak economic scenarios with Nigeria, Kenya, and South Africa as case studies.

Now, before you blame it all on COVID-19, we should note that even before now, Africa has largely remained disconnected from global trade and opportunities, perhaps partly responsible for the slower rate of COVID-19 spread to the continent. Productivity remained low; infrastructure weak; systems mostly didn’t work and inefficiencies abounded with hundreds of millions of people unable to consume goods and services they otherwise needed — a concept aptly described as “non-consumption” in Efosa Ojomo’s Prosperity Paradox

This state of affairs is largely due to compounding effect of corruption, poor public institutions, as well as decades of underinvestment in critical growth drivers like education, infrastructure, and health.

Unsettling as this is, at Ventures Platform we believe that this makes a stronger case for investing in innovative digital startups. They may not be completely recession-proof but tend to be nimble enough to navigate new operating environments. In fact, they may benefit from a boost in user adoption and lower customer education costs as people find new ways to live, work, communicate and various sectors take their services online. We deeply believe in the long term potential the continent holds especially as innovators and entrepreneurs leverage innovation to build solutions and plug the gaps created by these poor public institutions.

Moreover, the way you get out of rot is by building.

This is why at Ventures Platform, we continue to invest early in mission-driven founders building capital-efficient platforms to democratize prosperity, plug infrastructural gaps, connect under-represented communities, create efficiencies, solve for non-consumption, and improve livelihoods. The companies we support have existing positive offline indicators, sustainable competitive advantage and are led by accountable founders, with the potential to generate $2million ARR in two years.

And so we will continue to invest in companies like Reliance HMO and MDaaS. We fund and support companies creating products and services that deliver healthcare to the last mile efficiently and affordably.

Millions of young people are unable to access services and goods that would improve their lives and finances, so we will fund companies like Trove and PiggyVest that are innovating around enabling wealth creation and targeting non-consumption.

Over the years, African governments have under-invested in infrastructure, a situation only worsened by endemic corruption. This is why we will fund companies like Send that aim to bridge infrastructural gaps and enable African companies efficiently participate in global commerce.

African innovation is grossly under-represented globally, this is why we invest in companies like FunnelJoy. Likewise, communities within Africa remain mostly offline and disconnected from critical financial services, as such we will invest in platforms like CrowdForce and Kudi.

Africa urgently needs to democratize prosperity, and companies like Paystack are building infrastructure for this with platforms like Thrive Agric helping thousands of farmers become more prosperous.

We will seek out companies that are capital-efficient, have a clear path to monetization, led by founders with a unique insight into the market, are mission-driven, and have a deep-rooted desire to win.

So going forward we are excited to partner with entrepreneurs building early-stage companies particularly in the following verticals;

1. Financial Services and Insurance — While we have had advancements in digital banking solutions, lending, money transfer, we expect to see a lot more advancement around wealth management, digital currencies, remittance, B2B oriented solutions such as Digital SMB banking, and insurance products that help people better manage uncertainty.
2. Life Science and Health Tech — We have a broken healthcare system, and as such, it has become increasingly difficult for everyday individuals to access and afford quality healthcare services. We are seeking companies transforming the way we diagnose health issues, access healthcare, pay for it, and experience it; companies providing tools that help healthcare providers become more efficient and cost-effective.
3. Edtech and Digital talent accelerators — Schools (Primary — Tertiary) need to be able to deliver classes, administer tests, gauge and track performance, engage the student community online. No single event should affect the delivery of education as severely as this has. As the revenue of companies dwindles globally, companies would seek new ways to reduce their cash burn whilst maintaining or improving outcomes. They would search for more cost-effective ways to deliver their products and services. This presents a huge opportunity for organizations providing skilled digital-native talent, as they can outsource this talent to companies across the world at a significantly lower cost.
4. Enterprise SaaS — Businesses of all sizes are increasingly looking to better manage their business process, sales, and teams. Companies that were not leveraging software tools before now, will begin to do so. Consequently, they will optimize their process, reduce burn, and massively increase productivity and revenue.
5. Digital Infrastructure Plays — Companies building digital rails and networks needed for the optimal operation of industries, enterprises, and more broadly speaking societies.
6. AgriTech and Food security — Africa needs to move towards food security and sustainability. We need to leverage data and technology to massively increase production, reduce waste, and improve the whole agricultural value chain.

If you are a mission-driven founder, building a capital-efficient business that democratizes prosperity, plugs infrastructural gaps, connects underrepresented communities, creates efficiencies, solves for non-consumption, and improves livelihoods, we would love to talk to you.