ChinAfrica, Missed opportunities and Silver linings
From our September 2019 newsletter issue. You can subscribe here.
Thoughts & Themes
In September, Quartz Africa provided a comprehensive update on China’s increasing influence in Africa in furtherance of its ambitious Belt and Road Initiative. “The story of China’s engagement in Africa in the 21st century lies at the nexus of ambition, pragmatism, and most importantly, convenience. In just over two decades, China has grown to become the biggest foreign player on the continent. It is now Africa’s largest trade partner, its largest infrastructure funder, and its fastest-growing source of foreign direct investment, pledging $60 billion in 2018 versus just $5 billion in 2006.”
Arguably the most important recent Chinese presence are technology providers including Transsion Holdings, maker of Africa’s most popular low cost smartphone, ZTE and Huawei, “brought together under the “Digital Silk Road” umbrella, which Chinese officials have said will create “a community of common destiny in cyberspace.” The plan is to bring advanced IT infrastructure to BRI nations by investing in broadband networks, smart cities, artificial intelligence, e-commerce hubs, and cloud computing.”
As part of its increased focus on Africa, the Alibaba Group recently hosted its fourth cohort of African founders for its business training eFounders Initiative in Hangzhou, China and has launched a four-year training program for Rwandan students to learn cross-border e-commerce. In pursuit of the diamond in the rough, the business is set to deploy its first $1m of $10m dollar Netpreneur Prize. The Prize will see US$10 million being distributed to 100 entrepreneurs over the next 10 years.
Over the last two quarters we have seen interest in early stage companies grow out of both peer Chinese venture funds with strategic objectives aligned with Shenzen, and companies bringing the Chinese model of the virtuous consumer wallet combining mobility, payments and ecommerce as seen by Opera’s “O-“ products and services in Lagos. Our Managing Partners will be in China in Q4 and welcome the opportunity to connect with any China-Africa participants in your networks.
Japan is increasingly seeing Africa as an attractive investment destination and positioning itself as an alternative to Chinese capital and influence. “Tokyo is focusing on its core strengths by funding partnerships aimed at boosting technological innovation, industrialization, impact investment, institutional building, and climate change adaptation” reports Quartz Africa. At the Tokyo International Conference for African Development (TICAD), Prime Minister, Shinzo Abe pledged $20bn of investment to the African continent over the next three years. Recent years has seen an uptick in Japanese early stage investments. “Last year, car maker Toyota invested $2 million in Kenyan logistics firm Sendy while Sumitomo Corporation invested in the Nairobi-headquartered pay-as-you-go solar firm M-Kopa. Japanese insurance firm Sompo Holdings financed payment platform BitPesa, while Nigerian motorcycle app Max raised $7 million from Japanese motorcycle manufacturer Yamaha. In late August, automaker Mitsubishi also announced $50 million to enable the Africa-focused off-grid solar firm BBOXX to expand into Asia.” reports Quartz Africa. Japan’s strategy to counteract China’s overwhelming public sector influence in Africa with its private sector investment focus will be welcomed in an ecosystem in need of partnerships and innovation.
OPIC 2.0 launch:
The US International Development Finance Corporation (DFC) goes live in October with an investment budget of $60bn, of which a majority is expected to be deployed in Africa. The final board meeting of predecessor OPIC took place last week marking the end of its 50 year legacy. For a refresher of our expectations for this initiative, see our thoughts outlined in this Op Ed.
Portfolio and Lateral news:
Our portfolio companies chasing expansion with Workstyle, has launched its new coworking location in Nairobi and KOKO Networks is expanding its fuel distribution across the region in partnership with Vivo Energy. Greg Murray, CEO KOKO Networks, spoke to CNBC Africa on the WEF side-lines on this partnership.
Sparkmeter has launched Koios, it’s new cloud-based grid management platform that provides a single endpoint for managing an entire portfolio of sites. The launch of Koios reaffirms SparkMeter’s position as the ultimate plug-and-play grid management solution for emerging market microgrids and distributed utilities.
Our very own Samakab Hashi who leads Lateral Capital East Africa, partnered with Briter Bridges to develop the State of Logistics Tech in Africa report. The report, made possible by interactions with over 40 key startups in the logistics-tech sector as well as extensive primary research, investigates the role of up-and-coming logistics companies in the region and explores the dynamics between contextual challenges and innovation.
What else caught our attention:
Silver lining or fly in the ointment? In a major business overhaul, Andela is ending its widely acclaimed software developer training program that outsourced talent to predominantly US based clients to focus on recruiting and supplying experienced developers for customers. “As the talent world has evolved, we have as well,” said Johnson, CEO of Andela. According to him, the rise of developer training schools like Lambda and Flatiron in the US is reducing the training period for developers. “It has also become clear that majority of the demand is for more experienced talent. This shift in demand also means that we now have more junior talent than we are able to place.” he said. Andela’s pivot from a developer training business to a pure HR outsourcing business, has resulted in the unfortunate retrenchment of over 400 junior engineers across Nigeria, Uganda and Kenya. The sudden availability of this talent pool is welcomed by the local ecosystem and at Lateral we are actively considering avenues to engaging these engineers. However this elation may be short lived as Andela targets more experienced talent for export. “We’re actually actively and intensely growing the mid and senior developer populations” with a target to hire an estimated 700 senior developers by the end of 2020.
The best laid plans: On the heels of the signing of the Africa Continental Free Trade Agreement (AfCFTA) by all 54 members of the African Union, South Africa was set to host the WEF with a focus on ‘Shaping inclusive growth and shared futures in the fourth industrial revolution’. Such summits give the continent rare opportunities to collaborate on strategies to unlock the continent’s potential. However, the agenda was redirected following protests and xenophobic attacks and diplomatic tensions.
Despite the unfortunate circumstances, one of the more positive highlights of the conference was the launch of the Africa Growth Platform which is aimed at helping start-up businesses access finance, advice and better regulatory conditions to enable them to compete effectively in international markets. The platform seeks to secure commitments from governments to implement policy reforms aimed at stimulating and accelerating business growth. Founding members are Alibaba Group, A. T. Kearney, Dalberg Group, Export Trading Group, U.S. African Development Foundation and Zenith Bank
As always we welcome thoughts and feedback — get in touch
Ochuwa // Lateral Lagos