Lateral Frontiers
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Lateral Frontiers

East or West?

From our December 2020 newsletter issue. You can subscribe here.

As we approach the end of 2020, an increasingly diverse group of global tech investors and companies are continuing to demonstrate an interest in Africa’s burgeoning tech scene particularly from Silicon Valley and China.

This month Jeff Bezos, joined Silicon Valley alumni such as Facebook’s Mark Zuckerberg, Twitter’s Jack Dorsey, and Google CEO Sundar Pichai, by making his first tech investment on the continent with Bezos Expeditions — leading Chipper Cash’s $30m Series B round. This of course follows last month’s landmark acquisition of Paystack by Stripe,
We continue to see Chinese strategic players double down on their exposure. This month fintech Opay, which is 13.1% owned by Opera announced in their Q3 statement that they are looking to expand across multiple African countries. This renewed ambition comes off the back of some impressive growth numbers. In October, OPay processed a gross transaction value of $1.4 billion on its platform more than three times the level in January.
Huawei the Chinese telecom giant has also just announced a move into the African fintech space by partnering with mobile platform fintech company Zapper to launch Huawei pay. With Huawei Pay, consumers will be able to add bank cards to the app and then pay in stores simply by scanning the Zapper QR Payment Code on the bill when they check out. Given Huawei’s strong market share on the continent, it will be interesting to see which other fintech’s Huawei will partner with across other markets and if they can add other payment rails such as mobile money.

These moves come on the heels of the Forum on China-Africa Cooperation (FOCAC) celebrating 20 years of collaboration. Chinese foreign minister Wang-Yi said that “China has contributed over 20% to Africa’s growth over a number of years”.

Direct Chinese investment in Africa has grown 100 times since 2000, standing at close to $50 billion in 2019, and China-Africa trade reaching $208.7 billion in 2019.

As we go into 2021, it will be interesting to see which nexus shapes the African tech ecosystem, Silicon Valley, or Shanghai.

Remittances Boom during Covid

At the outset of Covid-19 in March, the World Bank predicted that remittances to poorer countries would drop by 20% as a consequence of the economic downturn. However, in terms of digital remittance, the opposite has happened as remittance companies’ digital dividends paid off with a rush to online services. Data shows a huge upsurge in digital remittances to Africa, with Kenya’s 2020 August numbers 6.5% higher year on year and inflows to Zimbabwe were up 33% through July.

With informal forms of remittances such as the use of traders, bus drivers, and travelers to send money home ceased due to Covid-19, the diaspora had to turn to digital platforms as their only alternative, causing remittance flows to rise. African central banks then further reinforced the value of these platforms by reducing fees and loosening limits on digital transactions.

Increased Government Intervention in Telco’s

These past few weeks we have seen governments become increasingly interventionist. The Kenyan senate have reignited antitrust investigations into Safaricom as they want the company’s telecommunications and mobile money arms to be split into two. The telco giant has been accused of cornering the market with one Kenyan senator stating , “you have a situation where one single player dictates how much you are going to pay for data bundles, for calls and Short Message Service because it controls almost 90 percent of the market”. If the move does pull through, it would see Safaricom lose 30% of their revenue -which is attributable to Mpesa- and would see their monopoly on the telco and fintech markets in the region loosen.

In other recent news, the Ghanaian government agreed to buyout 100% of Airtel Tigo’s shares, plus its customers, assets, and agreed liabilities in a deal worth a reported $25m. This move was a result of the government looking to protect jobs in the telecom industry after Airtel failed to capture market share from the dominant MTN who control 57% of the market as well as leading the country’s mobile money sector.

Portfolio News

We have 3 new investments!

  • SeamlessHR Lateral is proud to announce that we have successfully closed and led a financing round in SeamlessHR. SeamlessHR is looking to build “Workday for Africa” by providing end-to-end HR solutions for medium- to large-enterprises.
    More information can be found here.
  • Autochek — Lateral was the first institutional VC to write a check in Autochek’s $3.4m pre-seed round in November. The company is looking to transform the automotive buying experience for consumers with an asset-light & technology-driven solution delivering value to every stakeholder in the automotive value chain.
    More information can be found here.
  • Kountable is a global trade and technology platform that delivers trust, transparency and auditability with data driven insights and real-time information from transactions where small and medium sized enterprises (SME’s) work with enterprise level suppliers and buyers. Lateral has committed to leading Kountable’s Series A-1 round and is also extending a line of credit credit to scale up their SME financing activities. These new investments take our total portfolio to 17 market leading start ups and scale-ups.

Follow-on Investment

  • Koko Networks — Koko is closing off 2020 by going from strength to strength. After selling its 50,000th cooker kit in Nairobi at the back end of Q3, Koko closed their Series B round in November.

Other Portfolio News

  • Medsaf — is entering the healthcare data space to bridge the gap caused by a lack of sophisticated data capture in the medical industry. Medsaf will look to monetize the data they have collected by reducing costs, increasing efficiency, and eventually additional revenue streams.
  • Workstyle — Opening a brand new shared workspace a few months before the emergence of the coronavirus might not be the most fortuitous timing, however, we are delighted to say that the Workstyle team has successfully navigated these choppy waters.
    After seeing occupancy dwindle at the onset of Covid, Workstyle has now seen their occupancy number rise above their pre-pandemic levels and are close to full capacity. Management is now planning an expansion strategy to exploit the new demand.
  • Portfolio Dinner — We would like to thank founders and team members from a cross-section of our Kenyan-based portfolio as well as some DFI’s for attending our annual portfolio dinner on 1st December. Companies in attendance were Lipa Later, Lynk, Workstyle, Sparkmeter, Pngme, and Kountable. The DFI’s present included Proparco, DEG, and Capria.

As always — thoughts welcome, please get in touch, and Happy Holidays!

// Samakab Hashi and Shreyas Mishra in Nairobi

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