Lateral Frontiers
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Lateral Frontiers

The mobile commerce land grab in Africa, MNO’s on the move and an African start up born from a Chinese manufacturing giant…

From our April 2019 newsletter issue. You can subscribe here.

Thoughts & Themes

  • Africa read through of Facebook double down on e-commerce and payments. All eyes were on San Jose as Facebook kicked off its annual F8 conference. We were intrigued with the companies renewed interest in e-commerce and payments, with Mark Zuckerberg announcing three key shopping features. How will this iteration of social commerce play out in Africa? New features will include Instagram influencer direct sales, merchant product catalog hosting and payments on Whatsapp with Facebook shipping support to merchants. This follows an announcement earlier this year of a checkout feature for Instagram and the multi country expansion of a payment feature that is already being used by 1 million users in India where Whatsapp has 300 million users. Whilst a partial pivot by Facebook to e-commerce and payments could be a boon for SME companies across Africa, where the informal economy comprises up to 80% of GDP in countries like Kenya, payment providers and banks now face a very different kind of rival. Payments continues to be a fragmented industry in Africa where banks and Mobile Network Operators (MNO’s) remain frenemies. The battle for the hearts and minds of African SME’s and their consumers took on a new dimension in April.
  • Leading African MNO’s reach for public liquidity. In April both MTN and Bharti Airtel announced plans for listings of their regional units. Africa’s leading wireless carrier MTN has converted its Nigerian unit into a public company, a preliminary step to a listing. The news follows hot on the heels of the successful IPO of Africa’s first unicorn Jumia last month. As the biggest investor in Jumia, MTN saw its share price gain almost 7% since the Jumia IPO, valuing the company at ~$14bn. We anticipate MTN will sell up to half their exposure in Jumia on lockup expiry. Separately Bharti Airtel, India’s second largest carrier announced that it’s African unit will be listed in London with expected proceeds of $1bn on a guided valuation of $5bn. As outlined by Safaricom CEO Bob Collimore the next chapter for MNO’s will require meaningful investment in digital consumer infrastructure.
  • An African Unicorn is born
    Few topics in the African technology industry have been generated as fierce a debate as the prospects of e-commerce leader Jumia. On it’s April 12th NYSE debut Jumia closed up ~75%. Online discussions since have unpacked similarities and differences to emerging market peers following Amazon and Alibaba including Latam leader Mercado Libre. Within the team at Lateral the debate is equally divided with the ‘long’ and ‘short’ cases made as the company reached a high at 3.5x the listing price and since pulling back 30% from the highs. Regardless of share price outlook, the milestone is significant for Africa’s technology sector. We outline the importance of Jumia’s focus on the long term enabling conditions that make Africa ripe for e-commerce in this thought piece.

Portfolio News

  • We are delighted to report that this month Koko Networks executed its long-awaited hard launch. The launch saw 700 KOKOpoint Fuel ATMs installed and turned on. KOKOpoints will be supported by 10 Shell fuel stations and bio-ethanol supply contracts with Kenyan, regional and international suppliers. The launch will place a Kokopoint within a short walk of all mass market homes in greater Nairobi. This will provide Network Coverage to approximately 5 million Kenyans. Congratulations to team Koko on this milestone after various product iterations and extensive testing of the platform.
  • SME business training and finance provider 4G Capital officially expanded their product offering from Kenya to Uganda. 4G Capital have commenced operations in Kampala, bringing much needed financial inclusion services to traders and small businesses. The company will be expanding its operations across Uganda and is hiring staff now. 4G Capital is also partnering with Ugandan based multinationals and distributors, to help boost and sustainably strengthen the FMCG supply chain. By providing short term credit to retailers, 4G Capital’s B2B product offering, KUZA aims to unlock potential and increases retail purchasing power.

What else caught our attention:

  • Atlas Mara and Equity Bank announce share swap: Equity Group Holdings (EGH) announced plans to acquire banking assets of Atlas Mara in four African countries in a share swap transaction. Equity Bank will acquire a 62% share of Banque Populaire du Rwanda Limited in Rwanda, and 100% of African Banking Corporation (ABC) in Zambia, Tanzania and Mozambique. The transaction is the result of a previously announced strategic review in which Atlas Mara stated it would focus on investments in core markets where a path to market leadership was clearly achievable and to partner elsewhere. The four countries mentioned contribute less than 2% of the group’s total net income
  • Lender in your pocket… During April mobile lending app Branch International raised $170 million in one of the largest Series C funding rounds raised by an African focused start-up. Branch collects data from users’ Android handsets including SMS and call logs, GPS information and contact lists. Machine learning is then utilized to assess creditworthiness and loan terms. First launched in Kenya, Branch now also operates in Tanzania, Nigeria, Mexico and India. It has processed 13 million loans, worth $350 million, for three million customers. The round was led by Visa and Foundation Capital and will see Branch implement Visa payment services into its platform.
  • Chinese Start up raises $20m in a bid to become the African Spotify: A 2019 trend highlighted in January is Chinese strategic investment into Africa based start-ups. This month Africa’s digital music service Boomplay Music announced it had raised a $20m Series A round to break into additional sub-Saharan countries and continue to build up its database of music tracks. Boomplay has an interesting origin story, the firm was founded by Transition Holding the manufacturer of Tecno, Infinix and Itel smartphones and is the biggest supplier of phones to the African market. Transition pre-loaded the app onto every Tecno smartphone and made it the default music player. The app now has 42 million users across Nigeria, Ghana, Kenya and Tanzania. and was voted Best African App by technology advisory firm AppsAfrica in 2017.

As always we welcome thoughts and feedback — get in touch

Samakab // Lateral Nairobi

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