The Africa SMME Tech Report
Issue No. 71. Africa-Middle East SME tech news and insights for 29 March 2024.
This edition of the Africa SMME Tech Report newsletter is presented by Realm Digital
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The Africa-Middle East News Digest
SMME Tech News for 29th March 2024
Editor’s note: We will devote the next several editions of this newsletter to sharing some of the best content from the recent BigFive Summit in Cape Town. First, we recap a panel on the outlook for venture investing in Africa on 18th March at Innovation City Cape Town. The panel was part of an opening networking event for the Summit, which unfolded over the following two days at the Radisson Blu Waterfront Hotel.
Justified Optimism on Africa Tech Investing?
On the eve of last week’s BigFive Summit in Cape Town, a high-powered panel of VCs and African tech founders gathered to answer one simple question. As we move deeper into 2024, should we be optimistic that there will be a better environment for African startups raising capital?
Broadly, the answer was “Yes”. But the panelists had a lot more to say about what is good, bad, and in between about the current equity funding environment.
“We are seeing that, even in a difficult environment, people are starting to invest,” said Launch Africa Ventures partner Janade Du Plessis.
“There's been a lot of investment already in Q1 of this year. So I'm quite optimistic that even in a challenging environment, we are now learning how to do deals.”
Du Plessis made a point similar to one that his co-panelist Savant Venture Fund GP Thaheer Mullins made on a recent episode of the Big5D Podcast. And the point is that many fund managers are sitting on money they need to put to work. This creates pressure for dollars to move off of the sidelines. Which is potentially good news for startups raising money this year. Assuming they have traction, product-market fit, etc. The bar for startups has been raised during the extended “funding winter” Africa — the world — has been experiencing.
Another key theme to the discussion involved the notion of “capital tourism” — or the prevalence of foreign capital in Africa and its contribution to the steep dropoff in equity funding from 2020 to 2023. Du Plessis said that from 2020 through last year, equity investment in African startups fell from around $6 billion to around $3.9 billion.
Du Plessis raised this issue early in the discussion.
“Of that $6 billion [raised in 2020], 75% of that was global capital,” Du Plessis said. “So we see a lot of what I call ‘capital tourism’. People come to Africa, and they say, ‘Oh, I see it's the final frontier…I think it's probably worth exploring a little bit.”
The challenge with global capital "tourism” in Africa is that most of the global investors make one or two investments and then move on. Du Plessis said a global investor ceases to be a tourist after around four investments.
Mullins had a tougher definition.
“If I were to define what is not a tourist, it would be a fund manager who has a headquarters or an operation on the continent,” Mullins said.
The panel was in general agreement that the “tourism” point underscores the need for more Africa-based investors to create a sustainable environment to fund startups on the continent. And the panel agreed there are signs of this emerging.
One area of agreement was that large exits (e.g., Stripe’s 2020 acquisition of Paystack for $200 million) that create liquid wealth for founders who then invest in startups via family offices and so on is one path to more home-grown tech investing. But the analysts pointed out it is not the only path.
Meghan McCormick, the Co-founder and CEO of Ghanaian fintech startup Oze, which also operates in Nigeria, said she has seen in the past few years African founders who raised cash through secondary offers, often investing at the seed stage in startups.
“I don't think we need the big exits to make that happen,” McCormick said “But I'm excited for more exits, come to see the multiplier effect.”
You can listen to the full panel here:
Or you can watch the discussion on YouTube here:
Found on LinkedIn
We found the following chart on LinkedIn (courtesy of Axel Peyriere) which summarizes the recent GSMA report on the State of the Industry Report on Mobile Money in 2024. You can view the report here.
The Reader Poll Question
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Latest Reader Poll Result
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