Can African tech disrupt 2020’s gloomy investment outlook?

Evon Jeewan, a principal at investment banking firm Bravura. Photo: File

Evon Jeewan, a principal at investment banking firm Bravura. Photo: File

Published Dec 2, 2020


CAPE TOWN - It appears that the momentum in Africa’s tech sector in 2019 has continued unabated into 2020.

That’s according to Evon Jeewan, a corporate finance principal at investment banking firm Bravura, who also pointed out that investor interest in the untapped potential of African tech start-ups reached a high point last year.

Jeewan said African tech companies were, surprisingly, enjoying market impetus, and start-ups had fared reasonably well regardless of the coronavirus pandemic that has collapsed and constrained numerous sectors around the globe.

In July, SweepSouth, a South African company that connects domestic cleaners to cleaning assignments via an online platform, announced an undisclosed amount in venture capital investment from Futuregrowth, a Cape Town-based asset management firm. This followed the company’s successful R60-million (US$3.9 million) capital raise in December 2019.

In May this year, media giant Naspers invested R100 million in agritech business Aerobotics, and in August it committed to investing R1.4 billion in the next generation of local tech start-ups.

In the same month, Ventures Africa reported that Kenyan human resources tech company WorkPay had secured US$2.1 million in seed funding, Zambian clean energy company WidEnergy Africa had received an undisclosed amount from ShEquity, and Mali-based off-grid energy start-up Energy+ had secured US$1 million in grant, debt, equity financing and enterprise development services.

Forbes magazine reported that 311 African tech start-up companies had received investment in 2019 from 261 investors, which was a 61 percent increase from the number of investors in 2018.

The amount of investment provided to African tech start-ups in 2019 was noteworthy, with different reports suggesting a total investment of US$406 million, according to a report by media outlet Disrupt Africa, and around US$2 billion, according to a report by Silicon Valley-based Africa-focused fund Partech.

“Notwithstanding the variance in numbers largely due to the use of different methodologies, the important takeaway message is there appears to be consensus in the investment potential of African tech companies,” said Jeewan.

Fintech has long been regarded as representing attractive opportunities given its demonstrable force in shaping the structure of the continent’s finance industries.

Fintech in Africa occupies a niche, country-specific space. There is a growing appreciation that African-developed apps are proving better able to meet the unique needs of locals and their usage habits than those developed in Silicon Valley, according to Jeewan.

Fintech is less about disrupting the traditional financial services on the continent than it is about building up what is an underdeveloped market, where 66 percent of the adult population is still unbanked.

For example, mobile money service M-Pesa, which was launched in Kenya in 2007, has since expanded to 10 African countries. At the time, financial inclusion in the country stood at just 27 percent of the population. Today this has grown to 83 percent.

In West Africa, mobile money agents were 13 times more active in 2018 than the total number of bank branches and ATMs combined, according to the Mobile Economy West Africa report.

In the past few years there has been an increase in fintech start-ups that have begun to mature. The typical investor with a buyout focus (later-stage investment) is now beginning to eye earlier-stage investments due to the crowded space in later-stage investments, where there is arguably more capital available than there are good assets.

To avoid overpaying for assets, investors are beginning to look earlier into the curve where there are attractive companies and better valuations, albeit with a higher risk.

As the fintech space begins to overcrowd, investors with an eye on African tech are also exploring other opportunities. According to the co-founder of Disrupt Africa, Gabriella Mulligan, interest in the e-health space in Africa has accelerated in the past 19 months, with the Covid-19 pandemic highlighting the work being undertaken in the health-tech sector. Mulligan says that there are huge opportunities here to prove concepts, gain traction and achieve lasting change in health care.

African News Agency

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