Africa Tech Summit London - Herman Singh, MTN On Africa's Largest E-Commerce Start-Up and Others On Over-Priced Deals, the Missing Exits and Just Surviving

Last week was Africa Tech Summit London that saw some of Africa's most active start-up investors and experienced start-ups gather in one place. Russell Southwood reports on who said what.

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Two occasions stand out in the now busy Africa start-ups events itinerary: Africa Tech Summit London and Afrobytes in Paris (7-8 June). Neither are in Africa but they are two of the most concentrated gatherings of investors and African start-ups that have been invested in.

But why in London and Paris? Shouldn't these kinds of events be happening in say Lagos, Kigali or Nairobi? As it happens, Africa Tech Summit did its event in Kigali earlier this year and plans to repeat it. But the central truth is that it's extremely difficult to gather people from across the continent in a single place. Also, first-time investors in Africa are more likely to travel to Paris or London than they are to some venue on the continent. It's easier to bridge the "cultural gap" for investors that MFS founder Dare Okoujdou talks about in the interview below this article.

The Africa Tech Summit moderator, Neandra Salvaterra opened the day by describing it as an event "about the future of now". Hermann Singh, Chief Digital Officer, MTN gave a barnstorming keynote presentation about how Africa's largest mobile operator sees the digital changes happening and why it invested in Africa's largest e-commerce start-up. At last, some mobile operators have a script for the digital transformation.

"Africa is one of the most exciting parts of the world in terms of digital adoption and MTN is involved in many verticals including: digital media services; e-commerce; digital finance and e-government".

He said that as a mobile operator it faced a stark choice:" Voice, data and text (revenues) will decline. Do we just hand over to the OTTs (the Over-The-Top operators like Facebook and Google)? We need to become OTTs ourselves. The opportunities in the space are awesome".

He identified two trends that are both providing huge opportunities to Africa's start-ups but also redrawing market boundaries. Firstly, he talked about value chain compression where "I can produce and sell immediately". Online means that over time the endless intermediaries required to get or sell goods will disappear.

Secondly, he talked about industry collision:"A retailer, a telco, a music streaming company all find themselves in the same space". A trend reinforced by the news that Nigeria's Telnet looks set to sell its payment company Paycom to extend Opera's OPay into Africa. Everybody is trying to do everything.

In that spirit, MTN has been one of the main investors in Jumia, "the largest e-commerce play on the continent" which sell fashion, electronics and other retail goods. Its biggest continent-wide sellers according to Singh?:"Diapers and pasta." It has 4.2 million consumers on its platform and Singh described e-commerce as a way of leapfrogging 'bricks and mortar', with huge consumer benefits:" We're a telco talking about e-commerce. This is not our core business. We got into it because no-one else wanted to get into it".

If that sounds fanciful, look at the table of percentages of online transactions as a proportion of total retail transactions in five key countries below. Africa only needs to head to higher single figures to get much higher volumes of sales.

UK: 15.7%

China: 19.4%

India: 2.6%

Africa: 0.5%

In the digital media field, MTN has launched the biggest mobile gaming platform in Africa with revenues of US$100 million.

But although smartphone use has grown enormously in the last three years and it is often the platform African start-ups are betting on, Singh told us that half of Africa's smartphones are still not activated for data:"This represents an amazing opportunity for us. Why? Everyone is petrified of apps as they consume data in the background. Our services are designed for compression".

In the Investing in African Tech - Opportunities, Risks and Returns, four seasoned start-up investors looked that the market. When asked about how to size the African opportunity, Charlotte Ward, AHL Ventures was optimistic:" The addressable market is growing. There's increased access to products and services that were not there before. There's better execution on the ground and the ability to deliver to the mass market".

Eghosa Omoigui, EchoVC put his finger on the talent issue when asked what was the winning formula:"It's difficult to get people to "apprentice". There are people with too many side-hustles. We invested in and founder Mark Essien started an internship programme with training. He probably graduated half the people Andela has". He also talked about the "cultural gap" that exists for some international investors when they come to the continent:"External investors don't get some of the problems our start-ups experience. We can translate for them but you still might be speaking different languages". He also pointed out that some start-ups had accepted dodgy money and without the start-up entrepreneur realizing it, these investors would never pass external due diligence.

Wale Ayeni, IFC Venture Capital tried to answer the recurring question as to why there weren't more exits on the continent:"Last year AYO Technologies made a JSE exit. The news didn't leave Africa. Exits in the USA (from Africa) are not as common but the pattern is changing. If you can structure a business with US$30-40 million of revenue a year, there's various ways to structure an exit". Charlotte Ward said:" We've had no exits yet but we're expecting them through strategic buyers and P/E Funds. We have interesting minority stake investments in energy that are very exciting".

Eghosa Omoigui added" The P/E Funds don't have pipelines so they start looking at those smaller companies". He also complained that there was a tendency to over-value among African start-ups:"We've tried to acquire companies but everyone thinks they're going to be the next Facebook so it's difficult to find that alignment. It's a work in progress".

A session on the Power of Co-Creation with Saidah Nash Carter, Thomson Reuters and Niki Neumann, AFGRI technology services spoke about the opportunities offered by agriculture:"If we can enable successful farmers, we can enable Africa". Like many others, they want to connect traditional financial institutions to small farmers to make loans using non-traditional data.

Nash Carter said:"We are a data company and we're looking at our data sources and alternative data sources to create a risk model: weather predictions, yield predictions and mobile and social data". Obviously with Thomson Reuter's strength in commodity prices it is hoping to make its mark in a crowded field,

In the African Fintech - What's next? Session Tokunboh Ishmael, Alithea Capital touched on the little discussed gender dimension in the African start-up sector:"Women products are not noticed or backed by any of the dominant sources of capital".

Karanvir Singh, Yegomoto described how he set up a registration system for motorcycle taxis, backed by the Rwanda Government with an Uber-style platform for payment. This Rwandese operation is effectively the pilot for wider expansion in Africa. One of his "show me the money" moments was that he told us that there are 0.5 million Boda Boda (motorcycle taxis) in Uganda.

In the Scaling African Tech Ventures session, Jason Spindler, I-Dev talked about hoping to connect 100,000 households to renewable energy. But he also pointed out that:"doing a deal in the retail space in East Africa (is difficult). The entire Kenyan market is the size of Cincinnati. It's not worth it unless it's completely 'plug and play'."

Sheila Birgin, iHub in Kenya said that 15 companies had raised US$3 million so far this year. Kola Aina, Ventures Platform said he believed that grants (to start-ups) do more harm than good and that he stressed the importance of the equity market. The session Chair Nicole Anderson, Redsand Partners concluded by saying:"Bottom line we need more people writing cheques in Africa."

In the Innovation Showcase, Robyn Farah, Kato Global (which does design prototyping) caught people's imagination with a project in Lagos that runs an electric engine using urine. Brian Mwiti, Hope Technology previewed a small echo location device for blind people, which when launched will be called 6th Sense.

The Women Inspiring The Future of African Tech heard from Wambui Kinya, Andela that:"27% of our developers are female. Why not 51%? If they can see who they're aspiring to be, they'll get there." Roby Farah, Kato Global described running a Build a Robot session. With a poster that said Women and Technology - Build a Robot, they got 50% women but a poster with just Build a Robot they got significantly fewer women.

The scale of the issue in the start-up sector is perhaps best illustrated by a study carried out by IFC Venture Capital. It reviewed over 8,000 start-ups that applied to accelerators in emerging markets and nearly half had a female co-founder. However most of these businesses were culled in the early stages and post acceleration only 1% of the companies had female leadership. Only 5% of companies in later stages of financing were led by women.

The day concluded with The African Media, Music and Entertainment Opportunity Unpacked which I moderated. The most memorable thing was Nik Patel, Iroko tweeting Jason Njoku's advice to Africa start-ups:"Just F****N Survive!"

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