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BEATING THE ODDS
An often repeated saying among entrepreneurs in Nigeria is one borrowed from New York: “If you can make it here, you can make it anywhere.” But the circumstances are usually less glamorous than in New York.
The sentiment captures the difficult, everyday challenges and peculiarities that come with running a business in Africa’s largest economy. And since technology ecosystems do not exist in a vacuum, tech startups and their founders are faced with these difficulties too.
Beyond the hype and novelty, these startups have to beat several odds in the pursuit of innovation and growth. A survey by the ONE Campaign and the Center for Global Development with 93 Nigerian tech firms offers a glimpse into the tough realities of running a tech startup in the country.
More than half of the respondents identified a lack of reliable electricity as a severe constraint to operations with a majority of the surveyed startups reporting 30 or more power outages monthly. To shore up the electricity deficit, startups are likely keeping the lights on by investing in expensively fueled power generators.
And that’s money that might have come in handy in other parts of their business especially as 60% of the surveyed startups also reported access to credit as a major obstacle. While Nigeria annually ranks among the top destinations for startup investment in Africa, much of the funding goes to established startups with high-profile or foreign-trained founders. For many others, the reality is much more stark given local banks’ reluctance to support startups and even when they do it’s with exceedingly high interest rate loans.
The situation is made worse with the wealthy individuals who could fund a home-grown venture capital and angel investment culture still largely reticent to do so. Founders also report political instability and corruption as major obstacles to operations alongside government rent-seeking in the shape of multiple taxes and levies and then there’s the harassment of staff by the police.
For its part, the Nigerian government points to its higher ranking on the World Bank’s annual Doing Business report as proof of its efforts to improve the business climate. But, as the World Bank’s report measures progress more by existing policy rather than its implementation, there’s a case to be made that its getting easier to do business in Nigeria only on paper.
But, as it turns out, the workarounds to some of the problems plaguing the business environments will come from tech ecosystems. From off-grid energy companies trying to drive up electrification rates to fintech startups looking to boost financial inclusion and access to credit—the hustle must go on.
— Yomi Kazeem, Quartz Lagos correspondent
STORIES FROM THIS WEEK
Photos of how unprecedented floods ravaged a World Heritage site in Côte d’Ivoire. Rising water levels from Côte d’Ivoire’s largest river resulted in disastrous flooding in the streets and homes of the Quartier France of Grand-Bassam, a UNESCO World Heritage site, over the last two months. Through intimate photography, Nuits Balnéaires captured the damage wreaked by the flooding as coastal erosion continues to pose a major risk to cities in the West African country.
Kenya is stepping up its citizens’ digital security with a new EU-inspired data protection law. Amid increased calls for African governments to be more proactive in creating data protection and privacy laws, Kenya is taking the lead. The government is banking on newly approved data protection laws which comply with the European Union’s General Data Protection Regulation.
Guinea’s president is prepared to risk it all for a third term as anti-government protests grow. The latest episode of an African leader attempting to bend constitutional rules for political expediency is happening in Guinea. President Alpha Condé is backing a constitutional amendment vote that faces opposition at home and abroad, Joe Penney reports.
Zimbabwe’s new bank notes are facing a major mobile money-induced test. For the first time since 2009, Zimbabwe has official currency notes which have been launched in the hope of resolving a cash shortage problem that’s lasted for two years. But as Tawanda Karombo explains, a disruption of mobile money services this weekend will be a severe test for the viability of the new notes.
China is taking on China to win Africa’s online payments markets. China-based Transsion Holdings, the top phone maker in Africa, has backed PalmPay, a payments service going live with $40 million in funding. It’s a move that pits it against OPay, a payments service currently in Nigeria, incubated by China-owned Opera browser and backed with $50 million in funding. As Yomi Kazeem finds, the large funding rounds signal the interest of Chinese investors in Africa’s payments as they seek to replicate the successes of AliPay and WeChat Pay back home.
A New York-based journalist has become the face of shrinking press freedom in Nigeria. This week, security officers in Abuja, Nigeria opened fire on journalists and activists protesting the ongoing detention of Omoyele Sowore, publisher of Sahara Reporters, a New York-based publication which focuses on Nigerian politics. Rudolf Ogoo Okonkwo explains how Sowore, who has been in detention since August for organizing political protests, has been granted bail by judges but has still not been released by the authorities.
THE DEALMAKER
Africa has its first homegrown unicorn as Interswitch, the Nigerian payments processing giant, sold a 20% stake to Visa for $200 million. The deal confirms Interswitch’s billion-dollar valuation and is a boon ahead of a London IPO planned for next year. It’s the latest in a string of investments in African fintech companies with PayPal,Mastercard and Stripe also backing Africa-focused fintech companies in the last 18 months…Yodawy, an Egyptian online medication ordering platform, raised $1 million in a Series A roundnotably led by Egyptian VC firms, Algebra Ventures and CVentures and with participation from Egyptian angel investor firm, ASI Ventures…Ride-hailing firm, Bolt launched a $11 million green fund to offset its emissions footprint around the world. In Africa, the environmental impact fund will back M-Kopa, the off-grid solar energy company with operations across East Africa. Bolt currently operates in 44 African cities and is Uber’s biggest rival on the continent…The European Investment Bank has launched SheInvest, an initiative to “mobilize” $1.1 billion in investment to improve access finance for women across Africa as well as boost gender equality and female economic empowerment.
CHART OF THE WEEK
Jumia’s plans to build an African fintech leader are on pace. The largest e-commerce operator in Africa is still shipping big losses as it chases growth and profitability but a partial fintech pivot is showing signs of promise. After recording rapid growth in transactions on Jumia Pay, it’s in-house payments solutions, Jumia’s plans to spin-off the service are gathering pace.
OTHER THINGS WE LIKED
Sierra Leone is having an uphill struggle to reform its mental healthcare. Even after a ruinous civil war and escalating poverty which was exacerbated by the world’s deadliest Ebola epidemic, Sierra Leone at one point had only one practicing psychiatrist. Today it has two. For The New Humanitarian, Malte Werner reports on how traditional beliefs and superstitions are key obstacles alongside economic challenges in providing meaningful mental healthcare in the country.
Nigeria has turned to its big beverage companies to help fight plastic waste. The amount of plastic bottles used in Nigeria has doubled in just the past three years to an estimated 150,000 metric tons annually with up to 80% never reused or recycled. For Bloomberg, Yinka Ibukun reports on the efforts being made by the big bottling companies, local authorities and informal operators to reduce an environmental menace particularly in bustling city of Lagos.
Nairobi should rethink its colonialist approach to urban design. The Kenyan government is planning a new expressway in Nairobi expected to cost 62 billion Kenyan shillings ($620 million) which was originally meant to go through Uhuru Park, but will now circumvent it. For CityLab, Patrick Gathara argues the new road is being built for the city’s elite and will not really reduce the congestion it’s meant to target.
ICYMI
Generation Africa. Twelve young Africans are invited to become champions for global development issues as part of a six-day program in late February/early March 2020. It’s fully-funded storytelling program by the Bill and Melinda Gates Foundation in partnership with the Thomson Reuters Foundation in Johannesburg, South Africa.
Africa Scholarship Program, Wageningen University. The Netherlands-based university is offering seven fully-funded Masters Degree scholarships to African students. (Feb. 2020)
KEEP AN EYE ON
Africa Fintech Summit 2019, Addis Ababa (Nov. 21). The bi-annual conference will hold its second edition in Ethiopia with investors and founding pioneers discussing the continent’s fast-growing fintech sector.
*This brief was produce while listening to Come on Home by Lijadu Sisters (Nigeria). [Spotify] RIP, Kehinde Lidaju.
Our best wishes for a productive and ideas-filled week ahead. Please send any news, comments, suggestions, ideas, new Zim dollar notes and Internswitch pre-IPO shares to africa@qz.com. You can follow us on Twitter at @qzafrica for updates throughout the day.
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