Blockchain for African banks, marketplaces and Amazon in Africa caught our attention

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

Thoughts & Themes

• Building the Future Podcast: in this discussion, Steven shares his thoughts on market gaps and opportunities in Africa in 2019
• Digital Market places: what are key success factors in deploying technology to aggregate products and services for Africa? E-commerce in Africa has taken longer to scale due to infrastructure deficits and misunderstood consumer profiling. The right combination of online / offline presence is key and winners are deeply data-centric in pushing demanded products and services in the local informal economy to the top of their platforms. EM Marketplaces are gathering momentum. Amazon acquired Indian services aggregator Tapzo in 2018. Tapzo aggregates mobility, delivery, bill payments and more into one app. The key challenges for marketplaces in Africa are creating trust between customers and service providers, quality assurance and loyalty from service providers. We are working with talented founders that have achieved product / market fit unlocking the supply of services. This great A16Z podcast provides context.
• US in Africa 2.0: In October, the US Congress passed the BUILD Act to create a new development agency the USDFC in what we think is a once in a generation opportunity to makeover U.S. development finance in markets that will represent 80% of future global economic growth. In this article we outline 3 principles to deliver the potential of this re-set.

Portfolio News

• In February, Lateral portfolio company AppZone successfully completed the first decentralized bank to bank digital transaction in Nigeria using its blockchain clearing product “Zone”. AppZone has built a suite of products that cover all aspects of digital financial services provision. Zone allows P2P settlements and payments for business and consumers via member banks. There have been numerous single product offerings solving an individual aspect of the massive intra-African electronic transactions market (remittances, payments, lending), but this is the first meaningful platform solution.
• Asoko Insight — in partnership with PWC and the London Stock Exchange published its Companies to Inspire Africa 2019’ report featuring 360 of Africa’s fastest growing and most innovative companies, including Lateral portfolio peer 4G Capital. 4G has operations in Kenya, Rwanda and Ghana and powers the growth of financially sustainable micro SMEs with over 55k customers across 72 locations and credit origination of ~$30m at over 80% repeat customer rate.

What else caught our attention:

-Amazon in Africa: The e-commerce behemoth has embraced a workaround for cash payment requests in emerging markets including Kenya by allowing customers to checkout using a QR code generated by paying at a remittance channel such as Western Union. We continue to believe that consumer logistics at the intersection of online and offline formats is worth paying attention to. Koko Networks leverages existing brick and mortar retail formats to enable e-commerce.

Grab a courtside seat: why is the NBA announcement of an African league a big deal? The NBA already has a track record of capital investment in Africa having built a new training center in Senegal, but more importantly, diasporan stars have backed African projects across healthcare, education and SME development for over a decade now. Further, the NBA has shown its ability to innovate ranking 3rd in Fast Company’s most Innovative companies 2019. Its streaming service grew subscribers by 63%; and total revenue by 25% due its investment in the year-old NBA 2K League, the first extension of pro sports into esports, which has 21 teams and games that stream on Twitch.

Nigeria decides: following a one week delay due to logistical issues and an election with the lowest voter turnout in Nigeria’s twenty years as a democracy, President Muhammadu Buhari was returned to office for a further 5 years. In less dramatic fashion, Sengalese incumbent president Macky Sall was elected to serve a further 5 years. While stability and improving governance are essential to African prosperity, and a wave of improved governance has swept Africa in the recent past, our portfolio companies have managed to excel independently of the outcomes of elections.

Ethiopian Prime Minister Abiy: “My model is Capitalism”. Much has been written about the scale of the Ethiopian market (popn 105m), it’s growth (10 year average ~10% p.a) and speed of liberalization under new leadership. We have explored opportunities in medtech and clean energy. We remain excited by the combination of addressable market size, technical skills sets and potential for leap frogging technology, but have found the maturity of the tech ecosystem a challenge so far. As an example, cloud hosted applications are a rarity due to restrictions requiring data to be stored server side by private companies. AWS and cloud have brought the cost of launching a business down exponentially and this technology infrastructure will undoubtedly be embraced as the technology ecosystem matures. In the meantime In this FT article, and this in depth analysis PM Abiy Ahmed outlines the capitalist model he envisages for strategic sectors such as telecoms…

As always we welcome thoughts and feedback — get in touch

Steven and Rob