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Uncertain future
Over the last five years, the dominant trend across Africa’s largest tech ecosystems has been a record-breaking investment boom. From payments and e-commerce to health and renewable energy, several fledgling startups have convinced backers of their long-term potential for growth and profits.
Last year alone, startups on the continent reached new heights, crossing the $2 billion mark as most forecasts suggested a continued uptick in funding. That seemed to be the case with deals like Jumo’s $55 million raise in February—until Covid-19 struck. Over the past month especially, the pandemic has shut down economies and the world is on the cusp of a recession. For Africa’s tech ecosystems, the pandemic and its after-effects will likely result in a sharp fall in funding inflow, new forecasts show.
Startup accelerator AfricArena estimates total funding in African startups this year could drop by as much as $800 million with a slowdown expected to become more visible in the next two quarters of the year. The report’s worst case scenario also suggests effects of the economic slowdown could last through 2021 with recovery only expected by 2022.
The expected investment slowdown follows established trends during recessions as venture funds will typically look to be more capital efficient. That reality could prove most damaging for companies seeking early and seed stage funding as investors become more risk-averse and likely tilt more towards more established companies with more robust businesses and clearer paths to profitability.
But the pandemic may yet prove pivotal even for larger tech companies on the continent who will have to adapt to prevailing macroeconomic headwinds.
As it turns out, some succor may yet come from within the continent as more homegrown venture funds, with a nuanced understanding of local realities emerge. One of those is The Future Africa Collective which launched last month in the wake of the coronavirus outbreak to “create new and more sustainable funding sources” especially for companies “at the earliest stages.”
— Yomi Kazeem, Quartz Lagos correspondent
Stories from this week
I am alive because my Kenyan great-grandfather quarantined 100 years ago and here we go again. As in many parts of the world, African countries are relying on a change in social behaviors, especially the adoption of physical distancing measures, to curtail the spread of Covid-19. Carey Baraka tells the story of the similar measures adopted by his great-grandfather amid a trypanosomiasis epidemic in the early 20th century.
Truck drivers transporting essential goods cross-border may also be transmitting Covid-19 in East Africa. As coronavirus cases continue to mount across Africa, truck drivers have come under closer scrutiny as possible vectors of the disease’s spread in East Africa. As Neha Wadekar in Nairobi reports, those fears have been heightened in landlocked Uganda as 12 drivers en route from ports in Tanzania and Kenya tested positive for Covid-19.
Why Amazon is expanding Web Services in Africa but still has no e-commerce here. This week Amazon rolled out its first Africa data centers in Cape Town, matching similar efforts by Microsoft and Huawei last year, but it has in fact been on the continent since 2004. Uwagbale Edward-Ekpu explains why the global behemoth is more interested in data centers and cloud computing opportunities in Africa than it is in e-commerce.
Tanzania’s president is under pressure after three MPs die in 11 days and Covid-19 cases spike. Tanzania’s president John Magufuli has described Covid-19 as a “demon” and declared all places of worship remain open because they are where “true healing” will be found. Magufuli has also been relatively relaxed about instituting movement restrictions or lockdowns and is now under pressure after three members of parliament died in just 11 days.
The problem with downgrading the economies of developing countries in a time of crisis. African countries and the African Union have to learn how to curtail the hampering influence of ratings agencies including Moody’s, Fitch and Standard & Poor’s who have downgraded their economies early in the Covid-19 crisis, writes Misheck Mutize. “The downgrades of some African economies reflect monumental bad timing. I would argue, in most cases, they were premature and unjustified.”
African countries don’t need donated ventilators without revamping their health systems first. There has been much concern about the low number of ventilators in African countries in the event of a severe Covid-19 outbreak, so much it’s prompted early proposals of generous donations. But Efosa Ojomo warns that simply calling for donations of equipment to operate in under-resourced health systems likely won’t solve the problem in the short term much less longer term.
Dealmaker
•Helium Health, a Lagos-based electronic medical records provider, raised $7 million in a round co-led by Global Ventures, a Dubai-based firm, and AAIC Japan. The round also saw participation from Chinese internet giant, Tencent.
•TLcom Capital has backed Nigerian fintech company Okra with $1 million in a pre-seed funding round. The investment in the four-month old startup is TLcom Capital’s first bet on a fintech company.
•Pravica, a Cairo-based blockchain startup that offers a decentralized email service, has raised $500,000 in a pre-seed round led by 500 Startups, with the participation of Modus Capital and DYRES Venture.
Charts of the Week
African economies are spending up to five times their health budgets on debt repayments. As African countries respond to increasingly difficult realities of the public health and economic impact of Covid-19, there have been growing calls for debt repayments to be paused. As Yinka Adegoke explains, the scale of the problem is significant as data shows the wide gaps between health spending and debt payments.
Quartz Membership
The coronavirus pandemic is pushing the fitness industry out of the gym and onto the screen. Some players are capitalizing on that shift, with well-funded players doubling down on free trials.. But others won’t recover.
Other things we liked
Let Africa into the market for Covid-19 diagnostics. Africa is used to dealing with communicable diseases and is well set up to handle with the early spread of Covid-19 across the continent, writes Africa CDC head John Nkengasong in Nature. But even though funds are available to supply diagnostic labs, Africa finds itself caught in between the competing forces of wealthier countries who are restricting exports or outbidding African countries.
How Somali rap found its voice in a crowded UK scene. “As black Muslim children of immigrants, the British-Somali identity is complex and fragile,” writes Abubakar Finiin for Vice UK. Even though Somalis have been underrepresented and have had years of negative British media portrayal, the hope is a new crop of Somali rap acts will start to help change those perceptions and stereotypes.
ICYMI
University Startup World Cup. The competition sees university-based startups across the world exhibit and pitch to investors for funding and technical support. (June 14)
Volvo Environment Prize. The $150,000 prize for environmental scientists is now accepting nominations. (Jan. 10, 2021)
*This brief was produced while listening to No Accommodation for Lagos by Tony Allen with Afrika 70 (Nigeria). Allen, the legendary drummer and a co-creator of Afrobeat with Fela Kuti, died this week at 79. Bonus listening: Allen’s take on Art Blakey’s Moanin (live).
Our best wishes for a productive and ideas-filled year ahead. Please send any news, comments, suggestions and ideas to africa@qz.com. You can follow us on Twitter at @qzafrica for updates throughout the day.
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