How many startups or companies established in any African country can you name? I can help you: too few! And it’s not caused by the fact that there are not many entrepreneurs in Africa, actually – on the contrary!
It’s because lots of us are still too busy following businesses from the Silicon Valley or coveted Asian companies; and the “us” group includes venture capitalists. Bold statement? Partech pegged total 2019 venture capital for African startups at $2bn . Only two billion dollars. And this is the highest estimate of all three we looked at!
Fortunately, Catrina Sheridan is on her mission to change the current landscape of private capital investments in Africa. She’s the Founder and CEO of Nafasi, a platform for those who are interested in supporting African enterprise development and are looking for reliable partners.
We had a long chat with Catrina so that we could learn more about this unique initiative. We asked her about working with venture capitalists who are about to invest in Africa, what the impact of the COVID-19 crisis on the African entrepreneurial scene is, what industry sectors are the most invested in now, and much more.
Dominika Błaszak, Netguru: How does the outbreak of COVID-19 influence businesses in Africa?
Catrina Sheridan, Nafasi: Africa is going through a different phase of the COVID-19 crisis right now, compared to the Western world. I think the biggest issue in Africa is the lack of access to testing. The level of testing available is much lower than it is in Europe, the U.S. or in highly-developed Asian countries.
The equally big concern is the condition of health systems throughout the continent. Hospitals don't have the capacity in terms of intensive care units, and availability to even treat patients that don’t require intensive care. What’s more, in larger cities people are living in close quarters and don't really have the opportunity to socially distance themselves from each other.
So the most vulnerable in the community still have to go out there and work, because they really exist in the subsistence economy. So there's a real question mark as to whether the preventive measure of social distancing is actually available in Africa.
Are you or your business influenced by the consequences of the pandemic?
In terms of the business of Nafasi, I think we are a digital play and in many ways the openness to digital solutions is even greater. People are realizing that you can, and now have to, do business online. The distance challenge has been taken away, which is often a feature in the clustering of venture capital in areas like Silicon Valley and London. Therefore Nafasi’s mission to join funders and mentors from the global north to tech entrepreneurs is now more acceptable as a practice.
Currently, one of my colleagues got together with a group of angel investors to connect them with entrepreneurs who want to pitch their business to venture capital. It all happens online and it’s making the proposition of Nafasi more real to people, because they’re getting the experience of running a business online and operating totally remotely.
Taking into account that the markets are unstable globally, how does it affect the willingness of investors to invest? Are they still so open to investing in Africa?
Actually, times like this one are often when investors are the most active – when the market is countercyclical, and maybe actually the most prudent time to make investments. So we don't see that investors’ willingness to invest had diminished.
Africa is such a big market. The scale of the opportunities is massive – over 1.2 bn people with the largest working population projected in 2050, greater than that cohort for India and China combined. New enterprises in Africa are embracing the digital revolution and taking offline business models, be it in social or for profit enterprises.
At Nafasi, we support mostly tech entrepreneurs, and I think the current crisis will actually add to the resiliency of their businesses. Entrepreneurs themselves are still moving ahead with their initiatives and they’re coming up with new business ideas. Let’s not forget that Africa has been through many challenges, including ebola, and some of these historic events have fueled the creation of many new companies and solutions. Now the most up-and-coming entrepreneurs have a new perspective, and while they are thinking about creating new solutions, they have the COVID-19 pandemic context in mind.
I believe that the organizations that are invested in will be hugely more resilient. I don’t say that the market isn’t uncertain there, there's no point in saying that it's not. But having said that I've been really delighted to see that there are smart investors that are actually getting in right now and realizing this great opportunity to support local African entrepreneurs
I’m happy to hear that! And taking into account how you see the moves of venture capitalists in Africa, which sectors are the most invested in right now?
The biggest sectors I see are agri-tech, solutions in the transport and logistics areas, health tech and ecommerce with some fintech.
Recently, I’ve got to know a business idea that is all about using technology to get people to emergency sites quickly combining the Uber experience with health tech. The whole area of safety, health safety, people's safety, and security – all these areas are heavily invested in and though through as part of the business model development.
Another interesting area is the audiobooks sector. It's about allowing the diaspora to get access to content from indigenous African markets internationally. Also, the whole area of e-commerce is growing where a lot of street traders are having to re-adjust their business models by going online.
And then, obviously, the whole area of solar power and looking for digital solutions to leverage opportunities in that sector. At Nafasi we use distributed ledger technology with blockchain which we believe is very important to address growth in institutional governance.
The market is quite varied, but it's very much covering areas that I am really excited about. It's addressing tangible issues such as health and education access.
One of the biggest consequences of the lockdown in Poland is education being moved online. Universities started to use online tools and do exams online, so that students have easier access to education. Do you also see this trend in Africa?
A lot of young people in Africa have always been really open to the online education space because it enables them to tap into international institutes like the Harvard OnlineCourses or courses offered by Stanford University. So there always has been this kind of outward view and having those online courses has been available for older students.
I haven't seen anything that would indicate bringing online education into people's homes at a more continental scale, yet. I know that many kids are accessing online educational resources using their smart devices. This space is starting to open up and education may start to be perceived as a globalized product, especially at the third and vocational level.
The lockdown situation, being very tragic and challenging, made many people realize (including myself) that we live in a global village and that we're all in this together, no matter where we live. Do you agree? Have you noticed any manifestations of this current state of things?
I think in the context of Nafasi and our mission of actually addressing unemployment issues or formal employment issues in Africa, I think we find our aims to be viewed in a more progressive light now. Before, when we were presenting our mission, in many cases our audience needed some explanation to help them understand why courting African entrepreneurs makes sense from a country development program and why formal employment is important in Africa, etc.
People are more aware of the issues Africans are facing every day, like access to food for example. Being under lockdown causes more deaths, because people don't have access to work, so they can’t make money to feed themselves. We all experienced difficulties in living our normal lives, and we are now more aware that those in need faced these difficulties with increased, negative intensity.
I think many governments around the world have focused their policies and spend outside of the pandemic on managing employment support because of the combined social and economic impact for everyone. There is a big focus on supporting small and medium businesses and entrepreneurs and we see this entry point as a more sustainable way of developing Africa and for Africans to reach their true potential.
All this makes the importance of having social infrastructure supporting entrepreneurs in place more obvious and closer to home.
So, despite all the hard conditions, it's wonderful to see all the large tech players come to Africa, how they create tools and services to allow this digital ecosystem to grow. However, that needs to be balanced with supporting indigenous digital companies in Africa to actually provide its own services. I think that's the way for sustainable development.