Africa as an Investment Destination

Africa as an Investment Destination

19 March 2019

 

On the 13th March 2019 Nigerian e-commerce startup Jumia filed for an initial public offering on the New York Stock Exchange (NYSE). According to a February 2019 Bloomberg report, the offering could value the company at $1.5 billion. Jumia will become the first African startup to successfully list on the NYSE. In 2016 the company became the first African startup to reach unicorn status, when it achieved a $1 billion valuation.

Jumia’s current investors include French companies AXA Group and Orange, USA financial services company Goldman Sachs, the UK’s development finance institution CDC Group and South African mobile Telco MTN.

The success that Jumia has enjoyed demonstrates the potential of African startups, as well as the purchasing power of African consumers, since the business only operates in Africa. This made us think about the need to reposition Africa as an investment destination, changing the narrative from charity and aid. Aid is necessary to alleviate poverty, improve education, health, etc., however experts also argue that aid develops a culture of dependency and fosters paternalism.

When it comes to business engagement, we certainly believe that foreign investment in startups versus aid is the required approach. Investments empower entrepreneurship; they demand a return in the form of profit, which creates a partnership relationship rather than dependency. Investments also create employment, which results in a more sustainable use of capital. President Obama famously said, at the Nelson Mandela Annual Lecture; “It’s not just money that a job provides; it provides dignity and structure and a sense of place and a sense of purpose. And so we’re going to have to consider new ways of thinking about…how we retrain our young people, how we make everybody an entrepreneur at some level.”

We encourage our venture capital investors to reflect on those words whilst they read this week’s newsletter. Happy reading!

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