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With 190 million people, Nigeria most likely to give birth to unicorns

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Africa’s most populous country is the biggest startup market most likely to give birth to unicorns. But capital and infrastructure to help these startups scale remain elusive.


The year 2018 was momentous for Staffbus.ng, a two-year-old startup helping solve the problem of congestion in Nigeria’s capital city.

Its solution? Encouraging residents to leave their cars at home and book its luxury buses for their daily commute to work.

Founded by Olusegun Oludayo, the startup was recently the winner of the N5 million ($13,700) Seyi Tinubu Empowerment Project (STEP) initiative, a pitching competition held annually in Lagos to identify leading tech entrepreneurs.

This program, along with many other venture capital (VC)initiatives, has sprung up in Africa’s largest economy in the last decade to help boost the startup ecosystem in Nigeria.

According to a 2017 report by Global Startup Ecosystem Report and Ranking 2017, produced by Startup Genome in collaboration with the Global Entrepreneurship Network (GEN), the Lagos startup ecosystem is estimated to be worth $2 billion. It has one of the highest rates of founders who have an undergraduate degree (59%) and those that have a technical background (93%).

However, when it comes to global penetration of these startups, there seem to be some significant challenges with only 11% of startups planning to take their business beyond the shores of Nigeria.

“We have a proliferation of similar ideas all trying to get funding from dwindling sources and those with funding just go around that circle of pitching, pitching, pitching. They don’t scale, so you find they remain startups for many years,” says Emilia Asim-Ita, CEO, AML Practice, a content, talent and resource advisory firm.

According to the Nigerian Communications Commission (NCC), Nigeria’s internet users this year reached a whopping 98 million. This, combined with the enthusiastic entrepreneurial energy of Lagos, has led to over 700 active startups in the country. As the business models of these startups become more innovative, there has also been an increase in the number of companies receiving big checks from top Silicon Valley VC’s in recent years.

For example, the significant funding rounds of Andela ($40million), Terragon Group ($5 million), Cars45 ($5 million), Rensource ($3.5million), Flutterwave ($10 million), Paystack ($1.3 million) has demonstrated that there is definitely a lot of potential in the Nigerian ecosystem but these are just a few success stories and are atypical to the entire ecosystem.

“The startup ecosystem in Nigeria is stagnating. It is difficult to give you empirical evidence but you will find that an industry or sector that is not growing and has not disrupted any new industries in a while and you haven’t seen significance in the growth and sustainability of even some of its biggest ideas cannot be growing, that is why I would say that it is stagnant,” says Asim-Ita.

This stagnation is as a result of the challenges facing the Nigerian startup ecosystem. Firstly, there is inadequate infrastructure.

“We are seeing the tech ecosystem go through some significant changes. The first big tech companies like iROKOtv, Jobberman and Paga were able to move from startups to become really serious companies and they have showed us that Nigeria has what it takes to build sustainable and profitable companies. We just need the right infrastructure to support our startups,” says Seyi Tinubu, founder and CEO of Loatsad Promomedia, a digital advertising company in Lagos.

Tinubu is also an investor and founder of STEP, a corporate social responsibility (CSR) initiative designed to empower tech entrepreneurs in Lagos with seed funding and mentorship.

“When you go outside the main cities, you will find there is a lack of access to internet and fluctuating power supply which has a long-term impact on the growth of tech companies leading to companies outsourcing development solutions to countries like India,” says Tinubu.

This invariably results in the inefficient use of financial resources and the eroding of a robust funnel of talent that the ecosystem needs, a problem organizations like Andela and the Tony Elumelu Foundation are trying to address.

“Startups need capital to operate. In Nigeria, many tech startups are known to solve local niche problems and try to create a long-term business out it but most of these businesses are often un-validated concepts which makes them difficult to secure investment in,” says Wande Adams, a business development executive at Enov8 Solutions, a tech company with a focus on all sectors.

The company aims to provide topnotch innovative solutions to identified gaps across various sectors. It recently secured a $250,000 funding from SPHINX Capital. Among the company’s many innovative solutions is a crowd-funding platform called SeekFunds designed to fund/raise money towards business, projects, charities, medical and educational assistance.

But the main challenge for most startups is still how to secure larger capital raising rounds to gain significant market share.

“Nigeria has attracted about a third of all startup funds available on the continent and we are still far away from having our own unicorns,” says Uzoma Dozie, CEO of Diamond Bank.

A unicorn is a term for a tech company valued at $1 billion or more. For this, the firm requires massive capital injections to achieve its potential, usually in tens of millions.

“When a startup has proven a concept and is seen as a viable business, it must protect itself from copycats and scale to other markets very quickly and this is a very a pricey process,” adds Gordon Adomdza, a Professor with Ashesi University in Ghana.

Most VCs get a buzz when they can find a handful of companies with the potential to be unicorns and they invest in all of them with probably most of them failing except one whose success returns all the capital invested.

In February 2018, Zinox acquired leading Nigerian e-commerce player Konga in a move that is widely believed to have been a significant down round.

Unicorns, down rounds and utter company failures are an inherent part of the world of venture capital. Nigeria, with its 190 million population, remains the biggest market and the one most likely to give birth to unicorns. For this to happen, it requires huge capital investment to help these startups scale, something that seems unlikely to happen in this current climate.

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Economy

Finances And Coronavirus: Threats And Opportunities In Lockdown Era

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Coronavirus has affected everyone in the UK, but not everyone has been affected in the same way.

This is starkly apparent when it comes to money. Eight million people are on furlough, receiving 80% of their normal pay from the government’s job retention scheme, while thousands more have been made redundant.

Many self-employed individuals and business owners are likewise under extreme financial pressure because of the lockdown.

But for others, the coronavirus has been a very different experience. Millions have been able to work from home on full pay but with significantly reduced outgoings – no commuting, no expensive coffees or sandwich shop lunches, no dry cleaning bills.

With shopping and entertainment options severely curtailed, general spending has dropping dramatically. According to pollsters YouGov, 1 in 6 people have been able to add to their savings, while 1 in 10 have managed to pay of their debts.

44% of respondents feel less secure about their financial situation
 
YOUGOV

Perhaps not surprisingly, white collar professionals have been better able to improve their finances. Those in manual occupations are more likely to have continued going into work rather than working from home and enjoying the associated cost savings.

Worryingly, YouGov found that 36% of Britons have dipped into their savings to meet their bills during the pandemic, with 44% feeling less financially secure as a result of the crisis.

Additionally, 16% have reported that their debts have gone up, while over a third (35%) have reported that their incomes have decreased.

Government intervention

The financial situation for many people would undoubtedly have been worse had it not been for swift intervention by the government on an unprecedented scale.

The job retention scheme, originally due to run until the end of July, has been extended until the end of October – although from August employers will be expected to contribute towards the cost.

Businesses are also able to access a range of loans underwritten in full or in part by the government, including the Bounce Back Loans Scheme and the Coronavirus Large Business Interruption Loan Scheme, where the maximum loan size was increased from £50 million to £200 million earlier this week.

Additional funding has also been made available to large corporations by the Bank of England.

Other government measures include the Self Employment Income Support Scheme. However, at present, this only provides payments to cover the months of March, April and May, and there has been no suggestion that it will be extended in the same way as the job retention scheme.

Mortgage payments holiday

The government is planning to extend its mortgage payments holiday initiative, whereby banks and building societies are instructed to allow borrowers to miss repayments on the understanding they will make up the accrued capital and interest debt over the rest of their loan.

The scheme was originally due to run until 20 June 2020, but under propoals expected to be rubber-stamped this week, those who have already taken payment holidays will be able to apply for an extension of up to three months, while those who have not yet applied will be able to do so until 31 October 2020.

UK Finance, which represents lenders, says 1.82 million mortgages were subject to a payments holiday as of 20 May – roughly 1 in 6 of all mortgages.

The three-month payment holiday for credit cards and other credit-based products is under active review – we may hear more on that from the Financial Conduct Authority in the coming days.

Impact on motoring

One area of the economy that has seen a huge contraction is motoring, from car sales to fuel consumption.

The number of new car registrations collapsed in April, the first full month of the lockdown, falling 97.3% year on year, from 161,064 in 2019 to 4,321 in 2020.

The restrictions imposed by the lockdown inevitably led to most people driving less or not at all, which had a knock-on effect on sales of petrol. The reduction in supermarket pump prices to below £1 a litre earlier in May was a clear indicator that supply was well ahead of demand.

Research from Lloyds Bank suggests fuel spending in April was down 58%, while day-to-day commuting expenditure was 86% lower.

Online car retailer CarWow reckons more than two fifths of Britons have spent less than £10 on petrol during the last month, with a third purchasing no petrol at all.

Vix Leyton at CarWow, said: “After more than two months in lockdown, the idea of a regular petrol station top-up no doubt seems like a distant memory to the millions of British motorists who’ve not needed fuel – or perhaps even driven – for weeks.”

With some of the lockdown restrictions beginning to easy, Leyton suggests now might be a time to fill up: “For those wanting to take advantage of low pump prices, now is arguably the time to do so – providing you can do so safely – before lockdown measures are eased even further and long queues begin forming.”

Bike use – and thefts – on the up

Another effect of the lockdown has been an rise in the number of people cycling for their permitted daily exercise, but a consequence of this has been an increase in the number of bicycles being stolen.

David Fowkes of insurer Admiral said: “Several cycle retailers have reported that they’ve sold out of many models. We’ve seen a 46% increase in the number of bicycle theft claims over the last seven weeks compared with the same period in 2019. That’s incredible when you consider that overall theft claims have fallen during the lockdown as people have stayed at home, deterring burglars.”

Admiral won plaudits in April when it became the first UK insurer to give a cash rebate (£25) to all its car insurance policyholders. Only LV has made a similar pro-active gesture, leading the Financial Conduct Authority to impose a package of measures that require insurance companies to provide support to customers in financial distress as a result of the pandemic.

Energy bills

With more people working from home and staying at home in line with government stipulations, there has been an increase in domestic energy consumption, with comparison site Compare the Market suggesting annual bills could rise by £400.

However, global demand for energy has reduced sharply, with factories and offices mothballed and travel services limited.

Stephen Murray, energy spokesperson at MoneySuperMarket, says cheaper domestic energy deals are available as a result: “A cocktail of factors have come together to make this is a great time to switch supplier. 

“There’s been a major drop in the wholesale element of domestic energy prices of nearly 40%- something partly explained by oversupply in the market due to declining business energy usage as a result of the coronavirus crisis.”

As economies gradually emerge from lockdown and energy demand increases, there is likely to be an impact on prices in the opposite direction.

Tips to keep your finances in shape

Here’s a to-do list for anyone wanting to save money and get their finances in the best possible shape:

  • Compare energy prices: use a comparison site to see if you can save money by switching. If you’ve never switched or haven’t switched for two or three years, there are likely to be cheap fixed rate deals available
  • Talk to your insurer about saving money: the regulator has told car and home insurance companies to help customer whose finances have been harmed by coronavirus, but it’s up to you to contact them to discuss the options, such as reducing the estimated annual mileage on your car insurance and getting a premium refund
  • Don’t automatically renew insurance: whenever a car or home insurance policy comes up for renewal, run a quote on a comparison site to see if there’s a better deal out there
  • Get the best broadband deal: check you’re on the best deal, especially if you’re working from home or using streaming services more than usual. You need the best combination of speed, capacity, reliability and price. See if your existing service provider can improve its offer
  • Talk to your lender: if you have debt, such as a mortgage, personal loan, credit card balance or car finance, and you are struggling to meet your repayments, talk to your lender to see what options are open to you. Don’t be tempted simply to stop making payments as this will have a long-term effect on your financial record.

If you are in financial distress as a result of the pandemic, or it has made your situation worse, contact a debt charity such as National Debtline or Stepchange for advice and support.

Kevin Pratt, Forbes Staff, Advisor UK

Contributor Group, Personal Finance

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Op-Ed: How To Be A Major Player In Global Food Markets

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Last year, Bill Gates named his 10 breakthrough technologies for the year. Among the technological developments he outlined were robot dexterity, new-wave nuclear power, customized cancer vaccines and the cow-free burger. It was the first time that the list, usually compiled by MIT Technology Review, was created by a guest editor. It is no wonder that Gates rightly predicted that home computers and the internet would infiltrate much of our lives. Yet, when I went through this list, it was not necessarily universal. Many of these breakthrough technologies made sense through Western lenses. We have to ask, which of these breakthrough technologies will have the most significant impact on the African continent?

Perhaps the most pressing issue for Africa now is agriculture. Climate change has had a devastating impact on the agriculture sector, which is particularly concerning when you consider that most African economies still heavily depend on it. A study by McKinsey & Company found that more than 60% of the population of sub-Saharan Africa is smallholder farmers, and about 23% of sub-Saharan Africa’s gross domestic product (GDP) comes from agriculture. Yet, increases in temperatures, changes in precipitation patterns and extreme weather events not only disrupt entire industries but reduce food availability and impacts food quality. This, of course, is coupled with the fastest-rising population, which places more strain on resources.

We have already observed in the last few years how devastating a drought can be. South Africa has become a significant food importer, while Kenya and Zimbabwe are on the verge of starvation. This has seen the regional and national economic growth take a severe knock. Yet, as the United Nations put it, “the continent has enormous potential, not only to feed itself and eliminate hunger and food insecurity but also be a major player in global food markets.” So how do we go about this? I would argue that tapping into the technologies of the fourth industrial revolution (4IR) does not just serve as a way of revitalizing the agricultural sector but also realizing its potential. As the American financier Bernard Baruch once put it: “Agriculture is the greatest and fundamentally the most important of our industries. The cities are but the branches of the tree of national life, the roots of which go deep into the land. We all flourish or decline with the farmer.”

I have just bought a farm and have been looking at ways in which artificial intelligence (AI) can make farming more efficient. Farmers can tap into AI to combat disease and pests, which have been made worse by climate change and pesticide use. Drones and other robots equipped with computer vision can collect data points from the farms’ existing crops. If you were to ask me to spell out some breakthrough technologies, many of them would be inextricably linked with the agricultural sector.

For instance, it is estimated that humans would need to plant over 1.2 trillion trees to combat climate change. Here, we could use AI to automate this process.

Airlitix is a South African AI software that is currently being used in drones to automate greenhouse management processes. We could take this a step further. Airlitix can collect temperature, humidity, and carbon dioxide data as well as analyse soil and crop health.

Elsewhere, similar technology has been adopted. The Third Eye project in Kenya uses near-infrared cameras mounted on drones to survey and diagnose the plants for pests and diseases, water stress and nutrient deficiencies. This requires a combination of historical data and the use of AI. Last year, IBM developed an AI-powered app to test the quality of their soil and water on location, in real-time. The AgroPad is a technology that can rapidly perform chemical analysis of water and soil samples. In California, Ceres Imaging has mapped fields using images of farms, which are analysed using AI to ascertain whether crops are getting enough water. This technology helps farmers decide when to plant, water, spray and harvest their crops.

This conversation crops up as we scrutinize what it means to have a green economy. The 4IR does not merely provide tools for efficiency, but it presents a unique opportunity to interrogate how we can transform the industry as our natural environment deteriorates.

To a large extent, we underestimate the importance of the agricultural sector. Yet, without it, we would not have food security, we would see our economies crumble and there would be untold job losses.

-Tshilidzi Marwala

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5 Tips For SMEs To Counter The Covid-19 Crisis

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It was recently reported by ratings agency S&P Global that the coronavirus outbreak has plunged the world into a recession. On the home front, a sudden surge in COVID-19 cases in the country resulted in the President of South Africa imposing a 21-day country-wide lockdown, starting from Thursday, 26 March 2020. Combine this with the fact that the country also recently announced to be in its third recession since 1994 it’s safe to say that many businesses are beginning to feel the effects of the pandemic.

The impact of the coronavirus on small businesses is likely to be substantial, especially for local businesses who are already feeling the pinch, as financial and market uncertainty can easily translate into an emotional crisis that can overwhelm our systems. However, help is on the way as the Department of Small Business Development announced that a Debt Relief Fund has been set up to assist small, medium and micro enterprises impacted by COVID-19.

While this relief is welcomed, it is still vital for leaders to step up. The world has been through crises before, but during these significantly difficult times, the economic impact may be as severe or possibly worse. As such, those in leadership positions must use past crises as examples and apply what was learnt to keep the country on course and minimise the impact of the pandemic.

Karl Westvig, CEO at Retail Capital, has pinpointed the visible areas that are affected and outlined a few pointers to help small business owners weather the storm.

Liquidity

The first victim of panic is liquidity – banks, asset managers and funders stop lending. When they cannot calculate the potential risk, they will not lend.  Therefore, it is critical to shore up cash by drawing down on available facilities and suspending any unnecessary investments. Reduce expenses and manage cash flow daily.

Get Your Best Team on It

When a business is growing, we tend to shift our best people into roles linked to growth and new initiatives. In a crisis, these people need to move into the highest priority roles. These roles would include collecting from customers, raising facilities or engaging key clients.

Morale and Communication

People need leadership. This would include authentic and regular communication about the situation, what the business requires and how this will be achieved. You can’t control the circumstances, but you can control the response and actions. This will create more certainty.

Hands-on

Events evolve quickly and every day is critical. Leaders must be hands-on. They have to be in touch with customers, suppliers, funders and staff. They have to collect data on everything – the mood, the financial metrics, even customer stories. Some of the best information is anecdotal, not just big data.

Policies

It’s tough to lead when you don’t understand all the underlying levers. These can change in a crisis. What worked in a stable environment can go out of the window in an instant. The best approach is to start again, listen to customers and then adapt your policies within your framework.

“This is not a manual on how to handle the current crisis, but hopefully, the points mentioned above can add to what you are already doing. In simple terms, it is easy to be overwhelmed, so tackle a few things very quickly and with commitment. This will create certainty and lead to action. The alternative is paralysis,” concludes Westvig.

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