As technology and digital platforms continue its strong growth across African businesses, GetFundedAfrica reflects on potential and existing business owners should bring with a larger focus on the enabling environment, to position themselves for 2020 and beyond.
The statistics of Africa’s bludgeoning population are all over information media and staring at people during everyday life on the continent.
Fortunately, national regulators are in the thick of enhancing opportunities in the industry, especially via financial inclusion. Key to bridging the gap in the potential of agriculture and achieving financial inclusion regulatory targets are the utilisation of mobile applications as a strategy to improving digitisation in agriculture, these would cascade into benefits such as improved yields, wider margins, and resilience to climate change
BusinessDailyAfrica reports that top American investment bank Goldman Sachs is the latest to acquire a stake in Kenyan start-up Twiga Foods following a $23.75 million deal that will help the agro-based firm spread across the country and Africa.
The US bank will provide funding to the start-up together with three other Twiga Foods existing investors — International Finance Corporation (IFC), venture capital firm, TLCom Capital, and French private equity fund Creadev.
Twiga, purchase produce from a network of farmers and delivers it to thousands of informal vendors, has recently become a magnet for foreign investors, making it one of the most funded start-ups in the region.
Twiga Foods is a mobile-based supply platform for small- and medium-sized fruit and vegetable vendors and was established in 2014. It runs a cashless platform where it receives fruit and vegetables from 17, 000 farms for direct delivery to more than 8,500 vendors.
Twiga’s business model offers famers predictable rate for their produce, timely payments, escape the troubles of delivering to the market and avoiding the network of middlemen. Vendors, on the other end of the supply chain, are assured of a reliable supply of produce.
Besides fresh produce, Twiga has in recent months ventured into processed foods like rice, maize flour, cooking oil, milk, juice and sugar following demand from manufacturers keen on tapping into the firm’s technology-based distribution network.
The new round of equity funding will scale up Twiga Foods’ use of technology and inject efficiency into its food distribution model, ultimately boosting consumption of fresh, quality produce while lowering their cost.
Going back to GetFundedAfrica’s introductory paragraph on financial inclusion, technology and digital platforms, we can briefly describe part of Twiga’s business model. The company manages a digital platform which serves the purpose of distribution infrastructure, enabling end-to-end data collection and processing. Integrated with mobile money (M-Pesa), the platform facilitates cashless payments throughout its value chain
Twiga Foods’ distribution infrastructure is managed through a digital platform that enables real-time, endto-end data collection. The platform is also integrated with mobile money (M-Pesa) to provide cashless payments throughout the value chain
Also involved, is an additional ($6 million) debt from the Overseas Private Investment Corporation (Opic) and the Switzerland-based AlphaMundi, which specialises in impact investing.
Opic supports US businesses investing in emerging markets by offering loans and guarantees.
“Goldman Sachs is getting a stake and it will be the lead institutional investor in Twiga. It is providing the bulk of the $23.75 million, said Peter Njonjo, who became the company’s chief executive in March 2019 after stepping down as president of Coca-Cola West and Central Africa.
“This funding enables us to invest in our technology and organisation to tackle the inefficiencies in Africa’s domestic food production and distribution,” he added.
Other investors include IFC, which is the World Bank’s investment arm, TLCom Capital, and Creadev
What Attracted Investors/Funders?
Strategically, the investment underlines Goldman Sachs’ quest for deals in Africa and international institutional clients looking to invest in the continent as the investment bank grapples with a slump in revenue.
Co-investor, Venture capitalist TLCom Capital prefers to invest in tech companies in their early to growth stages, and its deal with Twiga comes as the Kenyan start-up plans to beef up technology in its next phase of growth.
Goldman Sachs reckons that food distribution will be big business in Africa given that its population is set to double over the next three decades, creating the need for affordable food sources and guaranteed markets for farmers. “We are delighted to be backing Peter and the highly capable team as they scale operations and drive sustainable access to higher quality and lower priced food on the continent,” said Jules Frebault, the Africa head at Goldman Sachs in a statement.
Since succeeding co-founder Grant Brooke as CEO earlier in this year, Mr Njonjo has focused on raising additional capital to help ensure that the company consolidates its Kenya operations while laying the groundwork to spread its wings into other African markets.
“We are using technology to get all these retailers onto a platform so that when they order, we can consolidate that buying power,” Mr Njonjo told the Business Daily.
Profile of Funder
According to Bloomberg, Goldman Sachs Group Inc. is a U.S. investment bank seeking to tap into the fast economic growth on the continent.
The lender is partnering with Investec on equity trading, which will allow both firms to extend their trading operations from Johannesburg to the rest of Africa, New York-based Goldman Sachs said in a statement on Wednesday. Goldman Sach seeks to leverage on the economic growth potential from Africa’s population profile; working-age population is larger than the non-working-age share of the population. Africa’s working-age population will rise from 705 million in 2018 to nearly 1 billion by 2030, according to the African Development Bank. Increased commerce, service expansion and quality on the back of a rapidly growing African fintech sector serves as further justification for Goldman Sachs renewed interest in South Africa and Africa at large.
