Ventures

Sean Obedih: Say hello to Corporate Venturing, Africa

There is nothing like a good idea whose time has come.

I am talking about corporate venture capital in Africa.

You know the gist, but let’s recap. Africa accounts for 14 percent of the world’s population, is one of the fastest growing economies in the world, and has a growth rate expected to average 7 percent annually over the next 20 years.

Bottom line, it’s a continent is poised to become a leading source of innovation in a variety of industries.

 

Who’s paying attention?

According to the Kenyan based Savannah fund, corporate venturing is one of the hottest trends of 2014.

IBM opened its 12th Research Lab in Kenya in 2013, the only one in Africa. A number of projects are already underway in the areas of energy, water, transportation, agriculture, healthcare, financial inclusion, human mobility and public safety. They also run the successful Smartcamp competition for start-ups and were very impressed by the results.

Intel has also been actively investing into Africa, since June 2011, when Intel Capital invested $5M in JSE listed (Altech) Allies Technologies Limited. With the almighty MPESA expanding rapidly now across Asia from that £1M funding from Vodafone, everyone is seeing that the opportunities for tech companies are huge – since everything from financial services to education, healthcare and agriculture are unable to avoid modern technology.

Governments are also paying attention, and not just with their lips. Ghana finds itself heavily investing in modern infrastructure projects through Hope City, a $10 billion high-tech hub in the Greater Accra Region (complete with what will be Africa’s tallest building, amen) that is focused on both maintaining growth in the sector and attract major players in the global ICT industry to the West African country.

The launch of Hope City comes just a few months after Kenya broke ground on its own flagship tech mega project; located 60 kilometres southeast of the capital Nairobi towards Mombasa, Konza. Techno City is being touted as “Africa’s Silicon Savannah,” a major IT hub that aims to create some 100,000 jobs by 2030 at an estimated cost of $14.5 billion.

Then there is Rwanda, always our favourite everything-is-possible-in-Africa story. Rwanda recently announced the launch of a 4G network – pointing to a future that can create the conditions for innovation to flourish.

If you’re casting a long view, then this isn’t just about technology alone, in fact. Take for one instance Pharmaceutical giant GSK, which has been so active it recently sold 28.2 million shares in Aspen, netting around £425m ($741m), reducing  its stake from around 18.6 per cent to 12.4 per cent while retaining a seat on the board. The deal part of a trend which has seen GSK grow ever so close to the South African firm as part of a push into emerging markets, while also providing a conduit for Aspen to expand its overseas business.

 
SEE ALSO: Jason Njoku’s Local Champions | A Nigerian Internet Story
 

In 2009, GSK took a 16 per cent stake in Aspen, granting it the right to distribute GSK products in sub-Saharan Africa. GSK also handed over a German manufacturing facility along with marketing rights to eight international products. Last year, Aspen took control of a GSK generic drugs unit in Australia, while in October it bought a GSK plant in France and thrombosis treatments Arixtra (fondaparinux sodium) and Fraxiparine (nadroparin) in a deal valued at $1.1bn.

Those deals and others such as an alliance with Merck & Co helped Aspen become Africa’s biggest drug maker with 6,000 employees and sales of around $1.9bn in the year ended June 30 2013, up 27 per cent year-on-year. It now says it is the ninth-largest generic drug maker in the world.

These companies are thinking strategically in terms of decades – as Africa’s coming out party continues. And we shouldn’t have it any other way. They offer advantages that venture capital (VC) and private equity (PE) firms can’t match or even begin to contemplate. Corporate venturing allows small companies to tap into infrastructure and resources of the parent company.

Platforms like VC4Africa and organisations like AVCA have been instrumental in driving growth of the VC/PE industry but gaps remain beyond series B and C, so big they can perhaps only be plugged by corporates across many sectors.

And this solution appears to have come of age. The recent investment deal among MTN, Africa Internet Holdings (AIH) and Millicom allowing them to take a 33.3% each, will see MTN “develop” and “accelerate the growth” of AIH entities, including Jumia, Zando and Hellofoods, across Africa.

Then, for the first time, the prestigious Global Corporate Venture talk shop will hold a half-day session dedicated to corporate venturing in Africa during the two-day Symposium in London, the leading European event for Global Corporate Venturing professionals attended by over 500 executives.

I hope you’ll be paying attention.

 
[Photo Credit: danielfoster437 via Compfight cc]

Previous ArticleNext Article
Corporate Venturing founder of @SobekV and @thefoundershive.

3 Comments

  1. Interesting angle to investing in Africa. No doubt corporate venture capital (cvc) is huge compared to funds made available by venture capital (vc) and private equity (pe) firm, but with a very young ecosystem there's doubt such funds will get to the required layers. With vc and pe firms already setting limits to investments at $3mn, cvc will be x10 and x100 of that. While cvc, pe, and vc are welcomed, we'd need more angels and seed funds, more incubators, accelerators, to trigger large scale innovation where funding will be the last thing on any entrepreneur's mind.

    1. Thanks Alex, well the PE and VC industry is it's infancy across Africa apart from South Africa; there is no substitute to having a vibrant Angel investment ecosystem but we need to educate our people to start investing in Startups instead of buying expensive cars and investing in Real Estate.
      In terms of Corporate venture capital, I certainly believe that because they invest for both strategic and financial returns, this helps Africa more and they aren't constrained to the 3-5year cycle unlike VC and PE firms.

Leave a Reply

%d bloggers like this: