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A TechCabal roundup of the
impact of the coronavirus pandemic
on tech & innovation in Africa

APRIL 19, 2020
This newsletter is a weekly special focused on the effect of the novel coronavirus, COVID-19 on African tech and innovation ecosystems. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT.  

Hello,

One thing that has been obvious since the coronavirus emerged with resultant lockdowns is that it has caused a surge in e-commerce and digital payments. Africa is not left out. 

As we noted in Issue 2, e-commerce companies reportedly saw an increase in orders when the pandemic hit.

However, with lockdowns enforced and new policy restrictions in South Africa and other African countries, the e-commerce boom could be short-lived. And that’s our focus for today’s edition.

As the continent continues to record new COVID-19 cases and thankful recoveries; how are you? We hope you are keeping safe.

To help you stay healthy and happy this season, our sister publication, Zikoko has provided resources and practical tips.

Before we jump into today’s edition, here’s Issue 1, Issue 2 and Issue 3, in case you missed any.

Let’s go!

WHAT’S HAPPENING
No more room for a boom?

In contrast to initial reports that e-commerce companies in South Africa and across Africa were experiencing a boom, key players are now reporting a dip in revenue due to government restrictions. 

Naspers-backed Takealot, South African e-commerce company, told Reuters that it expects to lose about $20 million in revenue as a result of the lockdown. It also said it is now processing only 15% of the sales it would normally do. CEO, Kim Reid said he is hoping that the government will review the rules on online sales to limit the impact.

Takealot is the largest online retailer in South Africa in terms of market value,
revenue and volumes. Source: Online retailing in South Africa: An overview

As part of its measures to limit the spread of the virus in the country, the South African government announced a 2-week extension of an initial 3-week lockdown. It has also imposed restrictions on e-commerce companies selling what it considers non-essential items. South Africa currently has the highest number of coronavirus cases in sub-Saharan Africa.

In response to the restrictions, logistics and eCommerce businesses wrote an open letter to Ebrahim Patel, the country’s trade and industry minister calling for the ban on delivery of non-essential items to be lifted. The group pointed out that it could have devastating effects on small businesses.

There’s no clear statement from the government on why e-commerce companies cannot deliver non-essential goods. However, one reason that is apparent is that companies still require warehouse staff members and logistics personnel to fulfil orders. Essential goods also require people to fulfil orders.

When this is put into consideration, the ban on non-essentials can be said to be an effort to reduce the movement of people to the barest minimum.

In response, e-commerce companies say they’ve implemented the necessary precautions. Greg le Roux, CEO, Loot.co.za said its delivery partners have implemented contactless delivery mechanisms to ensure smooth and safe delivery. Roux called on the government to expand its definition of essential services.

“We have been inundated with requests for non-essential goods as defined by the gazette, however, which are deemed very essential by our consumers. The demand for laptops, schoolbooks, stationery, etc, illustrates the need for the list of the essential items to be expanded so that South Africans can continue to live as normal as possible during the extended lockdown period,” Soux added.

South Africa is not the only country where startups have faced policy roadblocks relating to COVID-19. In Nigeria, logistics businesses were initially confused regarding their exemption status. Without prior information, the government identified certain businesses as essential and granted them exemptions.

This was unlike South Africa which created a portal for businesses to apply for exemption certificates. The confusion in Nigeria caused about 3,000 truck drivers on freight logistics platform Kobo360 to stop work for fear of harassment by law enforcement.

South Africa faces tough decisions. Its economy is set to contract on an annual basis for the first time since 2009. Source: Bloomberg.

More job losses could happen if e-commerce companies begin to make hard decisions. Source: Bloomberg.

The Nigerian government quickly moved to rectify this, and even created a committee to help startups.

Now I am wondering how best African governments should approach policy and regulations in the face of the pandemic and a looming economic recession.

Should it be by immediately expanding the definition of essential services to save these companies? Rescinding position on non-essentials just like in India and allowing digital companies to operate un-hindered?

Or offering some form of funding to these companies until the crisis is over? (very unlikely)

There are no easy answers, to be honest. It’s a “damned if you do, damned if you don’t” situation.

In South Africa, the government says it is continuously reviewing its lockdown rules. And this seems like the best scenario; constantly adjusting to current realities.

For now, South African e-commerce companies have responded by pivoting to essential products.

Given supply chain constraints, perhaps it’s better for them to double down on delivering essential products efficiently well just like Amazon’s initial decision to do the same.

But Amazon is an unfair comparison when you consider dropping consumer spending and the fact that the e-commerce giant’s valuation is almost half of Africa’s GDP.

If nothing changes, these companies will be forced to make hard decisions.

FROM THE CABAL
Serial entrepreneur, Sim Shagaya shares lessons with African entrepreneurs for building in tough times.

On the first edition of TechCabal Live; “Building in tough times”, Sim said: “I have been forced to make decisions that I would not otherwise make, very similar to the way the [Nigeria National Petroleum Corporation] has been forced to deal with the [fuel] subsidy or South Africa with its airlines”.

To prepare against projected shocks, African investors are having conversations with portfolio companies on all the tough fundamental questions. Emergency working capital and securing cash in safe assets are some of the ways they are helping portfolio companies weather the storm. As Eloho Gihan-Mbelu, managing director of Endeavor Nigeria has written, basics of survival require startups to reduce expectations around outside capital, conserve cash, and re-forecast projections on cash flow.

The Nigerian government and private sector efforts are seeking ways to improve power supply during the pandemic. Conversations are said to be ongoing through a Stimulus Bill, to provide electricity at no cost to the public for a 2-month period. The Rural Electrification Agency (REA) in partnership with the Africa Development Bank (AfDB) has made available a US$200 million development fund to ramp up solar home systems and solar mini-grid projects to connect over 500,000 people across 105,000 households to energy supply.

Nigeria will repurpose a set of equipment designed for HIV and tuberculosis tests to accelerate COVID-19 testing. Nigeria Centre for Disease Control, NCDC received the first set of supplies of the equipment on Thursday, April 16. With it, the agency says tests will increase across the board.

NEWS FROM AROUND THE WORLD
Stripe is doing very fine.

The payments giant has raised $600 million in the midst of the pandemic, valuing it at $36 billion. Stripe says it currently has $2 billion on its balance sheet (assets less liabilities) indicating that it raised the new investment to grow its business and not because it is struggling.

Google launches ‘Journalism Emergency Relief Fund’ to support local news amid COVID-19. The funding is open to news organizations producing original news for local communities during this time of crisis, and will range from the low thousands of dollars for small hyper-local newsrooms to low tens of thousands for larger newsrooms, with variations per region.”

WHAT WE ARE READING
Author of the Internet’s most anticipated annual trends report releases a coronavirus version.

Mary Meeker and her Silicon Valley VC firm, Bond Capital told its investors on Friday, April 17 via email that the coronavirus’ high-speed spread and impact has similarities to the devastating San Francisco earthquake of 1906. “We are optimists and believe there is hope on the other side of despair….” the report says.

Fundraising in a crisis: Lessons from TaskRabbit. Leah Busque Solivan, Founder at the gig-economy company shares lessons on how she navigated difficult times, including the great recession in 2009, while raising capital for her startup. “The best founders start when times are difficult,” she says.

Stay Safe

Have a wonderful week and please observe all the guidelines provided by health experts.

You can subscribe to our TC Daily Newsletter; the most comprehensive roundup of technology news on the continent, and have it delivered to your inbox every weekday at 7 am WAT.

Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay updated on tech and innovation in Africa.

Victor Ekwealor, Managing Editor, TechCabal

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