AUGUST 9, 2020
This newsletter is a weekly in-depth analysis of tech and innovation in Africa that will serve as a post-pandemic guide. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT.


Pandemic-induced economic hardships are bearing down on the world, and Africa is not left out. Countries like Nigeria, and Zimbabwe have had economic problems, months before the pandemic came and piled on the existing woes.

In whatever version of normal we emerge, creating favourable economic policies – and an attendant increase in disposable income – is still a very pertinent issue, independent of the pandemic.

Now more than ever seems like a good time to examine the realities around the total addressable market in most parts of Africa; indicators, and proactive measures, etc. And most importantly, how all these will augur for the business models of consumer tech companies on the continent.

While we head out, catch up on previous editions of The Coronavirus Weekly Newsletter and editions of its iteration; The Next Wave.

Let’s dive in.


Tech and TAM realities
ICYMI – On Monday 3rd of August 2020, 15 years after it first set up its first outlet in Nigeria, South African retail giant, ShopRite announced it is considering selling all or a majority stake of its business in Nigeria.

According to a CNN report the company said;

“[Its] South African
division grew by 8.7% while sales at its supermarkets outside South Africa (excluding Nigeria) fell by 1.4%.”

Of course, mixed reactions trailed this announcement, and this report does a decent job of summarising the whys: currency fluctuations, profit repatriation, logistics concerns, sundry issues, COVID-19 and purchasing power.

It is also important to remember that two months
earlier, in June, Mr. Price, another South African retail brand shuttered operations in Nigeria.

Considering that Woolworths, yet another South African company, left in 2013, are Mr. Price and ShopRite 7 years too late?

Maybe. Maybe not.

In a Financial Times report at the time, a representative from Woolworths said;

“High rental
costs and duties and complex supply chain processes made trading in Nigeria highly challenging. The Nigerian business was unable to sustain a compelling product and value proposition which represents the brand well, and meets the needs of the Nigerian customer in a climate that is hot throughout the year. Given that Woolworths could not see these circumstances changing in the medium term, the investment was deemed no longer viable.”

These problems still persist to a large extent; it’s still very hard to do business in Nigeria.

But, it is also very important to note that this is not primarily a Nigerian problem and or, considering recent xenophobic history, a South Africa vs Nigeria problem.

Last year, Choppies and TFG exited the Kenyan market, the latter also left Ghana. They mostly cited increased competition and high operating costs.

How do all these dots connect?

Tech and the TAM illusion

In Africa’s growing tech and innovation ecosystem, there is a huge overestimation of the number of people that are willing, and able to pay for product and services; the total addressable market (TAM).

Most startup founders have a slide in their pitch deck where one variation of population size is directly equated to market size.

The fact that these huge retail brands selling essential goods are shuffling in and out of struggling African markets is very instructional. Will consumer tech
products, largely considered luxury in this context, sell?

Africa’s middle class is growing exponentially, but that may not even matter eventually, and you’ll see why.

According to a 2011 report (PDF) from the Africa Development Bank;

“The number of middle class Africans has tripled over the last 30 years to 313 million people, or more than 34% of the continent’s population, according to a new report from the African Development Bank (AfDB). The reasons for the increase in size and purchasing power of the African middle class include strong economic growth, and a move towards a stable,
salaried job culture and away from traditional agricultural activities.”

However, these numbers are positive, but not necessarily exciting when checked against population growth rates in Africa, and other – less populated – continents in the world.

This World Bank’s 2019 Accelerating Poverty Reduction in Africareport is a paradox that puts this into better

“The share of Africans living in extreme poverty has fallen substantially—from 54% in 1990 to 41% in 2015—but due to high population growth during the same period, the number of poor people in Africa has actually increased from 278 million in 1990 to 413 million in 2015. If circumstances remain the same, the poverty rate is expected to decline to 23% only, by 2030 and global poverty will become increasingly African, rising from 55% in 2015 to 90% in 2030.”

TLDR: As more people are escaping poverty, more are being born into it.

In a now popular Medium article from August 2019, VC and entrepreneur, Dr. Ola Brown dissects the mystery of market size in Nigeria. And most importantly, why population size does not equal TAM.

Nigeria is arguably regarded as Africa’s largest economy, but these lessons can be extrapolated to other markets on the continent.

How to TAM

In 2008 when it shifted
operations to solely focus on Africa, Shenzhen-based Transsion Holdings and its brand of smartphones came with a winning strategy; a focus on selling to all Africans regardless of economic status.

Even though it kicked off with a price war, it did not end there. Nikkei Asian Review outlines how Transsion positioned, and kept optimising for the market.

It was a winning strategy as today, Transsion accounts for most of the smartphones in Africa, and continues to grow market share.

Payday loan apps are the most popular applications of fintech, and another example
of tech solutions that best reflect the realities of TAM in Africa. There are many more, but some of the most popular solutions are currently targeted to the bottom of the pyramid.

Poverty will be eradicated from Africa, and tech and innovation will both play a major role in making this happen. Until this happens, it is important to build for the larger populace; price points, marketing strategies, market realities, and the whole nine yards.

In 2017, for the Harvard Business Review, William Attwell, outlines how much Africa’s middle class is misunderstood; a mistake the aforementioned retailers have made.

On a final note, being aspirational and building for market realities are not mutually exclusive.


How Africa’s biggest telecom companies are diversifying their revenue streams.
In the last ten years, social media and the internet have greatly disrupted the business model of telcos in Africa. Subscribers are adopting over-the-top (OTT) services for communication needs. As SMS and traditional phone calls are being displaced and replaced by instant messaging and internet-enabled voice and video calls, Abubakar Idris
explains how Africa’s biggest telcos are diversifying their revenue.

Technology to fix the medical gaslighting of women. Studies show that women are less
likely to be diagnosed with and treated for pain than men and when it comes to reproductive health issues, accurate and timely diagnosis are far between for women.
In this piece for our new Femtech in Africa series, Kay Ugwuede examines this medical gaslighting of women; the long winding history of dismissing women’s physical ailments as a by-product of a psychological affliction and, most importantly, how a simple tech solution can help.


“The next wave of innovation across Africa that I am keen to see is the integration of payment and transaction platforms across the continent. Payments for digital goods and services will be the biggest initial use cases. But given the limited trade currently ongoing across the continent, there is an important opportunity set for physical goods to ride these rails as well. As logistics remains a challenge for the latter, there is
room for continued innovation in the thinking around products and services for moving goods across Africa.”

Tomiwa Aladekomo, CEO, Big Cabal Media.

Every week, we will ask our readers, stakeholders, and operators in Africa’s tech ecosystem what they think the new normal will look like, and will share their thoughts here. You can share yours with with ‘The Crystal Ball’ in the subject line.

TC Insights

New Coat, New Cloth.
Since COVID-19 started, Titi (not real name) has only gone out of her house once. Titi now buys everything online; groceries, hair care products; you name it. This is the case for many Africans including residents in the continent’s largest

Initial assessment indicates that the pandemic has boosted e-commerce sales, but something more important is happening; consumer behavior is changing.

If you are familiar with Nigerians and their online shopping habits, you should probably know that among other issues,
trust has been a major barrier to the growth of the industry. There’s a
trust deficit that makes people prefer to go into physical stores to buy goods. Or in the case of online retail, cash on delivery.

The lack of trust has had a huge impact on the balance sheet of e-commerce companies in the past with returned and cancelled orders. The initial hype to solve the trust deficit with cash on delivery fizzled out. Konga, SuperMart, Payporte, were some of those who kicked it to the curb in the early days. Even Jumia, which initially didn’t want to stop COD, could consider doing so. The inability to solve the problem has limited the addressable market to a meagre 1% of what’s possible using Jumia’s numbers as an example.

With this context, the data from McKinsey’s June 2020 Consumer Pulse Survey becomes all the more interesting. The pandemic has forced new shopping behaviors including online shopping. While disposable income appears to be shrinking, people are seeking creative ways to meet their needs.

So while e-commerce sales have gone up, it’s more important to pay attention which is what drives where people shop.The key question is whether they will continue after the pandemic. Data seems to show that they may not.

The McKinsey respondents said they were more likely to buy their essentials in-store in the coming weeks. There’s a silver lining, however. A high share of respondents are now more willing to increase online spending for entertainment at home (e.g. Netflix). There’s an opportunity there.

If you are a founder in Africa, please fill our investor list here to let us know who gave you your
first check. Get TechCabal’s reports and send us your custom research requests here.

Best wishes for a great week

Stay safe and please observe all 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.

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– Victor Ekwealor, Managing Editor, TechCabal

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