TechCabal Daily – A $180 billion economy

WHY E-COMMERCE IS KING IN EGYPT

On the pyramid of sectors in Egypt, e-commerce is Cheops, the great pyramid that towers over all other sectors. 

Over 20% of Egyptian startups are pursuing opportunities in the e-commerce and retail space. In fact, e-commerce in Egypt received over $131 million in funding last year, 1.4 times the number Nigeria, Kenya, and South Africa received in the same period.

Egypt also makes up 80% of the e-commerce market in the Middle East and North Africa (MENA) region where e-commerce is growing at an annual pace of 25%.

Why’s Egypt leading?

First, government initiatives are pushing e-commerce along. In order to raise money from taxes, the Egyptian government is playing a long-term game that will pay off soon. The informal sector makes up more than half of Egypt’s e-commerce sector and the government wants to help informal workers and businesses legalise their products/services. 

In 2020, the government also offered incentives like tax exemptions and simplified tax systems in order to get MSMEs to formalise their businesses, and thus raise taxes. 

Egyptian banks have also been instructed by the central bank to also put limits on cash transactions while removing the same limits from digital transactions. This forced MSMEs to move from cash dependency into digital fluidity. 

Next, there’s the Covid factor. The pandemic accelerated customer trust in digital services which helped businesses like Noon see a 940% increase in sales.

Finally, Egypt also has better infrastructure to help support its growing e-commerce ecosystem. While the country is still tackling last-mile delivery like most, it has the second-best infrastructure on the continent with a combination of good roads and telecoms systems.

Big picture: E-commerce growth is now slowing down in Egypt; it’s expected to grow by 30% this year and it’s having a ripple effect on all sectors. The drive on e-commerce is pushing for the development of payment systems (fintech) and last-mile delivery services (logistics). Last year, Egyptian startups raised $403.5 million, and this growth will attract investors who are on the hunt for emerging and frontier markets. 

FACEBOOK IS GETTING SUED BY INVESTORS

Meta getting sued isn’t new. Like Apple’s releases, it’s an annual event. Getting sued by investors though, that’s a new one. 

What’s up?

In a new lawsuit filed on Tuesday, a Trust Fund is suing Facebook’s parent company, Meta, for failing to warn them about an update that will lead to a $10 billion loss this year. 

Last year, Apple updated its software with a privacy change that allows iOS users to opt-out of targeted advertisements. 

Side-bar: You know how you google one item once and then start getting ads across Facebook and Instagram for the item you googled? Well, that’s targeted advertisement. It’s a tool that allows companies run ads targeted at people that are in specific places, like specific things or are within a specific age group, gender or any combination of it. Big Tech companies like Facebook and Google track user data across browsers and apps and use that data to help their clients sell products and services. 

For Facebook, most of its revenue comes from targeted advertisements. 97.9% of its 2020 revenue came from ads and it made a whopping $114.9 billion from the same in 2021. 

So if investors are pissed, you understand why. Ads are the biggest revenue stream for Facebook and Apple put a dam on it. Since most iOS users can now opt-out of apps tracking them, companies like Facebook will lose sizeable chunks of their ad revenues. 

One report claims that big tech companies lost $278 with the rollout of the privacy change that most iPhone users have implemented. 

While Meta did warn its investors last year that Apple’s privacy change could hurt its ad revenue, investors in this lawsuit claim that Apple didn’t disclose the full extent to which the change would hurt. Investors only became aware of the extent of the damage in February when Meta’s earnings report was lower than expected.

It was in that same month that Meta reported that it could potentially lose $10 billion in ad revenue. 

Zoom out: This lawsuit comes just as Meta has agreed to pay a $90 million settlement for a 2012 lawsuit where users alleged that Facebook was tracking their activities even when they logged out of the app. As user privacy gets tighter, companies will have to innovate in order to run relevant and profitable ads. 

ASSEMBLING A STELLAR FOUNDING TEAM

Startups are the new fad. There are new ones popping up on the continent every week. In 2021, there were about 560 startups on the continent that raised funding, a 42% increase from 2020. 

We’ve featured a number of these startups on TechCabal and their success stories always have the same significant factor: stellar founding teams that help drive operations. From Shola Akinlade and Ezra Olubi of Paystack, to Odunayo Eweniyi, Somto Ifezue and Josh Chibueze of Piggvest, great founding teams can mean the difference between a successful startup and failing one. 

Helium Health is another great example of a startup with a stellar founding team. The startup was co-founded by Adegoke Olubisi, Dimeji Sofowora, and Tito Ovia in 2016 to use technology to provide better healthcare services for Africans. The platform has signed more than 500 healthcare facilities up for its services. It also helps 7,000 medical professionals from these facilities provide care to more than 300,000 patients monthly. In 2020, it raised $10 million in Series A which aided its expansion into the MENA region last year.

So how do these startups do it? How do they build stellar teams and choose the right people for the right track?

Well, TechCabal found out for you. In Episode 5 of Building from Ground up, we had a chat with Tito Ovia from Helium Health on how founders can build stellar founding teams. 

Here are the highlights from that conversation:

• Connect with people with whom you share a similar drive and interest. “Everybody has to be able to align on how and where they want to end up,” says Tito.

• Identify strengths and weaknesses, and play them to your advantage. For small teams though, this will be hard because it’s always all hands on deck. 

• Conflict doesn’t have to be bad. According to Tito, it means “everybody is thinking and invested in the growth of the organisation”. Tito’s advice on resolving conflict is to see it as a pitch. “If you can’t convince co-founders on a particular direction, how do you want to convince the outside world, your investors, and board?” Tito also advises that teams should have neutral parties and advisors. 

• Trust is one of the things that makes a good co-founder. 

• Tito also believes it is important that co-founders be at the right place in their lives. “What this means is that, if you decide to be a high growth startup, everybody must have the time and bandwidth to build it,” she said.

• Finally, not every entrepreneur needs a co-founder, and not everyone needs one during the early growth phase. There’s a time for everything and everyone, and sometimes, that means co-founders don’t fit in just yet. 

WALTZING INTO A $180 BILLION INTERNET ECONOMY

Africa’s internet economy is projected to increase by 56% to $180 billion in gross merchandise value by 2025 as paperless retail transactions on the continent continue to rise in the post-pandemic era.

Blockchain-based mobile network operator, World Mobile figures show Nigeria, Kenya, South Africa and Egypt will fuel the continent’s mobile commerce boom.

In the period under review, there will be significant growth of smartphone penetration in Africa and simultaneous growth in digital retail transactions. World Mobile’s report shows there will be around 120 million new mobile subscribers by 2025 on the continent, taking the total to 615 million, up from 495 million in 2020. 

Also, fuelling the growth of Africa’s digital economy is the proliferation of entry-level internet-enabled handsets that cost $28 or less.

The growth of the internet economy also comes amid the rapid adoption of mobile money systems on the continent. Approximately 144 mobile money providers operate in Africa, with two companies such as M-Pesa, MoMo and Orange Money accounting for a significant share of the market.

This digital move is also primed to plug millions of unbanked people in those countries into mainstream financial services and prop up businesses especially those in remote areas.

Africa is expected to attract billions worth of investments into its data centre market on the back of the continent’s growing internet economy.

OPPORTUNITIES

• The Ekiti State Government has launched a free training boot camp to train 50 of its residents in software development. The scholarship is open to residents of Ekiti, Nigeria—including non-indigenes of Ekiti State—who are interested in learning tech skills to land new job opportunities. Apply here.

• Applications are open for the Sound Connect Funds in Southern Africa2022 grant. Southern African NGOs and businesses that focus on and support the cultural and creative sector in Southern Africa are invited to apply to get up to €180,000 in grants. Check it out. 

• Applications are now open for the United States African Development Foundation/Stanbic Kenya Grant Foundation Programme 2022. MSMEs in Kenya that are 100% African-owned are invited to apply for the chance to get up to $50,000 in grants. Check it out.

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