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Startups
Hohm Energy in financial distress months after it raised $8 million
When Hohm Energy, a startup that provides access to loans for solar installations, announced an $8 million raise in February 2024, it was the largest seed round ever raised by a South African company.
Founded in 2021, Hohm Energy launched at a time loadshedding had worsened electricity supply in South Africa. People turned to renewable energy solutions to meet their power needs. The company claimed it had helped customers access up to $90 million in financing. Hohm Energy looked like a runaway success.
Yet things aren’t always what they seem.
Last week, CEO Tim Ohlsen left the company amid unconfirmed reports of cashflow problems. The company also laid off an undisclosed number of employees.
Ephraim Modise set out to find out what had happened at Hohm, and how a business flush with money just a few months ago has now entered business rescue.
Read Moniepoint’s 2024 Informal Economy Report
Did you know that 57.7% of the business owners in Nigeria’s informal economy are under 34 years old? Click here to find out more about the demographics of Nigeria’s informal economy.
Banking
Banks in Kenya to track high-value transactions
Since 1970, Kenya has lost $10.6 billion to illegal financial activities like money laundering and terrorism financing. While the country has worked to tighten its anti-money laundering laws, the Financial Action Task Force (FATF) included Kenya in its greylist in February—a list of countries with deficiencies in safeguarding their financial systems against money laundering and counter-terrorist financing.
The FATF grey list meant more scrutiny for banks and other financial institutions in the country. And so, the Central Bank of Kenya (CBK) asked commercial banks in the country to comply with global ISO 20022 messaging standards, which demand banks clear details about every money transfer.
On Wednesday, NCBA, Kenya’s fourth-largest commercial bank, told users that it would start tracking cash deposits and transfers above 1 million Kenyan shillings ($7,700). The bank is among the first banks in the country to implement the rule.
Banks across the country will be keen on following the rule, as non-compliance attracts a $155,000 (KES 20 million) fine.
A previous attempt to grant tax authorities access to bank and mobile money transactions was unsuccessful. In its bid to uncover tax cheats, Kenya’s tax regulator sought to look through bank and mobile money transactions. However, the Law Society of Kenya said the move was against users’ right to privacy.
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Telecoms
Credit agencies downgrade Liquid Intelligent Technologies, now credit-risky
Debt is cheaper than equity. But during low interest rate periods, it becomes tempting for companies to raise more money than they need. And that oversubscription can be problematic because debt must be paid back.
One such company, Liquid Intelligent Technologies (formerly Liquid Telecoms), a pan-African telecommunications company, is now struggling with debt repayments. Within the last 7 years, Liquid raised $1.4 billion through debt instruments.
The raise had a debt agreement that required them to maintain a debt-to-earnings (DTE) ratio of 3.5x. This means their debt could not exceed 3.5 times their net earnings. The agreement also stated that the DTE ratio threshold is supposed to decrease to 3.0x by August 2024. However, as of the end of June, Liquid’s DTE ratio was still 3.46x.
Its next repayment schedule is due in March 2026 for a $220 million loan. Another $620 million from issued bonds is due in September 2026. Lenders are growing impatient: Liquid has to either increase its earnings or lower its debt.
Only the former is conceivable as there’s low confidence that Liquid will meet this deadline given its slow performance. Although its revenue grew to $183.7 million in the last quarter, its profit margin took a beating to 65.5% as the company struggled with forex losses from its Zimbabwean business. Liquid still suffers from a net debt of $930.6 million.
To worsen things, credit rating agencies Fitch and Moody’s downgraded the company’s rating from B to CCC+ and B3 to Caa1 respectively, making Liquid a company with “substantial risks”.
This outlook is bad for a company that has historically been dependent on debt to finance its infrastructure-heavy telecoms business. Refinancing the business again through debt will mean getting loans at high interest rates—if at all it gets another loan. Amid all this, former CEO and deputy executive chairman, Nic Rudnick stepped down from the CEO position of Liquid Intelligent Technologies in September 2022 to take up the position of Deputy Executive Chairman. Following more than 20 years in the company, Nic has decided to step down from executive responsibilities and will continue to serve the company as a non-executive director.
Liquid is staying low and seeking to raise $90 million equity funding from the US International Development Finance Corporation. Question marks still hover around how the company will use the cash; a few critics question Liquid’s run-up debts that led it here.
Startups
Glovo extends ads service to Nigeria
Food delivery businesses are small-margin businesses. The businesses often offer services in adjacent verticals to earn more revenue. For example, Chowdeck, popular offers Relay, a parcel delivery service.
In July, Chowdeck also said it was building an ad-product.
A customer base of 600,000 also meant that the startup could offer ad placement in its app. And so it did, offering slide-show banners on its app at ₦250,000 ($152) per week. The startup also advertises other businesses via push notifications, charging ₦250,000 per notification.
Chowdeck’s move follows other businesses which are branching into advertising. In September 2023, Glovo, the Spain-based food delivery platform, launched its own ad service. This month, that service expanded to its Nigerian platform. Nigerian users were shown an ad for Jollof+, a savings product on its app.
While advertisers are now spoilt for choice, with food delivery platforms starting to emulate the advertising models of traditional media companies, the competition between these startups to offer the most compelling and effective ad solutions has only just begun.
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TC Insights
Funding tracker
This week, Egypt-based fintech Lucky ONE raised $3 million in funding from Lorax Capital Partners, KEM, DisrupTech Ventures and other existing investors. (August 7th)
Here’s the other deal for the week:
- Egyptian lending startup Qardy secured a seven-figure pre-seed round of investment. The round was led by 500 Global, White Field Ventures and Vastly Valuable Ventures, with contributions from various angel investors. (August 6th)
Follow us on Twitter, Instagram, and LinkedIn for more funding announcements. Before you go, our State of Tech in Africa H1 2024 Report is out. Click this link to download it.
Crypto Tracker
The World Wide Web3
Source:
|
Coin Name |
Current Value |
Day |
Month |
|---|---|---|---|
 Bitcoin |
$60,923 |
+ 7.04% |
+ 6.41% |
| Ether |
$2,666 |
+ 9.67% |
– 13.01% |
 XRP |
$0.600 |
+ 0.25% |
+ 36.40% |
| Solana |
$156.83 |
+ 2.61% |
+ 8.28% |
* Data as of 06:28 AM WAT, August 9, 2024.
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Written by: Emmanuel Nwosu & Faith Omoniyi
Edited by: Muyiwa Olowogboyega & Timi Odueso
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