By Nishika Bajaj
The fourth edition of the India-Africa Entrepreneurship and Investment Summit held in Mauritius over July 17-18, 2024, at the Royal Green Wellness Resort in Moka sparked discussions on fostering economic growth and collaboration between the two regions.
A key panel discussion held on Day 1 titled “Current State of Early-Stage Funding in Africa & Mauritius” was moderated by Dr Oomesh Gokhool, Senior Lecturer, FoICDT, University of Mauritius. The speakers were Anna Ekeledo, CEO Afrilabs; Vuyisa Qabaka, HYBR Group; Nassima Sadar-Gravier, co-founder Mo Angels; and Rajiv Indimath of Inflection Point Ventures.
Dr Gokhool introduced the topic and opened the stage to the panelists to introduce themselves and lead the discussion forward. Anna Ekeledo noted that she’s the Executive Director and CEO of AfriLabs, an African network of innovation and technology hubs across Africa. Next, Nassima Sadar-Gravier noted that she’s an investor and an entrepreneur who is a co-founder of Mo Angels as the first and only syndicated angel network in Mauritius. For his part, Vuyisa Qabaka of pan-African innovation firm, HYBR Group, greeted everyone on the occasion of Mandela Day. Finally, Rajiv Indimath stated that he represented Inflection Point Ventures, a large syndicate of angel investors in India, and noted that a recent investment in Kenya had them excited about Africa.
Unique factors for the success of certain startup ecosystems in Africa and Mauritius
Nassima emphasised that Africa has four big countries – Kenya, South Africa, Egypt, and Nigeria – which have emerged and succeeded for the last decade. She noted that these have been recently joined by the DRC which is showing good growth potential. “Mauritius has something most of these countries do not have, which is a reliable internet and a good infrastructure. Something that all of these countries have, and that Mauritius is trying to emulate, is the entrepreneurial mindset,” she stressed.
Anna noted that the number one factor for the continent’s success is the entrepreneurial mindset. Second is the critical role that corporates play in the ecosystem. Another is the support system that contributes to the innovation such as hubs, mentors, and angel investors on the continent. Finally, the regulatory environment is both a critical factor to enable innovation, as well as forced by the resilient startups on the policy makers to ensure success.
Vu commended the University of Mauritius for making this platform possible and available, and for working with the likes of Mo Angels in consistently ensuring that the academic ecosystem of the university, including its researchers, commercialisation office, and technology transfer office, is part of entrepreneurial engagement. The other key item he emphasised was encouraging the Mauritian government to start thinking about the culture of research and development (R&D). Here, he noted that South Africa is one of the few countries that allocates a robust part of its national budget to R&D, while on average in Africa, less than 2% of fiscal budgets is allocated to it. He stressed too that about 50% of all VC capital is allocated to FinTech.
“The challenge with Africans, in terms of how we look at things, is that we look at it from 54 different perspectives and views, because of our 54 separate countries. As you guys would know, the advantage India has over our continent is the fact that you’re one subcontinent and one big economy. The founders who will ultimately win the opportunity in the market for growth in Africa as well are the ones who are going to be able to raise money to buy out their ideas in 54 countries and partner with them very seamlessly. And Mauritius has a very unique position in this, in the manner in which your government has done tax treaties and trade treaties, as well as your location being slightly outside of continental Africa,” he emphasised.
Rajiv noted that when it comes to leveraging Mauritius, it has features which can foster deep tech research, in terms of the depth of economy and political stability. Can deep tech for healthcare problems, for instance, be solved for Africa by Mauritius as a bridge? For that, he stressed that government should participate and universities as well.
How can Mauritius become a leading tech innovation hub?
Vu noted that to do business from Mauritius to America is a 12-hour time difference, while to do business in Mauritius and Ghana is a four-hour time difference and to do business with Mauritius in South Africa is a mere two hours! Mauritius is also a multilingual country with French and English spoken here. There are 32 countries of 54 on the continent that have French as an official language. The predominant language of business in Africa is English. Thus, Mauritius has the time zone and the language possibility advantage.
“It’s a matter of now understanding how to leverage these strengths to drive the difference and value that you can bring. And I love the angle of being really a strong knowledge center for new industries that are growing in the world – be it deep tech, biotech, or science innovation around data development,” he emphasised.
Anna noted that there were four key areas. First up, she noted that the tourism industry can be built for and rotated around to not just serve Mauritius, but Africa too. The second one is the blue economy and then third is manufacturing be it for textiles, food processing, metal and metal products. Finally, for trade and logistics, Mauritius offers a favourable ease of movement and policies that make it easier to get into the island.
“One of the exciting innovations here in Mauritius is Yugo, basically a logistics app connecting taxis and restaurants and the like. These are the sorts of solutions that can scale across Africa, appeal for Africa and the like. Now, among all of this, innovation should always be industry-led and research-led. But I feel like academia can actually step in to fill in that gap, to say that every research that we’ve done, at different levels, all up to PhD, would focus on critical gaps and challenges in different industries. This is a very important component that can actually drive development and make Mauritius an innovation hub for the continent,” she stressed. She also noted that a special position as a research entrepreneur in the university could ensure that applied research would happen.
Nassima added that going back to the entrepreneur, what is really missing and what we do not have in Mauritius is a good example of inspiring success stories, unlike Nigeria and Kenya. She noted one incubator accelerator called Turbine that entered into a partnership with the Association of Mauritius Manufacturers and is trying to change the start-up landscape in Mauritius. As a challenge, she pointed out that, being based in Mauritius, she sees us remaining constrained to the role of a service provider. Also, because of the demography make up with 1.2 million people here compared to 1.2 billion people on the continent, it is key to partner with people on the continent for solving the issues of the continent.
On climate change, she noted that, “By 2050, Africa will represent a quarter of the world population. Today, that population only contributes to 4% of the global greenhouse gas emission. And we must make sure that economic growth in Africa unfolds in a sustainable way with agriculture smart climate solutions, or putting more money into renewable energy, clean water, and whatever else the continent needs.”
Key entry barriers for early-stage startups in Africa and Mauritius: How to mitigate them
Here, Vu stated that Africa is not a capital-owning continent but is primarily a consumer-driven continent. As a result, not being a fully evolved capital class means that Africa is limited with resource access in terms of capital.
“Venture capital in Africa is less than 1%. So, we’re not a capital-owning class and we don’t have the full ability to necessarily deploy capital. The overemphasis on capital also takes away from the opportunity to re-imagine and re-create new opportunities to attract capital. I’ve always maintained that we missed a big opportunity in 2018 during the global recession to make ourselves really impactful and important, especially in our traditional colonial countries in Europe, and bring that capital – when it was really in a period of flux – in as an attractive and alternative investment when opportunities were missing,” he rued.
However, on the positive side, he lauded the global curiosity about Africa as the one frontier market in the world where nobody knows what’s going on. Such curiosity can be fed in the right way if the right people are standing up and being bold in presenting solutions that are driving value through capital, he stressed.
Vu also emphasised the need for talent as another big barrier. Once you have capital, suddenly the next problem is, do I have access to enough talent to convert the talent to value? And this is actually a big problem in Africa. He harked to talent as the next big thing. Speaking again to the university leadership, he urged them to train more people, invite more Africans to come into their spaces, create scholarships, and get all the funding needed to unlock the true potential of African youth.
On the last two barriers, he noted that these are interrelated ones such as infrastructure and energy gaps. He soberingly pointed out how lack of energy is crippling an even otherwise developed economy like South Africa. On infrastructure gaps, he stated that the real opportunity is to invest in infrastructure that enables the future – such as data centers.
Nassima stressed that the call for the university to attract more talent puts her in mind of the African Leadership University in Mauritius. She also went on to highlight a success story with Radley for Life networking in terms of a startup that went to a Lapland factory incubator run by two African guys who are now living the dream in Los Angeles – the global mecca for startups.
“One of the struggles in Mauritius that we see, even if we used to be competitive in the past, is that the cost of structures is too expensive right now. If you don’t have a Mauritian investor, it costs around $2,000 to set up a special purpose vehicle. The Angel Network in Kenya, for instance, prefers to use structures in Europe as those are cheaper. So today, Mauritius struggles with that. We have also the competition in Rwanda that is trying to position themselves to play a role, so I think we also need to find a way to lower the cost to make sure that not only the Mauritian investor will invest, but also so that foreigners from India can decide to invest through here because we do have those partnerships in place too,” she averred.
Anna emphasised that key barriers are early-stage financing, for which more collaboration is needed. She gave the example of Catalytic Africa as an initiative developed by AfriLabs and the African Business Angel Network (ABAN).
“Basically, what we’ve done is created a system where we connect all innovation hubs and the startups within the AfriLabs network across Africa with the angel investors that are part of ABAN across Africa. And through that system and connection, we encourage investment by the angel investors into startups that are part of the AfriLabs network. Then we also have a matching fund, grant funding, non-dilutive, into the startups after investments have been made. We’ve done this across the African continent where our first pilots had over 20 successful co-matching investments, including one in Mauritius and two investments from Kenya,” she highlighted.
The second barrier is access to market, which is a big challenge for African startups. She pointed out that market doesn’t necessarily equate to a large population, as investors are interested in addressable markets vs the full population size. “However, leveraging on large networks like AfriLabs, ABAN, and university networks, startups can get that support in terms of a path to scale to different African countries. And this is one of the trends we’re seeing on African continents with more African startups starting from one country, scaling fast, leveraging our networks to other African countries as well, and of course, taking advantage of favourable trade policies as well,” she concluded.
Collaboration between investors, startups & government to improve the startup ecosystem
Nassima pointed out that first and foremost is tax incentive. Incentives on tax need to be accelerated for people, not only as individuals, but as shareholders at corporates, to encourage the corporate to invest more based on a tax deduction that can be interesting.
“What we also try to do is to collaborate more with NGOs. If you want to reach people on the ground, it’s true that you may do that through corporates, through incubators, accelerators, but if you want to serve the poor people in your community, you also need to co-create with them. When it comes to collaborating with NGOs, India has great example in the agriculture sector. So, I think we really need to hold that chance to be that India is offering to Mauritius/ Africa, to really learn and to let grow with what has been doing,” she explained.
Rajiv pointed out that a critical piece of the collaboration puzzle is to create a scalable format to drive exits. If exits don’t happen, investments won’t happen, and if that’s not happening, then the ecosystem just collapses.
“Can Indian mature startups, like series B being funded, acquire African smaller startups? It could be strategic investments for expanding up, because they’re a go-to-market strategy in an organic way. But for that to happen, there are issues on transactions, taxation, and banking. So probably we need to solve that at a very systemic level, which requires for a lot of governments to come together, and the tax system will be a little more uniform and harmonious. That’s where I come from, because, without an exit format, the VC world wouldn’t exist. Maybe the first wave of exits would also happen by large African companies,” he explained.
Anna emphasised that things are already in place in Mauritius with the double taxation agreements with different countries. “It may be worth exploring further collaboration starting with the four big countries where we can visit the top incubators, accelerators and the private sector. We are really at the early entrepreneurial stage in Mauritius, so there is much effort to be done. Maybe we also need to see how India can help us to accelerate – instead of taking 10 years, maybe we’ll be able to do that in five years,” she said.
Vu offered two simple thoughts based on his experience of coming to Mauritius over the years. First, he noted that politicians and inevitably, the governments that they run, have very blunt instruments that they have to use, especially in Africa. He also paused to remind Mauritians that their competition is not Rwanda, but Dubai. The more we worry about Rwanda, the less our focus on our own game in terms of improving it, he thought-provokingly noted. The Mauritian government must use policy in whatever way that they think could catalyse or influence particular directions or particular outcomes. Maybe the resultant outcome potentially becomes the driver that leads to exits.
Here, he mentioned his visit to Israel in 2013, when an app called Waze was bought by Google for USD 1 bn. He remarked that the founding team of Waze had the opportunity to repatriate their funds to the US and have that money paid out in America. But they went and spoke to the government about the possibility of what they would want to do with those billion dollars in reinvesting it back into Israel, to drive talent, to accelerate the ecosystem, which brought about a change in exchange controls at the tax ecosystem in that country. So, exit can really be a good catalytic incentive for governments to make these shifts from a policy point of view.
The second thing he posited was a simple idea for Mauritius which happens to be famous for its accountants with some of the best PwC and Deloitte accountants hailing from the island. Combine this with a growing perspective in the startup ecosystem around boring businesses, around businesses that are in the small business tech space (SMBD tech), and you have a high value growth space, a thriving growth and digitalisation, and moving typically traditional businesses into the digital ecosystem. He pointed out the benefits of building the support infrastructure network that accelerates the development and growth of these solutions to drive efficiency, because Africa is a very archaic market.
“We might have 95% mobile penetration on the continent, but our adoption of technology is below 10%. So, you’ve got people walking around with supercomputers but are hardly using it for anything effective and efficient. And it’s a solution that I’ve built via the SMBD space that I’m going to use to drive that transition into digital adoption,” he concluded.
The session ended with audience questions exploring the role of Mauritius in the African investment ecosystem.
