Monday, June 30, 2008

Chinese Private Equity Fund for Africa?

Reading in todays Business Daily about CADFund (China-Africa
Development Fund) I couldn't help but wonder about how such a fund
would go about tackling Africa's unique complexities.

A continent that has 53 unique territories and jurisdictions, each
with its own combination of conditions and peculiarities, Africa does
not easily lend itself to such ambitious initiatives. Having said
that, though, it was good to note the comments from the fund's vice-
president Mr. Hu ... "China has a very good relationship with African
countries but we have to learn a lot of things about them.."

Apparently the fund has already invested US$60 million out of the US$
1 Billionearmarked for Africa and cmmited by the China Development
Bank. With deals in a glass factory in Ethiopia, power station in
Ghana and chrome plant in Zimbabwe the Funds investment strategy and
criteria raise a few questions. Both Zimbabwe and Ethiopia carry
extremely high levels of political risk among other negative factors
so it begs the question as to whether such investmemts should be
viewed as bold attempts to bolster private sector activity and in the
long term have a social return or are they deals that have been done
to appease the powers that be and in return receive accts to markets
and/or much needed raw materials?

It is interesting to note that the Fund is currently eyeing deals on
East Africa and is projecting additional investments worth $300m
across Africa.

I wonder, will they consider seed, startup and venture capital which
fits in with most countries development plans in the East African

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Thursday, June 26, 2008

Online Payments: Is Kenya a step away?

In North & South American countries, Europe and many parts of Asia it is considered very natural to see something you want to buy online and simply click to purchase it. Unfortunately for Kenya and many other African countries this is not so. Payment systems for electronic trading are either non-existent or so rudimentary as not to be of much use for online applications.

There are signs, however, that bright developers might have found a way around the vacuous labyrinth of regulations and policies which hamper and constrain the financial sector from offering payment gateways for online and electronic transactions. A company in Kenya called 360 Microsystems has come up with an innovative way of handling online payments through an interface with Safaricom's M-PESA service.

M-PESA is a mobile payment system that allows customers to complete simple financial transactions by mobile phone. M-PESA bypasses the banking system as all cash and value is captured, stored and redeemed within the M-PESA system and countrywide network of agents. Many businesses both in the formal and informal sector are using M-PESA to make payments (the system has an upper limit of Kshs 50,000/= or US$800 per transaction).

From the look of it, 360 Microsystems MobilePay application creates an online transaction layer that allows merchants who have registered with them to offer products and services to any M-PESA user with the payment traversing the M-PESA system with validation by both the Merchant and MobilePay.

Going over the website at it still looks like it has some rough edges and it is not immediately clear to the casual visitor how to use the service due to a lack of documentation. A couple of other blotches include a requirement for the user to register before they can complete a transaction. This might be a turn off for the one-off, compulsive internet buyer who doesn't have the patience to fill in multiple pages of forms. Nevertheless the idea and concept is clearly there and with some fine-tuning and optimisation, this might actually be Kenya's answer to the online payment problem.

Software Industry Association established in Kenya

This past week, the Kenya Information Federation, which is the ICT arm of the Kenya Private Sector Association - KEPSA launched the Kenya Software industry Association (KeSIA). The stated objective of the new Association is to promote locally developed and branded software products and market these both nationally and internationally.

The event which took place on the 19th of June also yielded an ambitious 18 month workplan with the following highlights:

  • Through partnerships with universities establish marketable projects initiated by students but with express stakeholder interest from within the local and international private sector.
  • Establish an Awards system to incentivise the creation of local software products
  • Attract venture capital providers through a proactive promotion campaign both locally and internationally
  • Establish access to research labs thereby creating a conducive operating environment for software entrepreneurs - sort of a Dev Incubator
  • Market segment development through the development of partnerships with other sector industry associations
  • Develop and enhance the trust of local consumers through adpotion of international standards

The Association appointed a coordinator, Bernard Nganga and a deputy coordinator Isayah Okoth - both actors in the local ICT space.

Will this be the watershed for Kenya's developer community?

Tuesday, June 24, 2008

TBL Mirror Fund & Acumen Fund in Healthcare Deal

Meridian Medical Centre, a Nairobi-based healthcare provider has signed a deal with two of Kenya's youngest Venture Capital firms. The TBL Mirror Fund, a Netherlands backed fund which I played a key role in setting up has co-invested with Acumen Fund, a US-backed fund.

Besides the funds going into the deal, both Acumen and TBL will be putting in mamgement skills, enhancing IT sytems and optimizing other critical inputs.

With TBL's appetite for equity and Acumen's creativity in designing interesting mezzanine instruments this is probably a deal made on heaven for the healthcare provider.

It will be interesting to see what exit avenue is taken in another 4-5

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Kenya embarks on exercise to protect Intellectual Property - will this help our jeune entrepreneurs?

The penny has finally dropped. After the country's huge loss of  revenue due to Japanese patenting of Kenya's traditional 'kiondo' and the near loss of the traditional 'kikoy' patent to a shrewd Kenyan living in the UK, the Kenya Intellectual Property Institute (KIPI) has now embarked on a process to take stock of traditional knowledge and artifacts and determine those that need protection through patent.

What is most exhilarating to me is the growing awareness of the value of IP.

It was quite exciting to read about this in the paper today and then sit with a young developer to discuss patenting of the process his code uses to access and display live stock market data on a mobile phone. An app that might end up revolutionizing the way in which Kenyans track their stock portfolios and help stockholders catch fraudulent brokers who don't execute orders on time or even worse those who trade on stocks without authority from the stockholder.

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Monday, June 23, 2008

Young Kenyan Entrepreneurs innovate around the Nairobi Stock Exchange

With the recent, heightened interest around shares at the Nairobi Stock Exchange and the pandemonium that typically accompanies any recent IPO or rights issue a number of ambitious young Kenyans are innovating and finding ways of making it easier for local investors to manage/track their investments.

One of the most prominent of these is the new website - MyStocks - which offers visitors/members with the opportunity to compile and track a portfolio of shares. The site also offers a creative and colorful range of reports in graph, chart and text form which give both historical as well as detailed views of the stock(s) that one is interested in.

There are also a number of techpreneurs who are coming up with similar applications to run on mobile phones and provide live monitoring of NSE data among others.

These are interesting times!

Another Dutch-based Fund for Kenya?

Kenya is about to get yet another Dutch-based private equity/Venture Capital fund. This one comes in the form of the InReturn East Africa Fund managed by InReturn Capital, a Netherlands-based investment and advisory firm that has been sniffing around Kenya for about 3-4 years. With a stated initial committed capital of 10 million Euros (15 million US dollars) the fund aims to invest into 20 companies in East Africa. This means that the average investment would be in the $500k to $1m range.

So, yet again, another fund that has shied away from the true venture capital and SME space and prefers to play in the realm of private equity by preferring larger deals. How long will it take before investors realise the potential that rests untapped in funding/financing startups, early stage and small/medium businesses?

Kenya Venture Capital Association in the works

An initiative to establish a Venture Capital Association for Kenya is being spearheaded by Guido Boysen of Grofin Capital. This is a very welcome undertaking as it will definitely help nurture and support the growth of Kenya's budding venture capital industry.

With every likelihood of affiliation with the African Venture Capital Association - AVCA - the Kenyan initiative will have a good foothold in establishing its goals, objectives, priorities and ultimately putting in place structures that would lead to a vibrant and active association.

Kudos to the guys behind this!

Equity Bank goes VISA

This week Equity bank announced that it is now part of the global VISA network. It is initially offering a VISA debit card to it's over 2 million customers across the country. This expands the bank's potential service reach via 3rd-party ATMs and point-of-sale devices to enlarge on the service portfolio that the bank is currently offering it's customers.

Formerly considered to be an unconventional, adventurous and trend-setting bank, will Equity be the first Kenyan bank to bite the bullet and offer e-transaction services? Will this be the bank that finally provides local merchants the framework and platform to trade electronically?

Let's wait and see.....

Safaricom IPO yielded Savvy kenyan Investors? Methinks not...

This week starts out with a lot of hullaballoo over the Safaricom IPO. With an oversubscription of 532%, the resultant allocation of shares and headache over refunds have left a bad taste in the mouths of many.

After harvesting every penny from every possible source, including going out and taking loans to invest in the IPO most of the Kenyans who put money into Safaricom definitely do not *feel* like savvy investors - especially when they are receiving in many cases a refund of the majority of the money they forked out (some sources say as much as 3/4 refund).

Nevertheless - the one major success that I would attribute to the Safaricom IPO is the heightened awareness of the value of securities such as shares - as opposed to the more traditional brick & mortar investments.