Start-ups across Africa engaged in agro businesses aimed at land preservations and restorations have been urged to make use of the opening for the 3rd annual Land Accelerator which comes up in Nairobi, Kenya in April 2-9, 2021. The application for the project which has opened will run till end of June 2020. The project focuses of ‘Land Restoration Entrepreneurs’ whose businesses restore the land such as farms that incorporate trees onto their land; growing restorative plants and trees (such as bamboo or cashew trees) on severely degraded lands, thus restoring the water table and increasing soil nutrients.
Also inclusive are businesses that involve reforestation that creates forests for both private and public clients; agroforestry and silvopasture which adds trees to the landscape of traditional agriculture lands; creation of organic fertilizer, pesticides and other nature-based soil amendments; technologies that lessen the demand for firewood, such as bio-fuel cookstoves; business models that support the profitability of maintaining forests, such as eco-tourism, bioprospecting, and sustainable forest products such as honey, specialty seeds and berries, mushrooms, oils and more. It could e recalled that the Land Accelerator’s second African cohort met from September 7-12, 2019, in Nairobi, Kenya and 14 startups were chosen from 335 applicants and represent 8 African countries. Each received a EUR 3,000 grant in addition to a travel stipend.
The Land Accelerator Africa has in the last few years attracted the partnership of World Resources Institute in participation with African Forest Landscape Restoration Initiative (AFR100), a country-led effort to bring 100 million hectares of land in Africa into restoration by 2030, while Fledge, a global network of conscious company accelerators and investment funds that has invested in over 30 African companies, is the knowledge partner, providing world class skills-building and networking. The major donors are Germany’s Federal Ministry for Economic Cooperation and Development (BMZ), a co-founder of the AFR100 initiative. In Africa BMZ is working to strengthen the development capacity of African states, and the DOEN Foundation supports pioneers who work hard to establish a greener, more socially inclusive, and more creative society, in which the capacity of the planet is the starting point.
This project was inspired by the need to halt land degradation which is a threat to food production globally. United Nation’s sources claim that over 3.2 billion people are at risk from land degradation worldwide. The UN Food and Agriculture Organization (FAO) indicate that three million hectares of forest are lost and 65 percent of land is impacted by degradation in Africa every year. Nearly two-thirds of Africa’s land is degraded, which hinders sustainable economic development and resilience to climate change. As a result, Africa has the largest restoration opportunity of any continent: more than 700 million hectares (1.7 billion acres) of degraded forest landscapes that can be restored. The potential benefits include improved food and water security, biodiversity protection, climate change resilience, and economic growth.
Through the Land Accelerator, efforts are made to build networks and give entrepreneurs the opportunity to increase their skills in storytelling and pitching so that they can connect with debt and equity funders who can help them reach the next level. Through expert mentorship, participants will explore new ways of maximizing their business models so that they can compete and grow their customer base, revenue, and environmental impact. Through sector-specific workshops participants will learn about cross cutting themes and best practices targeted towards land-based entrepreneurs such as farmer outreach, last-mile distribution, water management, international environmental certification standards and procedures, agroforestry techniques and conservation farming. The participants of Land Accelerators often network with one another, becoming each other’s newest clients, and most trusted sounding board for new ideas.
To actualize this purpose, the project managers are currently recruiting qualified business leaders, agricultural leaders, and investors to get involved as mentors, presenters, and venture judges. They are also seeking companies that would like to sponsor naming rights to a reception, or a grant prize to a judge-selected entrepreneur.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
While African tech startups may have escaped the crippling effects of the raging coronavirus pandemic in the first quarter of 2020 (January-March), there is consensus among founders and investors that the pandemic will have a cooling effect on the ease with which startups raise funds in the months to come. In the meantime, venture funding in the first quarter of 2020 for African startups reached $350 million according to data from Briter Bridges, a tech ecosystem data consultancy.
Here Is All You Need To Know
South Africa, Nigeria, Kenya and Egypt topped the funding charts. These 4 countries also received the largest share of funding in the whole of 2019.
Notable receipts in the period between January and March this year include the $55 million debt and equity financing raised by Jumo, a financial services company based in Cape Town.
In Egypt, doctor-booking platform Vezeeta raised $ 40 million as interest in healthcare funding on the continent heighten.
WeeTrackerreports that 86 deals were announced in Q1 2020, comprising funding from accelerators, incubators, grants, and prize monies. They estimate that total funding from these disclosed deals totalled $245.13 Million.
While Briter’s Q1 2020 data shows fairly normal activity occurred in January and February, there was an 80 per cent drop in March, the month in which Africa began to record the first cases of coronavirus infections.
According to Weetracker, in Q1 2019, African startups raised USD 186.09 Mn in total. In the preceding quarter (Q4 2018), the net funding amount was USD 175.86 Mn.
With the global economy expected to go into recession in 2020, the 74 per cent growth in funding seen between 2018 and 2019, is unlikely to recur. Major economies that fund African startups will most certainly record significant declines.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
The Zayed Sustainability Prize is calling on African innovators who have solutions that address some of the world’s biggest sustainability challenges to enter its 2021 edition.
Offering an annual winners’ total reward pool of $3-million ($600 000 to the winner of each category), the award is the United Arab Emirates’ (UAE) bid to reward impact, innovation, and inspiration across five sustainability categories.
The Global High Schools category is split into six world region winners, with each school able to claim up to $100,000 to start or augment their project in their local communities.
The Zayed Sustainability Prize offers a pool of $3m in prize money for five category winners
Now entering its 13th submissions cycle, the prize has already awarded a total of 86 winners whose solutions or school projects have directly and indirectly, positively transformed the lives of 335 million people, around the world.
Last year 2373 entries were received from 129 countries, with Nigeria among the top five of all countries globally among applications.
Earlier this year Okuafo Foundation, a Ghana-based startup won the prize in the food category.
Evaluation criteria
While the scope of submissions varies, core elements of each entry must lie in the innovative ways in which technology, applications and solutions are driving positive transformation of people’s lives.
For the health, food, energy, and water categories, organisations should demonstrate that they are improving access to essential products or services and have a long-term vision for improved living and working conditions.
Additionally, many technological-based solutions often integrate with impactful long-term programmes and mechanisms like practical skills training, social entrepreneurialism, and gender empowerment.
The evaluation of the health, food, energy and water categories focuses on three core criteria: impact, innovation, and inspiration which are described as follows:
For “impact”, submissions must demonstrate improved quality of human lives in a social, economic, technological, infrastructural, or environmental capacity.
For “innovation”, candidates should show a clear and unique value proposition, be disruptive or transformative, technically and commercially viable, and have been adopted in at least one market.
The “inspiration” criterion requires organisations to demonstrate shared values with Sheikh Zayed’s sustainability approach, have the potential to influence behaviour and actions in the wider community, and encourage others to develop complementary solutions for the advancement of sustainable and human development.
For the Global High Schools category, each school’s project should be designed to be student–led with emphasis placed on the students being actively involved in the planning, implementation, and monitoring processes.
Similar to the other categories, projects should demonstrate innovative approaches that will also be impactful and inspirational to others. The six world regions of the Global High Schools category are: The Americas, Sub-Saharan Africa, Middle East & North Africa, Europe & Central Asia, South Asia, and East Asia & Pacific.
Zayed Sustainability Prize, 2020 Edition
Evaluation process
The Zayed Sustainability Prize has a three-stage evaluation process, beginning with due diligence conducted by an independent research and analysis consultancy.
This identifies the qualified entries and results in the selection of shortlisted candidates. Afterwards, evaluations are undertaken by a Selection Committee consisting of category-specific panels of independent international experts.
From this shortlist of candidates, the finalists are chosen and then sent to the prize jury who will select the final winners, across all five categories.
Winners of the Zayed Sustainability Prize 2021 will be announced during Abu Dhabi Sustainability Week, in January next year.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
Founders Factory Africa, a Corporate-backed accelerator and incubator has unveiled four new African startups to its Venture Scale programme, which kicked off yesterday.
In a statement yesterday, Founders Factory Africa announced that it was welcoming Truzo (South Africa), RedBird (formerly Redbird Health Tech, from Ghana), MVXchange (Nigeria) and WellaHealth (Nigeria) to the six-month programme.
Here Is All You Need Yo Know
The four startups will also have access to exclusive partnerships with Founders Factory Africa’s pan-African corporate investors — Standard Bank and Netcare — which includes access to distribution channels, customer acquisition, pilots, data, IP and expertise.
Founders Factory Africa said the four startups have established innovative tech products specifically targeted at the African continent.
RedBird
RedBird offers a suite of verified rapid diagnostic tests (RDTs) and supplies, staff training and its own proprietary monitoring software to pharmacies — giving patients accessible, convenient ways to monitor and manage their health. The startup last week announced the launch of a Covid-19 daily check-in app (see this story). In 2018 the startup netted investment from US investor Gray Matters Capital.
Truzo
Truzo claims to be South Africa’s first web and app-based escrow platform enabling buyers and sellers anywhere to transact in a safe and secure way.
Wellahealth
Wellahealth provides small scale and affordable micro-insurance for common conditions. The first product targeting malaria is affordable and ensures quality and immediate care at your closest pharmacy.
MVXchange
The startup is a tech-driven maritime logistics platform that matches vessel charter requests with available Offshore Support Vessels (OSVs) — the Uber for ships. The startup previously raised $100 000 in funding, in a round led by US venture capital (VC) firm Oui Capital (see this story).
About The Venture Scale Programme
Founders Factory Africa’s Venture Scale provides African startups with £220 000 in tailored support services across product design, data science, engineering and business development, along with a cash investment of £30 000.
The Venture Scale programme at FFA focuses on developing existing startups that have the potential to scale across the continent.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com
Inspite of the major successes recorded in 2019 by several Africanstartups across the continent of Africa grossing over a billion dollars in venture capital funding, there is still huge concern over the high mortality rate of startups in the continent. This was the findings of a report which gave a bird-eye view of the shutdown rate of African ventures by countries, industries, stage of business and other key parameters pointed out that amid the successes recorded, failures abound, advising on ways to avoid the trap. According to the findings, the shutdown rate for startups on the continent from 2010 to 2018 was 54.20%, tough this looks lower when compared to other jurisdictions like the United States, India and China, but it is high judged from the number of attempts in Africa.
Thomas Festerling, CEO and Founder of the GreenTec Capital Africa Foundation
The Report titled The Better Africa is the first of its kind data-oriented report which co launched with GreenTec Capital Africa Foundation and made available for free to readers in digital formats. Using 500 startups out of available database of 4000+ startups in Africa, from market intelligence platform, TheBase, to derive these insights, the sample was chosen randomly via an algorithm which made sure to pick ventures from over 30 countries.
Breaking down the findings of the report according to country demographics, it found that Ethiopia, Rwanda and Ghana experienced the highest number of startup shut downs with Ethiopia at 75%, Rwanda at 75% while Ghana was at 73.91% which is higher than the number of shut downs experienced among the continent’s most prominent tech hubs of Nigeria, Kenya and South Africa. Nigeria witnessed maximum shutdowns at 61.05%, followed by Kenya at 58.73% and South Africa 54.39%. The Report did not did not link reasons for shutdowns with the business ecosystem within the jurisdictions studied but it noted that the sector that faced the highest shutdown rates was social networking companies with over 90% closure rate.
Speaking on the development, Thomas Festerling, CEO and Founder of the GreenTec Capital Africa Foundation said that “as a team, we wanted to gain insight into what hurdles African founders are facing and what the major barriers to success are across the continent. We embrace failure as part of the journey made by any entrepreneur toward reaching their goals, it is a part of the startup lifecycle – if something doesn’t work, we learn from that and improve. After what we have begun to uncover, we look toward increasing the studies’ depth and reach across the continent to gather even more representative figures.
Apart from the above findings, the Report equally uncovered the process to build a successful startup on the continent. The 68-page report featured conversations with nine African founders that would help the ecosystem in decoding the set of practices adopted by these leaders to manoeuvre their business on the continent. The conversations with the startup founders delve into areas such as market need analysis, external funding, talent acquisition and revenue generation among many other topics. These founders come from diverse countries, industries, experience and represent both operative and non-operative companies.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
This year seem to be kicking off well for startups across Africa even as some are reeling under the pressure of keeping their heads above waters. A great example of outstanding raise this year is the $55 million fresh funding secured by South Africa’s fintech startup Jumo, a firm that shook the continent with its bold raise of $52 million just last year which was followed up with an additional USD 12.5 million three months later.
Jumo’s seeming effortless attraction to venture capitalists has been the talk across the continent for a while until it announced the closure of another massive funding round recently bagging a fresh $55 million which it says is for expansion into new markets and to launch new products in Africa and Asia. This latest investment shoots Jumo’s total funding up to $158 million, making it one of the best-funded tech startups on the African continent. Jumo had something of a swashbuckling year in 2018, raising $67.5 million across three funding rounds.
According to the company, the latest investment comes from new and existing Jumo investors including Goldman Sachs, Odey Asset Management, and LeapFrog Investments.
Founded in 2014 by Andrew Watkins-Ball who currently leads the startup as CEO, Jumo specializes in social impact financial products, offering loans and saving options to those who are neglected by existing financial systems, and particularly small businesses. The company leverages mobile networks to provide loans and savings products to its customers. The digital financial services company has developed a credit-scoring algorithm that helps customers to unlock the value of their digital footprints by giving an accurate estimation of their creditworthiness.
The startup bundles products from various banks and sells it to businesses on the lookout for credit. The entire process of lending is facilitated through mobile networks, where the startup has tied up deals with a number of service providers.
Given high feature phone usage in key markets as well as customer sensitivity to data costs, the company offers transactional capability via basic USSD, web or app to allow seamless access and usage of the platform and products. To date, Jumo claims to have helped millions of consumers across its six markets in Africa and originated more than $1 billion in loans, having started out in Tanzania.
Since September 2018 when the startup first announced expansion into Asia via Pakistan, Jumo has moved its headquarters to Singapore while also growing to no less than 10 million people saving or borrowing from its platform. At the last count, the company had some 350 staff across 10 offices in Africa, Europe, and Asia.
The Founder CEO Watkins-Ball expressed his excitement with regards to the startup’s latest funding announcement saying that “this backing will help us build a better business and break new ground. The strong vote of confidence, along with the world-class tech talent we now have in the business, means we can achieve exceptional outcomes for our partners and customers,” enthuses Watkins-Bell who has close to two decades in finance and investing under his belt. As earlier mentioned, Jumo’s latest funding is expected to drive expansion into new markets and facilitate the launching of new products in Africa and Asia.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Interested African startups should dust up their pitch decks. Venture Capital firm TLcom Capital has closed its Tide Africa Fund at $71 million with plans to make up to 12 startup investments over the next 18 months.
“We’re rather sector agnostic, but right now we are looking at companies that are more infrastructure type tech rather than super commoditized things like consumer lending,” TLcom Managing Partner Maurizio Caio said in an interview.
Maurizio Caio, TLcom Managing Partner
Here Is All You Need To Know
The fund’s latest $71 million raise included support from Sango Capital, CDC Group as well as the IFC. This fund raise also reversed the roles a bit for TLcom founder Maurizio Caio.
The VC principal — who usually gets pitches from African startups — needed to sell the value of African tech to other investors.
“It’s been tough to raise the fund, there’s no doubt about it,” Caio said. TLcomhighlighted its past exit record and the viability of the African market and founders to bring investors on board.
“We had the advantage of showing some good exits…The emphasis was also on the gigantic size of these markets that are underserved, the role that technology can play, and the fact that the entrepreneurs in Africa are just as good as anywhere else,” said Caio.
He also referenced African startups being constrained by the social impact factors often placed on them from outside investors.
“The equation is not just about ensuring employment and inclusion, but also about the fact that African entrepreneurs have to be in charge of their own destiny without instructions from the West,” he said.
TLcom’s close of the $71 million Tide Africa Fund comes on the high-end of a several-year mobilization of capital for the continent’s startup scene. Investment shops specifically focused on Africa have been on the rise.
This trend has moved in tandem with a quadrupling of venture funding for the continent over the past six years. Accurately measuring VC for Africa is a work in progress, but one of the earlier reliable estimates placed it at just over $400 million in 2014. Recent stats released by Partech peg Africa focused VC funding at over $2 billion for 2019.
How To Secure TLcom Capital Africa Fund
Startups wishing to pitch to TLcom Capital are, according to Caio encouraged to contact one of the fund’s partners and share a value proposition.
“If it’s something we find vaguely interesting, we’ll make a decision,” he said.
TLcom is looking for tech enabled, revenue driven ventures in Africa from seed-stage to Series B, according to TLcom Managing Partner Maurizio Caio.
On geographic scope, TLcom Capital will focus primarily on startups in Africa’s big-three tech hubs — Nigeria, Kenya, South Africa — but is also eyeing rising markets, such as Ethiopia.
Part of the fund’s investment approach, according to Caio, is backing viable companies with strong founders and then staying out of the way.
“We are venture capitalists that believe in looking at Africa as an investment opportunity that empowers local entrepreneurs without…coming in and explaining what to do,” said Caio.
TLcom investments are between $500,000 (typically the entry ticket for a seed-stage investment) and $10 million (typically the lifetime investment in a given company, often via several rounds, over its life cycle).
The group can be reached at info@tlcomcapital.com
A Look At VC TLcom And The Extent of Their Investment In African Startups
Since 1999 TLcom has supported tech entrepreneurs in Europe, Israel, the US and Africa across all technology sectors, from semiconductor manufacturing to mobile solutions and services, and at all stages of development, from seed to growth capital.
TLcom target entrepreneurs who can best serve Africa by emphasizing the role of African leadership, creating jobs, targeting underserved markets, bringing efficiency to inefficient verticals, and ultimately providing evidence of the enterprise as a development tool.
The group has its offices in London, Lagos, and Nairobi, with its team ranging from Caio (who’s Italian), partners Ido Sum (Israeli) and Andreata Muforo (from Zimbabwe) and senior partner Omobola Johnson — the former Minister of Communication Technology in Nigeria.
“When I look at the African market I suspect it’s going to be a company that’s very much focused on business to business and business to very small business — a company that can that can solve their challenges,” Johnson offered perspective on next startups in Africa that could reach billion-dollar valuations at TechCrunch Disrupt Berlin conference in 2018
TLcom’s current Africa portfolio reflects startups similar to what Johnson described. The fund has invested in Nigerian trucking logistics venture Kobo360, which is working to reduce business delivery costs in Africa.
TLcom has also backed Kenya’s Twiga Foods, a B2B food distribution company aimed a improving supply-chain operations around agricultural products and fast-moving-consumer-goods for farmers and SMEs.
Both of these companies have gone on to expand in Africa and receive subsequent investment by U.S. investment bank, Goldman Sachs .
Other investments for TLcom include talent accelerator Andela — which trains and places African software engineers — and Ulesson, the latest venture of serial founder Sim Shagaya.
In all, TLcom Capital Partners has made 36 investments. Their most recent investment was on Nov 26, 2019, when ulesson raised $3.1M.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com
2020 would obviously be the year African startups would possibly raise a higher amount of funding. Lateral Capital ‘s Lateral Investment Partners I Fund has raised a $50million to invest in promising early-stage and growth-stage startups on the African continent, with the fund far exceeding its initial closing target of $20 Mn.
Lateral capital’s Managing Partner, Steven Grin
“We are fortunate to have received the backing of such a high calibre group of families and institutions. This initial milestone positions us well to continue creating valuable companies with talented founders who deploy technology to build for the needs of the world’s fastest-growing region, ” Lateral capital’s Managing Partner, Steven Grin said.
Here Is The Deal
At the first closing of the investment round, investor Investmon Corp— the family-owned investment company that specializes in high impact, disruptive businesses in new and emerging markets — led the major investment with participation from other institutional investors and leading family offices across the United States, Europe, Africa, and the Middle East.
Lateral Capital’s Lateral Investment Partners I Fund has the capacity to invest between $250k to $5mn in early and growth-stage companies across the capital structure.
“Investmon identified and backed Lateral Capital as its partner for African venture investing on the strength of its African and US team and cornerstone portfolio. We believe in their innovative model of company building and are confident that their approach to technology venture capital in Africa is the right way forward,’’ Albert M. Amon, Executive Director of Investmon, said in a statement.
As gathered from Rob Eloff, who is also a Managing Partner at Lateral Capital, the investment firm is targeting six investments in 2020, and some of those are already in the bag with the next investment closing potentially coming as soon as next month.
Besides Nigeria, Kenya, and South Africa, Lateral Capital also has eyes for investments in other parts of Africa with Francophone Africa and Ethiopia looking like bright prospects.
Lateral’s presence in multiple tech hot spots gives it ample leverage to deliver on its mission of bridging the divide between opportunity and capital via its US and African teams.
After making its tenth portfolio investment in Q4 2019, backing Nairobi-based Lipa Later, the fund has already made three new and two follow-on investments in 2020 and has set a target to review 1,000 investment opportunities in 2020 to add up to six new portfolio companies in the form of equity or debt.
A Look At The VC, Lateral Capital
Lateral Capital, which has family offices across the United States and parts of sub-Saharan Africa, accepted its first LP commitment in early 2018. With the initial close exceeding expectations, the venture capital firm is well on track to reach its final close target of USD 50 Mn in 2020.
With a presence in New York, Lagos, Nairobi, and Johannesburg, Lateral Capital has built a solid structure by fuelling technology solutions across financial services, education, healthcare, and real assets.
The VC firm is led by a team that has, between them, 40+ years of experience in the African tech scene drawn from working in up to 15 African countries. They have collectively done no less than USD 3.5 Bn in transactions.
Samakab Hashi, who is a Partner at Lateral Capital, handles operations in Nairobi, Kenya. The VC firm also has Ochuwa Akhigbe-Ogionwo and Garikai Govati holding down the fort in Lagos, Nigeria, and Johannesburg, South Africa, respectively.
Since its founding, Lateral Capital has also backed Asoko Insight, AppZone, Koko Networks, Lynk, MedSaf, WorkStyle Africa, and SparkMeter. It has also made and exited investments in one of its former investment partners, Silvertree Holdings.
Lateral Capital, which describes itself as a mission-driven venture fund that invests in early and growth-stage opportunities by partnering with visionary entrepreneurs with a demonstrated commitment to its mission and first-principles thinking in profitably solving pressing challenges, is part of the Capria and Align17 impact investment networks.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com
In terms of take home pay, South African startup founders or CEOs earn more salaries than their counterparts in other sub-Saharan African countries. A survey of startup compensation packages which focused on nearly 50 startups in Kenya, South Africa, Nigeria and Ghana was carried out by Timon Capital, an early-stage investor in sub-Saharan Africa and think tank Briter Bridges. The aim of the survey was to determine how much startup founders and CEOs take home on monthly basis as their salaries.
“We wanted data around compensation because it’s a useful tool for ourselves — and also useful to the entire ecosystem,” says Chris Muscarella, partner at Timon Capital, on their motivation for undertaking this survey.
Here Is All You Need To Know
According to the survey, 25% of African startup CEOs earn compensation above $60,000 annually, six times the median compensation for junior engineers.
CEOs take home salaries that are substantially larger than other employees, but other C-level positions are roughly similar to senior engineers.
Kenya and South Africa generally have higher compensation across the board than Nigeria and Ghana, especially for executives.
However, on average, startup employees across all levels earn far more in South Africa than anywhere else. For instance, chief executives of startups in South Africa earn more than five times their counterparts in Ghana and Nigeria, and more than double those in Kenya.
Due to obvious sensitivities when it comes to disclosing financial data, companies are not easily forthcoming with information about their compensation structure, according to Lisa With, Head of Research at Briter Bridges.
“Most respondents were at their pre-series A funding stage. When companies receive funding, there is an understandable increase in sensitivity about financial details.”
The lack of data and transparency represents an obstacle to how deeply we can understand compensation in Africa. Yet, “it is not possible to compel company leaders to respond due to the sensitive nature of questions about salaries. Some companies, for fear of being targeted, declined to participate in our study.” With said.
Among software engineers, the survey also found that South Africa ranks highest for pay packages. In contrast, despite being Africa’s largest economy and being home to the continent’s most valuable start-up ecosystem, Nigeria is the least lucrative for software engineers among countries surveyed.
“There’s a definite correlation between founders who are magnets for talent and able to retain that talent over time. Compensation is an important part of retaining great talent, but not the only part,” the report notes.
According to the survey, senior engineers are in the middle of the compensation spectrum. They often receive double the salary of junior engineers. Median compensation for senior engineers is $22,500 and median compensation for junior engineers is $10,000.
Disparity In Talents
The survey also found that the average startup founder in Africa holds a Bachelor’s degree. Nearly 33% of founders obtained a university degree outside of Africa.
Amongst 1,079 founders of 788 startups surveyed, only 20% are female. Kenya has the least gender disparity with 25% female founders.
”Those developer salaries are fascinating – you’re competing with remote work from around the world so,” tweets Seyi Taylor, entrepreneur and founder of online tech magazine, TechCabal. ”Remote work means a bunch of things but the one that always stands out to me: companies in wealthier countries have access to cheaper talent companies in poorer countries compete for talent with wealthier companies from across the world.”
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
In a perfect world of the gig economy, James should be able to hire a car from a rental service store, present his driving license and other certifications to Uber (a car hailing service, for instance), get registered if he is considered qualified based on a series of paper checks and tests, and take to town helping online car hailers to reach their destinations, at an automated pay rate, and of course, as long as he fully complies with the terms and conditions of his engagement with Uber. In this arrangement, although James uses the Uber hailing service as a vehicle to carry out his business, he is still considered by Uber as an independent contractor who works off the controls and the supervision of Uber, except on occasions where he is skidding off his original rules of engagement. Thus, in a gig economy, James should not be on Uber’s payroll and is not even qualified to be classified as an employee of Uber. But all that has been shaken up, disrupted by the Californian state legislature, in a landmark new bill that has just scaled through the last phase in parliament, pending an assent by the Californian state governor. If other jurisdictions draw inspiration from California’s new standards, then all logistics, transport and other similar startups that have built their business models around independent contracting would be back to square one; that is, to the previous era when there was little or no disruption.
Bradley Tusk, president of Tusk Ventures and Uber’s first political strategist, told The Verge, “A domino effect [is] not just possible, it’s all but guaranteed.”
First Here Is What The New Law Proposes
The bill has changed the criteria for being an independent contractor.
Now, for a company to classify a worker as an independent contractor, it must prove three things (you may hear this being called the “ABC Test”). If they can’t, then the worker is treated as an employee.
First, companies must prove “the worker is free from the control and direction of the hiring entity in connection with the performance of the work.” In other words, companies can’t manage contractors the way they would employees. As an example, if a catering hall contracted a chef to prepare food events, but controlled how the chef prepared the food — giving them custom orders from customers, giving a strict schedule for production, and instituting standard procedures — they would likely not satisfy this part of the test.
Second, companies must prove “the worker performs work that is outside the usual course of the hiring entity’s business.” This means a company like Uber has to prove that driving users from location to location is outside the company’s usual course of business. Uber said as much in a press release, contending that the company is actually a “technology platform for several different types of digital marketplaces.”
Third, the companies must prove “the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” For example, an electrician doing contract electrical work is still a contractor. It’s unclear if ride sharing or meal delivery companies will be unable to clear this bar.
Consequently, under this new law, all of these independent contractors could earn employee status if the companies can’t satisfy the ABC test — which greatly increases the company’s overhead. Worker’s comp, benefits, tax implications — it would be a serious reshaping of these companies’ finances.
Applying The New Californian Rule To Similar African Startups
There is no specific legislation on independent contractors in two of Africa’s largest economies — Nigeria and South Africa. However, the English common law standards have continued to apply.
The common law recognises a distinction between a contract of service (an employer-employee relationship under which the employee subordinated his or her services to the authority of the employer — a locatio conductio operarum) AND a contract for services (a principal — independent contractor relationship where the former contracts the latter to deliver certain services and there is no subordination by the contractor, who instead is answerable to the service deliverables contracted for — a locatio conductio operis).
Who Therefore Is An Employee Or Independent Contractor In South Africa?
Since there is no express law that draws a distinction on who an independent contractor or employee in South Africa is, courts in the country have often adopted an approach that can best be described as a “reality approach”, which involves assessing the reality of the relationship by taking account all of the relevant factors on a substance-over-form basis, the public interest and the fact that parties have no licence to artificially take themselves out of the scope of important legislation such as the Labour Relations Act 66 of 1995 (“LRA”) the Basic Conditions of Employment Act 75 of 1997 (“BCEA”) and the Employment Equity Act 55 of 1998 (“EEA”) in existence in the country. Consequently, there is currently in place in the country an authoritative judgement on the issue. By the rules, in arriving at whether a person is an independent contractor or not, questions must asked on whether:
The principal has rights of supervision and control over the contractor, i.e. whether the contractor is obliged to follow the instructions of the principal, including whether the principal is able to dictate to the contractor when he/she is required to render their services, the manner in which such services are rendered and generally whether the contractor is at the principal’s ‘beck and call’
Whether the contractor forms an integral part of the principal’s organisation, e.g. whether the contractor participates or is an integral part of the principal’s internal management and/or staff structures; whether the contractor is ‘part and parcel of the organisation’ or whether the work done is for the business but is not integrated into it and is only accessory to it; whether the contractor would appear to an outsider to be an employee of the principal.
The contractor is economically dependent on the principal or whether he/ she is free to derive income from other sources as well. Thus, a person who is truly self-employed cannot be economically dependent on their “employer” when he or she retains his or her ability and power to contract with and render services to other persons or entities.
The above three factors are not exhaustive of all the factors to be taken into consideration when considering whether a person is an independent contractor or not.
The South African parliament has however gone ahead to incorporate these three conditions (considered as presumptions which can be rebuttable) as part of South Africa’s national legislation on employment.
Consequently, under the LRA and BCEA, a person who earns less than an earnings threshold amount determined by the Minister of Labour in terms of the BCEA3, and who works for or renders services to another person, will be presumed — until the contrary is proved and regardless of the form of the contract — to be an employee of the other person if one or more of the following factors are present:
• the manner in which the person works is subject to the control or direction of the other person; • the person’s hours of work are subject to the control and direction of the other person; • in the case of a person who works for an organisation, the person is a part of that organisation; • the person has worked for the other person for an average of at least 40 hours per month over the last 3 months; • the person is economically dependent on the other person; • the person is provided with tools of trade or work equipment by the other person; or • the person only works for or renders services to the other person.
The effect of this classification into the status of an employee or an independent contractor is that in the Fourth Schedule to the South Africna Income Tax Act, only employees and not independent contractors are entitled to earn “remuneration”. That is, a person can only earn ‘remuneration’ if their services or duties are required to be performed mainly at the premises of the client and:
the worker is subject to the control of any other person as to the manner in which his duties are or will be performed, or as to the hours of work; or
the worker is subject to the supervision of any other person as to:
the manner in which his duties are or will be performed; or
the hours of work.
This will also mean that the independent contractor would not be part of certain benefits applicable only to employees such as a working period of not more than 45 ordinary hours in any week, fair termination of employment among others. As opposed to employees, independent contractors are only entitled to such “benefits” and terms as have been agreed to between the independent contractor and his / her client. Again, the termination of independent contracting relationships is governed only by the agreement between the parties.
Who Is An Employee Or Independent Contractor In Nigeria?
Nigeria’s case is very much the same with South Africa’s. Both countries have no legislation that specifically defines who an independent contractor is, except of course the application of the common law principles of contract of service and contract for service. Nigeria’s Supreme Court, in Shena Security Co. Ltd v. Afropak (Nig.) Ltd & 2 Others [2008] 18 NWLR (Pt. 1118) 77 SC; [2008] 4–5 SC (Pt. II) 117 has laid down the some extensive factors that should guide courts in determining which kind of contract the parties entered into –
If payments are made by way of “wages” or “salaries” this is indicative that the contract is one of service. If it is a contract for service, the independent contractor gets his payment by way of “fees”. In like manner, where payment is by way of commission only or on the completion of the job, that indicates that the contract is for service.
Where the employer supplies the tools and other capital equipment there is a strong likelihood that the contract is that of employment or of service. But where the person engaged has to invest and provide capital for the work to progress that indicates that it is a contract for service.
In a contract of service/employment, it is inconsistent for an employer to delegate his duties under the contract. Thus, where a contract allows a person to delegate his duties there under, it becomes a contract for services.
Where the hours of work are not fixed it is not a contract of employment/of service. See Milway (Southern) Ltd v. Willshire [1978] 1 RLR 322.
It is not fatal to the existence of a contract of employment/of service that the work is not carried out on the emjployer’s premises. However, a contract which allows the work to be carried on outside the employer’s premises is more likely to be a contract for service.
Where an office accommodation and a secretary are provided by the employer, it is a contract of service/of employment.
These factors, as in South Africa’s case, would also provide a guide in considering whether the benefits and the responsibilities expected of the independent contractor or the principal as the case may be.
The Implication of The Positions of The Law in the Two Countries In Relation To California’s New Rules
The above explanations are important because in both countries, courts will not usually be bound by the labels that parties chose to attach to their relationship or defer to the declared intent of the parties in this regard, whether in their contract or elsewhere. Thus, stipulating in a contract (or elsewhere) that a relationship is one between independent contractor and principal or referring to the contract as an independent contractor or consultancy agreement, when the relationship between the principal and the contractor is, in reality, one between employee and employer, does not make the relationship any less of an employment relationship, and vice versa.
Comparing South Africa and Nigeria’s case on the one hand and California’s case on the other, it is obvious that California’s case went too far in establishing who an independent contractor is. For instance, apart from the fact that in California’s case, companies must prove “the worker is free from the control and direction of the hiring entity in connection with the performance of the work,” companies must also prove “the worker performs work that is outside the usual course of the hiring entity’s business” and that “the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.”
While the first test, i.e. that of control, appears to still conform to the basic standards used in determining who an independent contractor is, the second and the third tests tend to have looked beyond these basic features of control and supervision to question the need for independent contractors when the engaging companies could as well themselves do the work. This, in all ramifications, is predatory legislation, and which would be very hard to found followership in other jurisdictions.
Do African Startups Need To Re-Adjust In Time?
As a matter of strategy, remodelling the nature of services African startups offer on the basis of this new Californian legislation would, of course be a matter of long-term strategic plans for startups. African government’s demeanour towards this is such that it does not seem that they are very much in a hurry to change the status quo. Unlike, other jurisdictions that have clear-cut definitions of who an independent contractor is, most African countries are yet to come up with even a legislated definition of the term. California’s case cannot be unrelated to the continuing agitations by Uber drivers in the state, of exploitation by the multi-billionaire dollar car hailing company. In March, Uber agreed to pay $20 million to settle a nearly six-year-old lawsuit by California and Massachusetts drivers over their classifications. The case is McRay v Uber Technologies Inc, U.S. District Court, Northern District of California, №19–05723.
Uber, rival Lyft Inc and food delivery service DoorDash, on their own, have pushed for separate legislation to boost driver pay and benefits while preserving their independent contractor status.
African startups with similar business models as Uber, Lyft Inc, DoorDash, Fiverr, Upwork, and others should however, keep this in mind. It not only has the capacity of suddenly bringing to an end the gig economy, it also has the potency of sending all new disruptive business models that rely on public workforce into an abrupt extinction.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
