Weekly Investor Update (June-WeekOne-2024)

10 min Read June 7, 2024 at 5:00 PM UTC

Monday

Kenyan climate data startup Gro Intelligence shuts down

Gro Intelligence, an agri-data platform based in New York and Nairobi, has reportedly shut down after months of capital shortages, leadership changes, and a controversial restructuring earlier this year.In March, the company laid off 60% of its staff, a move currently under investigation by the SEC for alleged labor law violations, as former employees claimed they were not given prior notice. The company’s founder, Sara Menker, was replaced as CEO by James Cariello in February.Despite securing some funding in March, it only provided temporary relief. Gro Intelligence raised $85 million in Series B funding in 2021 from investors such asAfrica Internet VenturesandIntel Capital, and $117 million throughout its existence. It was recognized by TIME magazine as one of the 100 most influential companies that year.

The shutdown is believed to be partly caused by last year’s funding drought, which impacted many startups. Despite high hopes and significant investments, its financial struggles became evident in early 2024 when reports surfaced about difficulties in meeting payroll and pension payments. This closure follows the shutdown of two other well-funded Kenyan startups in 2024: iProcure, a B2B agricultural inputs distributor, and Copia, a B2C e-commerce platform that entered administration in May. The company’s decline underscores the challenging environment for ambitious startups reliant on continuous funding in a volatile market.

South Africa’s ANC loses its 30-year majority in landmark election

The African National Congress (ANC), the party that has dominated South African politics since the end of apartheid, has lost its parliamentary majority for the first time in three decades. Final results from last week’sgeneral electionshowed the ANC securing 159 seats in the 400-seat parliament.Despite remaining the largest party, this is a significant setback, as the ANC had previously held an overwhelming majority. President Cyril Ramaphosa, addressing the situation, emphasized the need for all parties to collaborate for the country’s benefit.The new parliament will convene in 14 days, and while traditionally this is when the president is elected, the process may take a bit longer with the new dynamics in place. The ANC will now need to form coalition partnerships to govern effectively.

Investors are preparing for further volatility in South Africa’s financial markets following an election that resulted in no clear winner. The uncertainty surrounding coalition talks and future policy directions has heightened market tension. On Monday, the rand showed increased volatility, briefly reaching levels last seen in September. By 11:53 a.m. in Johannesburg, the rand had strengthened by 0.3% to 18.7375 per US dollar, potentially marking its first day of gains in four days. Yields on benchmark local-currency debt fell by nine basis points to 12.1%, and stocks broke a four-day losing streak, posting their largest daily gain in nearly a month. The market’s movements reflect the cautious optimism and nervous anticipation of the political developments ahead.

South Korea hosts first-ever Africa summit, eyes continent’s minerals

South Korea is hosting a summit with leaders from 48 African nations to strengthen ties over Africa’s rich mineral resources and vast export potential. The continent holds 30% of the world’s critical minerals like chrome, cobalt, and manganese and is home to 1.4 billion people, the majority of whom are 25 or younger.President Yoon Suk Yeol views cooperation with Africa as essential for South Korea’s industrial and digital transformation ambitions. At the summit, attended by at least 30 heads of state, Yoon and African Union chair Mohamed Ould Ghazouani will issue a joint statement.The event underscoresAfrica’s importanceas a partner for South Korea’s economic goals. On Wednesday, South Korean business leaders will conduct a follow-up business summit focused on investment, industrial development, and food security, aiming to foster deeper economic collaboration.

South Korea, a major global energy buyer a hub for leading semiconductor producers, and the fifth-largest automaker focused on electrification, sees a partnership with Africa as vital. Since Friday, President Yoon has met with leaders from Sierra Leone, Tanzania, and Ethiopia and plans to meet leaders from Zimbabwe, Togo, Rwanda, and Mozambique on Monday. Tanzania announced it would borrow $2.5 billion over the next five years through concessional loans from South Korea. Ethiopia signed a $1 billion financing deal over four years, focusing on infrastructure, science and technology, health, and urban development.

Zambia’s Bosso raises $400k pre-seed to scale construction e-commerce

Zambia’s largest online construction material marketplace, Bosso, has recently raised $400,000 in pre-seed funding to enhance its platform and introduce new features.Bosso, launched in 2022, provides widespread access to quality, affordable building materials and claims to have onboarded over 1,000 hardware stores and served more than 200 homebuilders across four of Zambia’s 10 provinces.The funding, secured fromLeonard by Vinci,Launch Africa Ventures,Renew Capital,Change-Com, and various angel investors, will support Bosso’s expansion in Zambia and the development of new products.

The e-commerce landscape offers vast opportunities for African entrepreneurs to carve out profitable niches. As online shopping grows in popularity, identifying and investing in promising e-commerce niches becomes crucial. In a market flooded with various e-commerce brands, niche focus can lead to rapid scaling due to unique product offerings that address specific market gaps. For instance, direct-to-consumer (DTC) brands like those selling meal replacements or beauty products thrive by highlighting key differentiators that set their products apart from competitors. By homing in on particular needs and preferences, these businesses can build strong customer loyalty and achieve substantial growth in a competitive market where revenues are expected to hit $56 billion by 2029.

South African economy unexpectedly contracts in first quarter

South Africa’s economy recorded a slight contraction in the first quarter of 2024, as revealed by statistics agency data on Tuesday.The GDP shrank by 0.1% quarter-on-quarter in seasonally-adjusted terms, contrary to economists’ expectations of a 0.1% growth. This decline was primarily driven by a downturn in the mining and construction sectors.On a year-on-year basis, the economy grew by 0.5%, slightly below the 0.6% growth forecasted by economists. This underperformance highlights ongoing challenges in key sectors and underscores the need for effective policy measures to stimulate economic growth.

South Africa’s economy has faced prolonged stagnation over the past decade, plagued by rolling power cuts, high unemployment, and inefficiencies in ports and rail systems, which have significantly hindered growth. In the first quarter of 2024, six out of ten industries tracked by Statistics South Africa experienced contractions. The construction and mining sectors were the hardest hit, with declines of 3.1% and 2.3%, respectively. Additionally, consumer spending weakened, as final consumption expenditure fell by 0.3%. Despite this, the South African central bank projects a GDP growth of 1.2% for the year, expressing optimism for an improved performance in the second quarter.

Morocco plans derivatives to help finance 2030 FIFA World Cup projects

Morocco is gearing up to introduce derivatives trading by the end of this year, according to Nezha Hayat, chair of the Moroccan Capital Market Authority. This move aims to expand the country’s capital markets, especially to finance infrastructure projects ahead of the2030 FIFA World Cupit isco-hosting with Spain and Portugal.With a focus on attracting more retail investors, Hayat stressed the need to broaden the market’s participation. Plans include launching a derivatives market alongside other financial instruments like exchange-traded funds, foreign currency-denominated mutual funds, and Sharia-compliant mutual funds.In addition, there are proposals to introduce mutual funds tailored for professional investors with less stringent constitutions and investment rules. These initiatives signal Morocco’s commitment to enhancing its financial infrastructure and attracting both domestic and international investors.

Indeed, the scale of projects planned for the 2030 World Cup in Morocco underscores the importance of capital market reform in facilitating financing for these initiatives. With banks unable to single-handedly fund all ambitious projects, leveraging the capital market becomes essential. The estimated spending of 200 billion dirhams ($20 billion) highlights the substantial investment required for strategic infrastructure and development ahead of the event. Co-hosting the World Cup further emphasizes the significance of these projects, not only for Morocco’s infrastructure but also for its global stature. By implementing capital market reforms, Morocco aims to unlock additional sources of funding and accelerate the realization of these critical projects.

BRVM main index falls on Orange slump despite historic SIB, SGB rally

The BRVM Composite index fell by 0.24% to 225.41 points on Wednesday, largely driven by a 3.93% decline inOrange CIshares, which dropped to 11,000 FCFA ($18.23).This decline overshadowed the positive performances ofSociété Générale CIandSIB, despite the former reaching its highest price ever at 20,295 FCFA with a 1.98% increase, and SIB climbing 7.24% to 6,595 FCFA, its highest in 15 years.The BRVM 30 index also declined by 0.35% to 112.41 points, while the BRVM Prestige index rose by 1.28% to 107.70 points, continuing its upward trend.

Top performers for the day included SIB, Oragroup (+6.48% to 1,890 FCFA), and Filtisac (+5.08% to 1,345 FCFA). In contrast, Uniwax experienced the largest drop of the session, falling 5.00% to 380 FCFA, followed by Air Liquide (-7.03% to 595 FCFA) and Orange CI (-3.93% to 11,000 FCFA). Orange CI and Nestlé CI dominated trading activity, accounting for 67.18 million FCFA and 50.43 million FCFA respectively, out of a total transaction volume of 421.70 million FCFA.

PE investor TLG Capital backs African swimwear brand

Private investment firmTLG Capitalhas invested an undisclosed sum inLiberty & Justice(L&J), an African swimwear brand available in over 250Targetstores across the USA. This investment marks the 40th deal executed by TLG Capital.Founded by Chid Liberty and former Miss Africa, Georgie Badiel Liberty, L&J is renowned for its vibrant, culturally rich designs and ethical production standards.Zain Latif, principal at TLG, stated, “Our investment will support L&J in expanding manufacturing operations on the African continent, including the establishment of a future factory in Liberia. This initiative is expected to create 700 jobs and introduce African-inspired prints to the global market.”

TLG’s investment strategy centers on innovative private credit solutions that promote economic growth and social impact across Africa. Through its Africa Growth Impact Fund (AGIF), TLG has facilitated numerous impactful investments, including initiatives to extend credit services to Nigeria’s informal sector. The investment in L&J aligns with TLG’s broader strategy of leveraging local knowledge and expertise to navigate the complexities of African markets. This approach has enabled TLG to successfully invest in diverse sectors across the continent, contributing to sustainable economic development.

Dividend payouts by BRVM stocks hit $1.1bn as telcos lead the pack

Dividend payouts by companies listed on the Bourse Régionale des Valeurs Mobilières (BRVM) reached 654.7 billion FCFA ($1.1 billion) for 2023, with telecom companies leading the increase.Overall, the turnover or revenues for listed firms rose to 9,304.5 billion FCFA, a 5.74% increase from 2022.Sonatel, the top performer, achieved the highest turnover of 1,620.7 billion FCFA, marking a significant increase of 165.7 million FCFA.The consolidated net profit forBRVMcompanies grew by 6%, from 1,222.7 billion FCFA in 2022 to 1,291.8 billion FCFA in 2023.Sonatelalso saw the largest profit gain of 52.8 billion FCFA.Dividendsdistributed increased from 611.2 billion FCFA in 2022, a 7% rise. Notable increases came fromNei Ceda CIandBOA Mali, significantlyrewardingtheir shareholders.

The BRVM, alongside other African stocks, offers some of the best dividend yields in emerging markets, attracting investors seeking high returns. These markets are known for their relatively high dividend payouts, as seen with BRVM’s recent $1.1 billion in dividends. Also, African stocks are often undervalued, trading at lower price-to-earnings (P/E) multiples compared to other emerging markets. This combination of high dividend yields and attractive valuations makes African stocks a compelling investment option. In addition, portfolio optimization through dividends is a powerful strategy for investors seeking to generate passive income and potentially mitigate risks on African stock exchanges. By using theDaba platform, you can take advantage of this technique and access attractive investment opportunities.

This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Articles do not reflect the views of DABA ADVISORS LLC and do not provide investment advice to Daba’s clients. Daba is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.