Angel investing in Africa (case study part 1): Canadian investor Jerome Kisting and Kenyan based m-Kazi

Recently M-Kazi closed their seed round with angel investor Jerome Kisting. This interview is the first installment of a three part series and abbreviates from an interview held with Jerome Kisting on Thursday the 22nd of November 2012.

Can you tell us about your background?



“I have a background working in finance and investments in Namibia. I became interested in the impact investing area 4 years ago. When I moved to Canada I got involved with an impact-investing fund, called the Toronto Enterprise Fund that gives grants to social enterprises. And it was a great introduction to the social enterprise business model and it broadened my perspective on business and what it can achieve.”

Please describe yourself as an investor

“I’m not the kind of person that will start a fund. I’m just curious and I want to try things and that is what this is about for me. I describe myself as an Angel impact investor. The money that I invest is my own resources that I’ve earned from other business transactions. ’I like the $25k to $100k range and what I also do is help channel some VC cash to the companies I’ve invested in. If a VC takes a stake, that is another milestone in the development of the business. If you can raise money from the VC’s essentially it shows that another party has vetted the business model and thinks that it can scale.

I made a couple of investments this year and I would like to give them some time to advance. The founders don’t need me on a day-to-day basis, it’s more a once a week call where we talk mostly strategy. So for now I’m focusing on my current investments, but will look at one or two more investments as I do want to create a portfolio over the next two to three years. The sectors that I’m interested in are food and agriculture, healthcare and technology – with technology I mean mobile, web and tech.”



What role do you see the Angel investor play and what is the opportunity to invest?

Richard Branson said: ‘You have to use money to make something happen’.  I really like to make things happen, so when I see an entrepreneur who shows traction, who takes his idea out on the street to ask customer X: ‘Will you buy this from me?’ If they can prove that to me, then absolutely I’m interested investing in the seed-stage. The lower the upfront investment, the greater your exit options are later. Because you don’t need to keep raising additional rounds and you don’t need to think about an IPO. For me it is key that a business supports itself. The lower the cash burn rate while the founders are trying different things and failing or succeeding fast the better because they will succeed at some point, or not. Of course you need funding to take the company to the next level, but the lower the investments the better. If you can’t show how the revenue model can be monetized in a relatively short time then I’m not interested in it because I’m not investing in capital intensive, four-year long R&D projects.”

Why do you look to Africa?

“I want to make investments that have a very defined social impact, but at the same time have a financial return. It’s interesting to see, especially because I’m looking at the African space, how you can still run a business and have a social impact. I choose to invest in Africa because I understand the dynamics in sub-Saharan Africa, I’ve done a lot of research; like a country analysis of Angola, evaluating the banks in Botswana and a lot of research on Namibia in the new energy sector. That’s why when I saw the M-Kazi profile on the VC4Africa website, I contacted Saskia from VC4Africa. From there I was introduced to Nancy and Lino.”

See the second part of this interview where Jerome talks about screening and structuring the angel investment with M-Kazi.
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"THE EMERGING COUNTRIES HAVE MONEY AND INVEST IN AFRICA. FOR THE FIRST TIME, AFRICA HAS AN ALTERNATIVE TO EUROPE.” EKOKO MUKETE

Ekoko Mukete, General Manager of the media group Spectrum, which owns two television channels in Cameroon, is an influential man in his country. He has been Vice President of the Cameroon Chamber of Commerce and Industry since 2003 and is also Chairman of United Bank of Africa (UBA Bank) in Cameroon, and Honorary Consul of the Republic of Turkey – a country which is increasingly investing in Africa. During the European Development Days (EDD), he came to present an Africa on the move and to talk about the African private sector’s contribution to the growth of the continent.

“A continent which has a real economy with tangible assets”, he explains, “in a world where the economy is tending to become virtual and where the financial system is based on the intangible. Yet Africa is real, with its population, its mineral resources and its land. It is high time that Europe recognized that it is the continent of tomorrow. Partners should change their approach. China, India – the BRIC group of emerging countries – have money and invest in Africa. For the first time, Africa has an alternative.”



For Ekoko Mukete’s generation, there is no longer any question of coming to hold out a helping hand in former colonial cities. “We are seeking a win-win partnership, on every count”, he insists, “Africa has something which Europe needs.”

Ekoko Mukete, who switches easily from English to French, embodies this Africa where language barriers are disappearing. In Cameroon, a bilingual country, he believes that the two languages of the former colonizers are “A blessing which has allowed Cameroonians to do business all over Central Africa.” He also points out that Rwanda decided to change from French to English, just like Gabon under Ali Bongo Ondimba, a President who alternates between the two languages in his own speeches.

A sign of an increasingly globalized Africa: “Côte d’Ivoire, a French-speaking African country, produces more presentation documents in English than Cameroon”, notes Ekoko Mukete. Another more well-known revolution underway is that of Internet. “A small business which sells masks in Douala can now sell them as far away as in Bora Bora or New Zealand. With this new technology, the only thing that holds you back is your spirit, your vision, the way you think. Young entrepreneurs who start up in Douala, Dakar, Libreville or Johannesburg can be global players right from the very first day.”

African diaspora is another anchor for Africa in the world and it is often underestimated – despite the decisive economic contributions they make, particularly via remittances for countries like Mali, Cape Verde or Somalia. For Ekoko Mukete, they are the “sleeping giant”. African diaspora are “A major asset for the coming years, if they return to their respective countries to grasp the opportunities of the better life that they have left to seek abroad.”

Yet the recurrent political crises in Africa could hold back this movement of return by African professionals trained and working abroad… and confuse the issue in the coming years for a private sector which must reckon with public authorities that are often predatory and sometimes unstable.

The trend, notes Ekoko Mukete, is that we are seeing private sector leaders in Africa become politicized, rather than political leaders taking the destiny of major groups into their hands – for the moment, the only exception is South Africa. In the case of Cameroon alone, “Businessmen have made money and have then gone into politics, by becoming mayors, so that they can have a flag on their car and satisfy their egos”, notes Ekoko Mukete. “This has affected business: these businesses leaders should have focused on business.”

This being said, the top business leader thinks that the private sector, in Cameroon as elsewhere, contributes in its own way to preserving peace. “People do not burn down buildings when there are demonstrations in Cameroon, because they know that these buildings belong to other Cameroonians and not to Lebanese or Greek people, as is the case in other countries. There is a sense of ownership which contributes to peace.”

ASEA: Unleashing Africa’s investment potential

The African Stock Exchange Association (ASEA) held its 16th annual general assembly and flagship conference in Cairo.

Under the slogan “Unleashing Africa’s Investment Potential,” the African Stock Exchange Association (ASEA) held its 16th annual general assembly and flagship conference in Cairo.

The chairman of the Egyptian Stock Exchange, Mohamed Omran, inaugurated the conference by speaking of the current challenges faced by the Egyptian economy.

“Let’s not look back in anger or forward in fear, but around in caution,” Omran said. “We need to unite and aim high,” he added.

Omran spoke of the potential the African continent harbours, with ever growing purchase power, a projected annual growth rate of 5 per cent in the coming years and a resilience towards global crises; all these factors will allow the creation of a “new Africa,” according to Omran.

The perception of Africa was at the core of the speech delivered by Sunil Benimadhu, the president of ASEA. He said that the image of Africa has changed over the past decade, from “the hopeless continent” to a more positive one.

In 2050, the top 10 economies will include two African countries, namely Nigeria in sixth place and Egypt in 10th place, India will replace the United States as the leading economic power in the world followed by China, according to forecasts shown by Benimadhu.

ASEA president gave a recipe to double Africa’s GDP growth; he emphasised the importance of continued improvement in business
climate, the implementation of inclusive growth, the enhancement of democratic principles and the substantial improvement in infrastructure.

Prime Minister Hesham Qandil said that a future democratic Egypt offers great opportunities for investors. “You are witnessing history, and we are proud of writing it,” said Qandil.

Qandil went on to discuss the preliminary agreement with the International Monetary Fund (IMF) and suggested it paves the way to
receive the necessary financing, and acts as a certificate of confidence for the Egyptian economy.

In his speech, the prime minister talked about the position that Egypt occupies as a major player in the African continent, a “continent full of potentials,” natural resources and human capital, which allows it to increase its GDP to $2.6 trillion in 2020 from $1.6 trillion today.

He concluded by calling upon attendees to improve the technical and legal infrastructure to achieve the desired integration between African markets, and asking the investors to invest in Africa.

Political developments and the democratic process were highlighted by the Investment Minister, Ossama Saleh.

Saleh pointed to what he called “historical changes” that took place over the past year.

“How to draw investment flows to the African capital markets?” was the main theme of a panel that encompassed financial and economic experts. Erik Bergolf, the chief economist and special counselor to the president of the European Bank for Reconstruction and Development, spoke on future measures: establishing macroeconomic stability, ensuring the health of the banking sector, developing local capital markets, improving general business climate and generating inclusive growth.

Muna Zulficar, the non-executive chairperson at EFG Hermes stressed the necessity of strong and committed investment banks for attracting capital flows and the independence of the judiciary to reduce risks of investment.

Zulficar said the Arab Spring has slowed investment in the short and immediate terms because of the perception of the transitional period, but has not stopped it completely. After the completion of the transitional period, “flows of investment will come back to Egypt in a more active way,” she added.

The chairman and president of African Export-Import Bank (Afreximbank), Jean-Louis Ekra, said that attention should be given to investment coming from African countries, the same as for investments coming from European and Asian countries.

During the day Benimadhu announced the launch of an ASEA Pan African Index based on the FTSE methodology.

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Commerce's Blank At Launch of 'Doing Business in Africa'

U.S. Department of Commerce

Acting Commerce Secretary Rebecca Blank

Remarks at Launch of "Doing Business in Africa" Campaign

Johannesburg, South Africa

November 28, 2012

(As prepared for delivery)

Thank you. Good afternoon. It is wonderful to be here in Johannesburg with all of you. I want to thank our sponsors:

First, the Corporate Council on Africa, which represents nearly 85 percent of all U.S. investment on this Continent. Thank you, CCA, for continuing to work with us to raise the profile of Africa in the U.S. business community.

Second, Business Unity South Africa. Thank you for helping ensure that the private sector continues to play a constructive role in this nation's growth.

I also want to thank Ambassador Don Gips, the U.S. Embassy staff, and the Foreign Commercial Service officers from the Department of Commerce who are based here, including Larry Farris. Thanks also to Undersecretary Francisco Sánchez and Assistant Secretary Michael Camuñez who continue to do such great work throughout Africa.

For decades, people around the world have talked about doing business in Africa. But today, it's real. It's happening. And Africa is rising as a result.

Just months after his inauguration, President Obama traveled to Ghana. He laid a foundation for the future of the U.S.-African relationship-a relationship based on mutual responsibility and mutual respect. He called for an era of deeper engagement among our leaders in government, business, and other sectors.

More recently, President Obama said he believes that Africa can be the world's next major economic success story. He's absolutely right. Sub-Saharan Africa is home to six of the 10 fastest-growing markets in the world. Economic growth in this region is predicted to be strong-between 5 and 6 percent-in coming years. And-most important-millions of Africans are finding a path from poverty to greater security, opportunity, and prosperity.

The United States is committed to helping build on and accelerate this success.

Earlier this year, the president reaffirmed that commitment when he issued the U.S. Strategy Toward Sub-Saharan Africa.

This Strategy directs the U.S. to dedicate greater support for efforts to strengthen democratic institutions, while continuing both to advance peace and security in Africa, and to promote opportunity and development. But most important for all of us today, the Strategy commits the U.S. to elevating our efforts to spur economic growth, trade and investment.

But before I discuss this in more detail, let me recognize the successes of the past four years.

The Obama administration has strengthened democratic institutions and challenged leaders whose actions threaten peaceful political transitions. We continue to support strong, transparent, democratic institutions that are guided by the rule of law.

The administration has supported regional security, including the support for the peaceful birth of South Sudan, the African Union Mission in Somalia, and working with regional partners to counter the predatory Lord's Resistance Army. We continue to promote regional stability and security because it is the right thing to do and because it is an essential element for continued growth.

The administration has heavily invested in development partnerships that promote food security, increase resilience to climate change, and empower communities that are responding to HIV/AIDS, malaria, and other health threats. We continue to lead major efforts like the New Alliance for Food Security and Nutrition, which aims to lift 50 million Africans out of poverty in the next decade.

And, finally, under President Obama's leadership, the United States has been the world's leader in responding to humanitarian crises-such as the famine in the Horn of Africa.

Despite all of these successes, Africa's dynamic growth and its increasing strategic importance demand that we deepen our engagement even more.

Sub-Saharan Africa, in particular, is experiencing rapid change. Internet and mobile technologies are dramatically shifting the way business is done-even while population expansion, political instability, and other challenges threaten the positive progress that many nations are making. But economic progress is clearly visible-private investments in Sub-Saharan Africa now exceed direct aid, thereby fostering long-term stability in both large and small countries.

This is our moment to work together to ensure that we both secure Africa's gains-and build on them. And I believe strongly that one of the ways we can do that is for U.S. businesses to invest in Africa, and to believe-like we all do here-in Africa's bright future.

That's why the president's Strategy to spur economic growth, trade and investment in Sub-Saharan Africa is crucial. Through it we want to support a business climate that enables and promotes trade and investment. We want to support efforts to better integrate Africa's markets, allowing them to compete more effectively and transparently. We want to support African companies' ability to access global markets and tap global supply chains. And, woven throughout these efforts, we want to promote Africa as a key destination for American investment and trade.

The good news is, the U.S. commercial and economic relationship with Sub-Saharan Africa has already begun to blossom. Two efforts are particularly praiseworthy in this regard.

First, the African Growth and Opportunity Act-AGOA-continues to support the flow of African goods to the U.S. More than ever before, American businesses and consumers are buying African products such as flowers, fruits, nuts, cocoa, footwear, and wine. Importantly, nonpetroleum exports under AGOA have tripled to nearly $5 billion. Compared to a decade ago, more than twice the number of eligible countries are shipping non-commodity goods under AGOA.

We are building on this by connecting even more African businesses-including small businesses-to global markets and supply chains. For example, the Commerce Department recently worked with X-Chem-a black, woman-owned AGOA exporter-to link her into the Walmart/Massmart supply chain. I believe Angela is here today.

And I was thrilled to see that three months ago, President Obama signed into law the renewal of the third-country fabric provision. This will ensure that we can continue to support apparel manufacturing in less-developed Sub-Saharan countries. This is especially helpful to women, who hold about 90 percent of these jobs.

Looking forward, the administration will work with Congress to ensure that AGOA is renewed in 2015.

A second example of how commercial ties are already blossoming is President Obama's National Export Initiative-an effort led by the Commerce Department.

President Obama set the goal of doubling U.S. exports from 2009 to 2014. As we know, the consumer class in Africa and throughout the world is growing, and demand for Made-in-America products has never been greater.

Right now, this Initiative is focusing on countries that are known to be stable, fast-growing markets, with significant commercial opportunities. South Africa, not surprisingly, is one of those. That's why we are: increasing the number of trade missions, focusing our advocacy efforts on markets like this one, expanding our lending activities, and bolstering our overall engagement on trade policy.

As a whole-due to our efforts under AGOA, the National Export Initiative, and more-the U.S. and Sub-Saharan Africa reached $95 billion in two-way trade last year, an increase of 16 percent from 2010.

However, U.S. trade with Sub-Saharan Africa accounts for only 2.6 percent of U.S. total trade with the world. So, we are still far from reaching the full potential of U.S.-African trade - as well as investment. We can and must do more.

As Africa's wealth increases, so does its demand for improved transportation, telecommunications, housing, energy, consumer goods, financial services, healthcare and more. American companies are poised to bring their entrepreneurial spirit, their expertise, and their know-how, to help meet that demand.

For all these reasons, I am thrilled today to announce the launch of the Doing Business in Africa Campaign.

And I'm pleased to be bringing a message from President Obama himself. He writes the following:

"Sub-Saharan Africa is a region of extraordinary opportunity for growth and economic development. That is why this June, I issued the U.S. Strategy Toward Sub-Saharan Africa, a plan aimed at strengthening democratic institutions; spurring economic growth, trade, and investment; advancing peace and security; and promoting opportunity and development in the region.

"To advance the goals of this strategy, and to deepen trade and investment between the United States and the nations of Sub-Saharan Africa, I am pleased to support the Department of Commerce's "Doing Business in Africa" (DBIA) campaign.

"The economies of sub-Saharan Africa are among the world's fastest growing, and this economic expansion--partly a result of our long-standing investment in Africa--provides an opportunity to lift millions out of poverty and foster long-term stability. Our challenge is to ensure these gains continue and spread, and to enable American companies and the African Diaspora to obtain the support they need to take advantage of these new trade and investment opportunities.

"Many American entrepreneurs and business leaders are unaware of the tremendous trade and investment prospects in sub-Saharan Africa or face challenges establishing business relationships in the region. The DBIA campaign seeks to change this by increasing awareness about key sectors and markets in Sub-Saharan Africa and opportunities to expand trade activities. The initiative promotes enhanced financing opportunities to bolster American exports and provides trade counseling and advocacy for entrepreneurs who want to tap into these growing and dynamic markets. The strategy also aims to further engage the African Diaspora community living in the United States to improve our commercial and economic ties with sub-Saharan Africa.

"Through the DBIA campaign, we are responding to the emergence of African regional economic communities, and working with our partners to deepen integration, reduce barriers to trade and investment, and support existing and new investments by American businesses. By doing so, we continue the work of creating jobs and expanding economic opportunity that will help drive our economy and support the growth of our African trading partners."

I am pleased to share just a few of the many efforts that we are immediately undertaking as part of this new campaign.

First, the Commerce Department has a powerful network of U.S.-based Export Assistance Centers as well as Commercial Service Officers in strategic embassies around the world. Through this campaign, we are going to train these counselors on how to help businesses start or expand their exports to Africa. Importantly, we will also ensure that these counselors have timely information about new opportunities that are arising on this Continent.

Second, we will place a special focus on empowering the African Diaspora in the United States-one of the world's largest. We know there is significant untapped potential for commercial interaction in these communities. We plan to reach out to the businesses in this community, making sure they not only know about opportunities... but that they can also find the tools they need to trade and invest in Africa.

Third, we will work with organizations such as CCA and the Business Council for International Understanding to launch a series of Africa Global Business Summits in the U.S. in 2013. These Summits will bring U.S. Ambassadors and commercial service officers from Sub-Saharan Africa back to the U.S. to share strategies and tips with entrepreneurs and business owners to help them successfully enter key markets.

Fourth, for the first time ever, we will partner with the State International Development Organization to train economic development leaders at the state and regional levels in the U.S., with a special focus on the opportunities and possibilities for doing business in Africa.

And fifth, we will bring business leaders to visit each others' countries and find new opportunities, because more than anything else, mutual economic growth is dependent on person-to-person relationships. For example, I'm happy to know that next week, the U.S. Ambassador to Nigeria, Terrence McCulley, will lead a Nigerian business delegation to a number of U.S. cities to see some of our biggest trade shows.

And here in this room, I am delighted to note that person-to-person connections are being made today. As part of a trade mission led by Undersecretary Sánchez, we have brought a diverse group of both small and large U.S. firms to Zambia and now to South Africa. These companies have traveled here because they have rightly discarded the old and false perceptions about Africa. They understand that the commercial opportunities in Africa are too compelling to ignore-and they want to help the Continent grow and thrive.

There are over a dozen on this mission, ranging from a Midwest-based agricultural and construction equipment manufacturer, to a Florida-based well-water treatment company, to a California company that integrates GPS and laser technologies with application software and wireless communications.

Could all of the companies that are on this mission stand and be recognized? I hope your conversations here in Africa are fruitful.

I have one final announcement to make as part of the Doing Business in Africa campaign-and it's related to the important area of financing.

I am traveling today with leaders from the Overseas Private Investment Corporation, the U.S. Export-Import Bank, and the U.S. Trade and Development Agency. Each of these agencies has dramatically increased their investments and activities in Africa in recent years.

In the past four years, OPIC has committed more than $2 billion in financing, insurance, private equity, and other support to Sub-Saharan Africa. In the past year alone, Ex-Im Bank supported $1.4 billion in authorized transactions with Sub-Saharan Africa. And USTDA has conducted studies, workshops, and reverse trade missions, while also supporting over $1 billion in U.S. exports in partnership with African project sponsors.

So thank you for all that these agencies are doing here in the region.

All of us here know that having energy in people's homes and businesses is crucial to development. We also know that Africa has abundant clean energy resources just waiting to be harnessed.

Notably, the South African government has made extraordinary progress in this regard. It has increased access to electricity from 15 percent of the population to about 85 percent today, making it a leader in Sub-Saharan Africa. Yet there is more to be done both here and throughout the region.

Here's our key challenge. One of the main obstacles to accelerating clean energy investment in Africa is an inability to fund project development costs. Even projects that have clear potential for broad impact and strong financial returns to investors often fail to secure financing.

So, as part of the Doing Business in Africa campaign, I'm pleased to announce today that the Obama administration will work through these agencies-OPIC, USTDA, and Ex-Im-to establish the new U.S.-Africa Clean Energy Development and Finance Center.

The Center will operate out of the U.S. Consulate General here in Johannesburg. Its mandate is two-fold: to help implement clean energy projects in Sub-Saharan Africa, and to promote U.S. private-sector participation as this sector continues to grow.

Specifically, the Center will provide technical and financial support for projects related to solar, wind, biomass, geothermal, hydro, ocean and natural gas.

Starting in March, Peter Ballinger will be spearheading this effort as OPIC's representative in Africa-working side-by-side with Larry Farris as well as Jason Nagy of USTDA, also here today. And I should note that Peter will be the only OPIC employee not based in the United States. Congratulations Peter, and thank you all in advance for the work you will be doing.

So, the Doing Business in Africa campaign starts now. We have no time to waste.

In fact, this afternoon I will be meeting with the U.S. Chiefs of Mission stationed in several countries: including Ambassadors Gips of South Africa, Cretz of Ghana, Gavin of Botswana as well as Deputy Chief Fox of Lesotho. They are here today, and I want to thank them for serving as crucial partners and advocates for this campaign.

In the coming days, months, and years, even more administration officials will be working and traveling to raise the visibility both of this campaign and of the U.S. Strategy overall.

I, myself, will be going to Nairobi tomorrow for the East African Community's annual heads of state summit. We will be working with the EAC-among other things-to establish a regional investment treaty, to provide trade-capacity building assistance, to build a more open and predictable business climate, and to launch the EAC-U.S. Commercial Dialogue-America's first Commercial Dialogue in Africa.

Overall, we must continue to find new ways for both business and government leaders throughout the U.S. and Africa to form powerful linkages that lead us all to greater prosperity.

And as I look around this room, I am confident of what we can achieve-together. It is significant that we are launching the Doing Business in Africa Campaign here in South Africa with all of you-in a country where U.S. companies have strong ties, as evidenced by those represented here. This nation has grown and diversified its economy and it serves as a crucial gateway to the rest of Sub-Saharan Africa.

You have already paved the way for the success and prosperity of businesses, workers, and citizens on both sides of the Atlantic.

And yes, as our new campaign confirms, U.S. firms are excited to be doing business throughout Africa from the Kentucky-based, water pump company now working with a South-African distributor to help small towns curb pollution, to major U.S. firms like GE which is supplying Kenya Airways with 20 jet engines for their new planes.

We want more stories like those.

Let me close with a quote from Nelson Mandela. Mandela once said: "After climbing a great hill, one only finds that there are many more hills to climb."

The U.S. and Africa have reached a wonderful moment-a moment where we are working with each other, learning from each other, and building on each other's prosperity-every single day.

As commerce flourishes between us and as our nations become more intertwined economically, it feels as though we have indeed reached the summit of a great hill.

Now, let us press on. Let us continue our journey together. And let us ensure that the United States is a strong partner in the rising prosperity of Africa in the 21st century.