The valuation of these African startups is increasing, as is the appetite of foreign traders, mainly venture capital firms from the United States, Europe, and even Asia
- In recent years, the continent has witnessed the creation of a significant number of startups, many of which have proven to be heavily lucrative
- Creating an organization is a powerful element, but owning or co-owning it and being the principal recipient of the wealth created is much more powerful
- Aside from technology, spreading from infrastructure to agribusiness and energy, it is evident that the production equipment is frequently not held by Africans
In one of several highlights of late 2021 in the buzzing microcosm of African tech, The Nigerian corporation MainOne, founded in 2010 and grown to be one of West Africa’s key information storage facility managers and communication service providers, announced in December that it had been bought by a United States firm, Equinix, after a booming US$6 billion revenue in 2020.
The US$320 million acquisition, which was completed in early April, was widely hailed since it demonstrated that businesses founded and run in Africa are lucrative and may attract an enormous amount from Silicon Valley to the continent. Equinix, a Wall Street-listed company, operates globally with around 220 information storage services.
In another significant African acquisition, a United States-based company, Digital Realty, bought control of South African based Teraco Data Environments, a developer valued at US$3.5 billion. The developer is Africa’s largest data centre services provider.
Teraco serves more than 600 customers, 275 connectivity providers, over 25 cloud and content platforms, and an average of 300 enterprises across Cape Town, Johannesburg, and Durban. The US-based firm now controls all that African information.
The takeover of MainOne and Digital Realty is but a tip in the growing startup iceberg. In recent years, the continent has witnessed the creation of a significant number of startups, many of which have proven to be heavily lucrative. “Technology-savvy younger people have established kinds of enterprises that we have not seen before,” Ngozi Okonjo-Iweala, the World Trade Organization (WTO) director, says. They are supporters of Flutterwave, InstaDeep, and Copia International.
The valuation of these African startups is increasing, as is the appetite of foreign traders, mainly venture capital firms from the United States, Europe, and even Asia. They have attracted a total of US$5 billion so far this year. In terms of fundraising, 2022 has gotten off to a strong start for these businesses, with the significant milestone of US$1 billion being reached between January and February.
Nonetheless, the current change is raising key concerns, such as whether Africa is genuinely benefiting from the global capital’s thirst for its technology or if it is being plundered of its gems.
Cyrille Nkontchou, the co-founder of asset manager Enko Capital, says that plenty of power is being created in a sector with a crazy high added value due to such funds, which devote money to capital to both establish and finance the development of African startups. “The reality is that everything happens as if many of the value developed is subsequently exported, which is a disgrace,” Nkontchou adds.
“Aside from technology, spreading from infrastructure to agribusiness and energy, it is evident that the production equipment is frequently not held by Africans,” says Bernard Ayitee, a London Faculty of Economics graduate. They founded Obara Capital, the central African hedge fund, in 2018. Creating an organization is a powerful element, but enthusiastically owning (or co-owning) it and being the principal recipient of the wealth created is more powerful.
Some countries have recognized this and enacted legislation to handle foreign money better. As a case in point, when US defence firm Teledyne attempted to acquire Photonis, a French startup based on night vision, the deal eventually fell through.