In venture capital investing, growth is typically measured around the proverbial “10x”, as in ten-fold growth in revenues, and is typically wrapped around the unspoken norm of the ten-year lifetime of a fund. Or in short, 10x in 10 years is considered successful.
In Africa, these expectations come silently along with the American and European investors, but there isn’t the decades of history to prove or disprove this benchmark, and the whole continent has produced fewer than 10 “unicorns” (vs. hundreds in America) and only a handful of successful exits, ever.
This is why many of us focus on “elephants”, but that still leaves the question, how fast can elephants grow?
Some can double year after year. For example, Swahili Honey (below). Doubling every year leads to 10x growth in less than four years and 20x growth in less than six. In this specific company, growth was 37x in its first seven years or 25x growth if you drop the first year in case you feel that tiny value skews the metric.
What I find fascinating about a company like Swahili Honey is that the technology they use driving all this growth is age-old and well-proven. It’s not an app or artificial intelligent anything, but wooden beehives, jerry cans, trucks, filters, and jars. It’s not a company seeking “product-market fit”, but rather a company that was already earning a profit back in 2014, with profits rising along with revenues.
The technology they use driving all this growth is age-old and well-proven. It’s not an app or artificial intelligent anything, but wooden beehives, jerry cans, trucks, filters, and jars.
This doesn’t fit the narrative I was fed for twenty years when I was building software companies and pitching to venture capitalists. Dozens of them in the 1990s and early 2000s were telling me my “go big or go home” ideas were too small, with plans that grew too slowly. If only I knew then about the opportunities for growth in Africa.
That said, one company isn’t a trend line and one trend line isn’t a trend. So, let’s look at Goldenpot, a younger company that has only had five years to grow. And, WOW, has it grown. Back in 2017, its customers paid it just $4,000 for the maize flour it grew with a few dozen women farmers. Again, ignoring that first year, the company has grown a bit more than the proverbial 10x, but in just four years instead of ten, and that growth despite a drought in 2021 that dropped farmers’ yields.
This company is selling a staple food, maize flour (a.k.a. corn meal), not a cash crop like coffee nor a high-value export like macadamia nuts.
Maybe there is something special about Tanzania? I’m sure there is, but not when it comes to business growth. For example, Ziweto Enterprise is based in Malawi, the eighth poorest country in the world as measured by per-capita GDP.
Their story has a lovely investment twist. Year One for them was back in 2016. $30,000 of revenue operating three tiny agrovet shops in the rural north of the country. Agrovet as in animal vaccines, medicines, and supplements to keep farm animals healthy. Revenues jumped 8x in Year Two when they purchased their distributor (for a lot less than $250,000).
The company is now the wholesaler and a retailer for the most popular veterinarian medicines in Malawi. Total growth since that acquisition is only 3.3x over five years, but the growth rate is speeding up, roughly doubling every two years.
While we’re on the topic of animals, let’s finish this spin around Eastern Africa in Rwanda, one of the fastest growing economies on the planet. PMP is Paniel Meat Processing, which back in 2017 produced sausage using a single, hand-cranked meat grinder, earning just $30,000 of revenues for the year.
PMP didn’t have any year with a giant growth rate, but like Swahili Honey, simply doubled each year, every year, growing 20x in the process to $600,000 in 2021. But that is not the whole story as rather than acquiring a company, PMP spun off two others.
The first spin-off is Livestock Bank, which has focused on growing commercial scale animals, partnering with thousands of smallholder farmers. Its growth has been on animals, not revenues, starting with eight hogs in 2017 and growing that to 8,500 by the end of 2021.
The second spin-off is TRUK, extracting the cold-chain logistics out of PMP and making that available to other food/ag companies in Rwanda and neighboring countries. Its first full year of operations was in 2021, and, in that year, it nearly passed its parent org in revenues.
What is the takeaway from these stories? For me, it’s that the opportunities in Africa are just as big and just as exciting as the tech venture capital sector in the States, but with a lot less of the feel of playing the lottery on technologies that may or may not work.
The opportunities in Africa are just as big and just as exciting as the tech venture capital sector in the States, but with a lot less of the feel of playing the lottery on technologies that may or may not work.
There are certainly challenges to growing companies in Africa, and these companies have a long way to go before they are the scale of Amazon or Facebook. But these companies don’t have to wave their hands about profitability like Amazon did for its first decade, nor ignore revenues altogether like Facebook did for most of its first decade. Instead, these and other companies like them sell real products to real customers who pay real money, resulting in real profits.
Take that and double it for five or ten or twenty more years, and these will be very large, elephant-like companies in the future.
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