Investors update: Vantage Capital invests $25m in East African watermaker

Vantage Capital invests $25m in East African watermaker

Highlights

• Vantage Capital, an Africa-focused mezzanine debt fund manager, has made a $25 million investment into Aquasantec International, a manufacturer, and distributor of water tanks, pipes, and related products in East Africa.
• The investment is in the form of mezzanine debt and ordinary equity, acquiring a controlling shareholding in the Group as part of a leveraged management buy-out.
• Aquasantec was originally founded in Kenya over 30 years ago by Chandulal Shah and family. Since then, the business has grown organically, becoming a household name across the region with factories in Kenya, Uganda, Rwanda, and Zambia.

Source: ABC

Our Takeaway

This transaction represents Vantage Capital’s 35th investment across four different funds with its portfolio of investments spread across 11 African countries. Along with venture capital, private equity investments have grown significantly in Africa over the past decade. Per AVCA, $7.6 billion in private investments (both VC and PE) was poured into Africa last year across 626 deals, a remarkable 46% year-over-year increase in deal volume, impressive figures considering 2022 presented numerous challenges for private capital fund managers globally.

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Elon Musk’s Starlink launches in another African country

Highlights

• Starlink, a satellite internet provider founded by Elon Musk, has launched services in Kenya, paving the way for more intense rivalry among regional network service providers.
• With promised download speeds of up to 250 Mbps and upload rates of up to 35 Mbps, the multinational, which is a spinoff of SpaceX, has also named local internet company Karibu Connect as its first authorized distributor in Kenya.
• The purchase of a terminal to allow the connections will cost a Kenyan home user Ksh89,000 ($628) plus a Ksh3,100 ($21.88) delivery fee, while the monthly membership rate will be Ksh6,500 ($45.89).

Source: Business Insider

Our Takeaway

The World Bank estimates that only 29% of people in sub-Saharan Africa had access to the internet in 2020. Whereas it is often uneconomical to lay cables or build telecom towers in remote parts of Africa, satellite internet providers can cover these areas at no extra cost after serving their main customers. Hence, Starlink’s promise of high-speed and low-latency connectivity could provide a big boost to the region’s economic activity. But the obvious drawback is the cost for users; pricing will determine to what extent Starlink can penetrate Africa.

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TerraPay, M-Pesa partner to facilitate cross-border remittances

Highlights

• TerraPay, a global payments infrastructure company is partnering with Safaricom’s M-Pesa in a deal that aims to facilitate instant borderless payments.
• The partnership, through TerraPay’s group company Mobex, will enable more than 30 million M-PESA mobile wallet-holders in Kenya to send real-time payments through TerraPay’s interoperable network across all wallets in Bangladesh & Pakistan, with plans to roll out India & Nepal in a few months.
• Given the rise of cross-border deals, in the six months to March 2023, M-PESA Global transactions grew YoY in volume & value by 2.2% & 5.6%, respectively.

Source: ABC

Our Takeaway

For African startups, there’s a major market opportunity in the massive diaspora remittances business. For context, remittances accounted for nearly 4% of Nigeria’s GDP as of 2020 and Africa received $49 billion in inflows last year. Yet, sending money from places like the US and UK or even Asian nations to the continent remains invariably expensive, with fees at an average of nearly 9% (the highest rate in the world and 3x the SDG target of 3%). Although most of the traditional players that charge high commission rates still dominate the space, fintechs are now wrestling market share with lower fees.