How Africa's most valuable company made their billions

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Yesterday I finally dug into the enigma that is Naspers and the story blew my mind. I hope it blows your mind too.

Three notes before we dive in today.

First, I use dollar amounts pretty liberally here. I want to make it clear that I’m referring to US Dollars unless I specify otherwise.

Second, while we’re covering Naspers' investing story, the company did have a questionable political past (as a predominantly white media company in the 1900s). Naspers apologised for its role in Apartheid in 2015 which you can read about here.

Third, if you haven't already, sign up to attend our event next week on Investing in African Tech!

Okay - here is the tour plan for today 🧭

• Inside Naspers: Africa's most valuable company

• Tech Roundup

• Tech Twitter

Let's get this tour started  🦍

Inside Naspers: Africa's most valuable company

This African company has a $90 billion dollar market cap.

It’s not a mining company, or a bank.

It’s Naspers - an internet and technology company from South Africa. But when Naspers started in 1915, it was a traditional media company.

Today, Naspers' wealth comes from one big bet made in 2001 - buying a stake in Tencent, the Chinese internet company behind WeChat.

Naspers bought a 46.5% stake of Tencent for $32 million. Today that stake is worth $133 Billion.

It’s one of the greatest investments in corporate history. But its success in Tencent is both a blessing and a curse.

Let’s dive into the legendary story of Naspers and how they’re struggling with the success of Tencent.

The Old Dog with New Tricks

Naspers never started in internet or investing - it began in media in 1915.

You can think of Naspers as the old dog that actually learnt new tricks.

Naspers started in 1915 and was called De Nasionale Pers Beperk - which literally means the National Press Limited.

They quickly became South Africa’s largest publishing company - dominating newspapers, magazines and books across the country.

In 1997, when Koos Bekker became CEO, things started to change for Naspers.

Bekker knew that the dot-com boom would change the media industry.

Audiences were moving to digital media and traditional retail was going digital too.

Under Bekker, Naspers began to diversify.

Bekker introduced Pay-TV to South Africa, making Naspers the first company to launch Pay-TV outside of the United States. Revolutionary at the time.

Naspers tried to replicate its success in other emerging markets - starting in Africa and then expanding to China.

But in 2001, after burning nearly $100M trying to enter China, Naspers was ready to leave Beijing.

Bekker admitted that they were ‘victims of our own stupidity’ - trying to export a western model of media into China.

But on the way out, they came across an opportunity. A small, loss-making Chinese company called Tencent.

Against Legal Counsel’s advice, Bekker invested $32 million for a 46.5% stake in the company.

And learning from the failed China entry, Naspers took hands off to ‘let the local entrepreneurs grow the business.’

Time-skipping to today, Naspers’ stake in Tencent is worth $133 Billion - one of the best investments in history.

And as Tencent grew, so did Naspers’ appetite for investing in more global tech companies.

Naspers’ Investing Spree

Tencent kicked off Naspers’ global investing arc. Under Bekker, Naspers transitioned into a tech investing company.

They looked to repeat the success of Tencent - aggressively investing in more and more locally grown companies in emerging markets.

And its investing sectors broadened too. A few of the positions they hold (or held) include: they hold positions in:

Udemy - An edtech company for online learning and teaching.

JD.com - China’s second biggest ecommerce company. Part of this stake ($3.7 billion) was sold in June 2022.

Takealot - South Africa’s biggest ecommerce company, which Naspers bought (almost) all of in 2017.

OLX - A Dutch Marketplace group with marketplaces across 30 countries in emerging markets. Naspers acquired a majority ownership in 2010, which it pushed up to 95% ownership in 2014.

Flipkart - An Indian e-commerce company rivalling Amazon’s India division. Naspers bought an 11% stake in Flipkart for $616 million. Naspers sold this stake to Walmart for $1.6 billion.

As well as launching Naspers Foundry - a South African venture capital arm.

And as the value of their portfolio grew, they needed to restructure.

Naspers had listed on the Johannesburg Stock Exchange (JSE) in South Africa, and the volatility of the South African Rand put a lot of investors off investing in the company.

So they spun out an investing arm, Prosus, which went public on the Amsterdam Stock Exchange in 2019.

When it debuted, Prosus was Europe's largest internet company valued at $138 billion. And Naspers owned 73% of it.

Naspers also held its media assets under Media24 and the South African ecommerce company Takealot.

But the bulk of Naspers’ value is in Prosus. And the bulk of Prosus’ value is in Tencent - Tencent makes up 76% of Prosus’ Net Asset Value.

Which makes me wonder..

Is Naspers tied to Tencent?

Naspers has been trying to diversify since Tencent has grown - investing in internet companies in emerging markets across the world.

Their scale and speed of investing has been aggressive.

And while it seems like their investing is opportunistic, I think Naspers’ search for the next Tencent is out of necessity.

When all of your value is tied up in one company, your fate is tied to that company.

And as a good investors knows, you don’t want all of your eggs in one basket.

Naspers could be on the defence, here trying to diversify their portfolio.

While Naspers has had wins like Udemy and OLX, none have been near the scale of Tencent’s $100 billion+ of returns.

And last week, Naspers felt the repercussions.

Tencent’s value fell by 75% from its 2021 peak, following the market slowdown and Chinese tech crackdowns.

And as Tencent began laying off staff late last year, Prosus also announced that it will cut 30% of staff to help their portfolio companies break even in the next two years.

Naspers’ investing story is legendary.

Instead of going inward and ‘winning in Africa,’ they took big bets overseas. Naspers lost a lot of those bets, but won big with Tencent.

It turned Naspers into an African tech success story - and Africa’s most valuable company.

But that success has tied Naspers fate to one company - Tencent.

Holding all your eggs in one basket is risky, and I think they need more baskets to put their eggs into.

What do you think? Let me know on LinkedIn here.

Tech Roundup

• Central Bank of Nigeria has launched Afrigo - it’s own card for payments in Nigeria - in a move to end the use of Visa and Mastercard for local payments.

• A new bill in Kenya aims to protect employees from employers who ‘interfere with their work-life balance.’ Basically, they’re preventing employers from contacting employees out of work hours without consulting a trade union.

Tech Twitter

Interesting take on Kenya's Work-Life Balance act..

And that's a wrap!

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Catch you soon!

👋🏾 Caleb