Amazon's African Expansion and the two C words 👀

Welcome to Proximity Fortnightly #3!

In case you’re new here, this newsletter will get you smarter on Africa’s tech scene in under 5 minutes. Maybe 7 if you’re a slow reader 🐢

📣 Kicking off with an announcement 📣

Starting from next week, you’ll be getting Prox Weekly in your inbox! We’re upping the cadence.

Why weekly? There are so many stories to tell from game-changing companies in Africa, and I want to tell as many as I can.

If you haven’t already, you can subscribe below.

In this edition you’ll learn about June’s record-breaking funding month, and why Africa’s startups keep growing while the rest of the world slows down.

We’ll also explore Amazon’s leaked African expansion plans, and the two ‘C’ words that it could mean for Africa’s tech ecosystem. See if you can guess what they are 👀

June Funding Roundup 💰

Venture funding in Africa continues to accelerate 🏎 💨

In June, funding continued to accelerate on the continent:

🤝 Number of deals: 66

💰 Amount raised: $439m (compared to $163m in June 2021 🚀)

While the rest of the startup world struggles with decline in investor confidence, down rounds and layoffs, Africa’s funding growth continues to accelerate.

Comparatively, the United States and Asia are have seen funding decline in Q1 and Q2 year on year growth.

Why the speed up when everything else is slowing down?

If you’ve read my content before, you would know that startups in Africa solve big, meaty problems.

This can be a bit different to startups in other countries.

As a consumer living in Australia, if my cost of living increases I can cancel my least favourite streaming subscription (Binge 💁‍♂️ ), start cooking instead of ordering Uber Eats, or hold off on buying an iPhone 13 Pro.

If I need to cut costs at my company the first thing to go would be the $300/month Asana subscription that only half the team uses. Back to doing OKRs on Excel.

.

But African startups are solving for basic needs - not for nice-to-haves.

Half of the population in countries like Nigeria are financially excluded and can’t access bank accounts.

Startups like Chipper Cash let anyone send and receive money on their phones - banking the unbanked.

Remittances (or, sending money to family in other countries) is excruciatingly hard and expensive with traditional banks in Africa.

MFS built the rails to let diaspora (people living outside of their home countries) send money back to Africa over their phones, and have helped over 170m people send money to Africa.

This month they raised a $100m Series C round.

In Africa, funding goes to companies building need to have products, rather than nice to haves. Naturally, growth (and funding) comes easily to them.

Amazon’s African Expansion

Last week, internal documents were leaked showing Amazon’s expansion plan, ‘Project Fela.’

Project Fela will see Amazon launch its marketplace and Prime membership into South Africa and Nigeria by April 2023.

Amazon’s hiring activity supports this too - they have been quietly recruiting salespeople and engineers in Lagos, and hired a major advertising agency in Nigeria.

So, what does Amazon’s Africa expansion mean? Let’s start with the wins.

🏆 Win for merchants: In 2021, over 50% units sold on Amazon from third party sellers. Great news for merchants in Africa.

🏆 Win for tech talent: Amazon will hire more talent in Nigeria and South Africa, growing its South African workforce by 4,000. This will also mean more gig-based delivery drivers.

🏆 Win for consumers: Amazon will bring prices down competitively for consumers.

With the wins come a few implications for African e-commerce.

Naturally, Amazon’s expansion means that marketplaces will feel the pressure.

The ecommerce companies below (not to mention any other emerging companies) are probably sweating a bit 😅

The two C words

If you are in startups or venture capital, you probably agree that competition is a good thing. It gives consumers the best value products, pushes innovation and makes the world go round.

You probably also realise that in the markets, there are no timeouts or free passes - it’s competitive, and can get aggressive.

That’s right - the first C word is competition.

If Amazon can successfully launch, there will undoubtedly be a loss of marketshare for African e-commerce.

Amazon will put pressure on marketplaces, who need to be more aggressive to compete, which means cheaper prices and (hopefully) better products and outcomes for consumers.

But here’s another take on Amazon’s expansion.

Big tech has incredible influence on the way the world is run, and can (mostly) dodge accountability. Most would say they don’t always have the best interests of the public in mind.

This is amplified when looking at how big tech plays in emerging markets.

For example, in India, Facebook attempted to launch ‘Free Basics’ - a program giving Indian consumers free internet. Great, right?

The catch: this was limited to websites that Facebook chose - essentially making them ‘kingmaker’ of the internet for those users.

Yes, Facebook was one of those websites. And users who wanted to use other websites on the internet would have to pay Facebook for access.

Fortunately, India blocked the program (after intense opposition).

The second C word = (digital) colonialism.

(If you saw that one coming then reach out - we probably have a bit in common)

We see a cycle with Big Tech here:

• Emerging countries receive readily available services and technology from Big Tech.

• Local competition struggles to compete with Big Tech.

• Consumers get benefits, but with strings attached.

• Profit gets siphoned back into big tech, rather than into founders who redistribute this back into their countries and local tech ecosystems.

I’m bullish on tech driving the emerging world forward.

But, that tech needs to have its users best interests at the centre of it. And when it can, it needs to bring the value created back into their respective countries and continents.

To me, this looks like empathetic founders who have experienced these issues firsthand and are determined to improve outcomes for people like them.

I’d rather see these founders win in Africa than Bezos. And I’m sure we’ll see the resistance.

Did you learn something new? Want to share your thoughts? Continue the conversation below on LinkedIn or Twitter, or let me know what you think over email.

• Tweet at me on Twitter 🐦

• Reach out on LinkedIn 💼

• Reply to this email 💌

And if you enjoyed this and know someone else who might please share it over 🙏🏾