In this letter, we cover:
- Nigeria's presidential committee on fiscal policy and tax reforms
- Safaricom's plan to invest in African early and growth-stage startups
- VC funding decline in Africa
Let's dive in.
📰 The news
President Tinubu sets up a committee on tax reforms
Earlier today, Nigerian president, Bola Ahmed Tinubu instituted a committee on fiscal policy and tax reforms to enhance revenue collection efficiency, ensure transparent reporting, and promote the effective utilisation of tax and other revenues.
Why it matters: "Our aim is to transform the tax system to support sustainable development and achieve a minimum Tax-to-GDP ratio of 18% within the next three years, without stifling investment or economic growth," according to Adelabu Zacch Adedeji, President Tinubu's Special Adviser on Revenue.
The committee will be chaired by Taiwo Oyedele, the Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers (PwC). Oyedele has been a critic of some of Tinubu's policies. Recently, he described a policy by the Tinubu administration aimed at requiring car owners in the country to renew their vehicles’ proof of ownership certificates annually as illogical.
"This tax is retrogressive. It is ill-conceived and poorly designed. Apart from the payment which seems to be solely for revenue generation, and perhaps more for non-state actors than for the government, it is illogical to have to prove annually that you own a vehicle for which you already have a certificate of proof of ownership issued by the government," he tweeted.
He further advised the government to reverse the tax stating that: "The tax adds complications to the myriad of multiple taxes which make doing business difficult and dampens tax morale".
Zoom in: Yesterday, President Tinubu suspended the implementation of the 5% excise duty on telecom services [and three other taxes] to address business unfriendly fiscal policy measures and multiplicity of taxes. The taxes were meant to be implemented this year, per the Finance Act of 2023.
In an executive order, the President deferred the commencement date of the changes contained in the Act from May 23, 2023, to September 1, 2023. This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy.
Safaricom wants to invest in more African startups
The news: Kenya’s leading telecommunications company Safaricom says it intends to launch a new VC firm Venture Co. for growth-stage investments and re-launch Spark Venture Fund for early-stage startups. The proposal is subject to stakeholders' approval at its July 28 annual general meeting.
“The intention is that any gains from the portfolio of investments will be capitalised back to Safaricom PLC,” local media The East African quoted the teleco.
Know more: In 2014, Safaricom started Spark Venture Fund, the first Corporate Venture Fund in East Africa. The $1 million fund supported Kenyan tech startups through a combination of investment, biz dev support and technical assistance. The telco said that it fully invested the fund in Sendy, Lynk, Ajua, Eneza, iProcure and Farmdrive.
In 2020, Safaricom allocated an additional $5 million to the fund to invest up to $500, 000. Earlier this year, the telco said that its portfolio grew “almost 5⨯ over the last couple of years”, with startups going on to raise more than $50 million in funding after being added to the Spark portfolio.
With this revamp, Safaricom wants to form a limited company wholly owned by Safaricom itself to “further strengthen governance processes”.
Zoom out: Although Spark Venture Fund will target early-stage startups based in Kenya, Safaricom intends to invest in growth-stage startups through Venture Co. However, there is no mention of limiting the latter to only Kenya. With its recent expansion to Ethiopia, the telco will likely look beyond its base.
💰 State of funding in Africa
In letter 168, we reported on the decline in the number of investments made by Google Black Founders Fund in Africa, it's safe to say that the funding decline has continued to rock the ecosystem on every end.
Per BD Funding Tracker, VC investments in African tech dropped by 48% in the first half of 2023. Last year, the funds raised by African startups in the first six months of the year accounted for 69.44% of the total annual funding. If the slowdown continues in the last half of the year, there will be more decline compared to 2022.
Peter Oriaifo, Principal at Oui Capital says that "funding will be down year-on-year (YoY); the key thing is that our biggest funding source which was US investors are significantly impacted". He further stated that the valuation of startups within the ecosystem will also decrease due to increased investments from local funds.
As usual, tech startups in the “Big Four” (Nigeria, Kenya, Egypt and South Africa) captured 92.13% of all investment in value [and the number of deals]. As it was in Q1 2023, Egypt topped the list raising $446.4 million across 15 deals, followed by Kenya ($339.1 million with 24 deals) and South Africa ($264.5 million with 23 deals).
Although Nigeria had the highest number of deals, 46, it accounted for only 13% (~$157 million) of the funds raised by the “Big Four” countries.
Also in the first half of the year, this happened:
- Fintech remains the most funded sector—based on the number of deals—on the continent, it raised about 60.46% of the entire fund. Followed by the mobility sector which contributed 8.05%. Other top-funded sectors include; e-commerce, healthtech, cleantech, agritech and logistics.
- Despite the hype about artificial intelligence adoption on the continent and across the globe—which can be traced to the launch of generative AIs like ChatGPT, funding for the sector in Africa has plummeted 98% compared to H1 2022, according to BD Funding Tracker.
🎙BD Talks: Alternative funding sources for African founders
The funding decline across the continent is biting hard, some startups have closed down, and others have had to downsize their workforce. Is there a way out? Join us this evening by 7:00 PM (WAT) as we discuss alternative funding sources for African founders with Oo Nwoye, founder of TechCircle.
Here are other important stories in the media:
- Twelve years of leading Google in West Africa: After 12 years of pioneering Google's growth in West Africa, Juliet Ehimuan has resigned to focus on providing mentorship and funding for young African tech entrepreneurs. In this article, we reflect on her time at Google and what's next.
- Closed shops in Africa: In the last six months, at least five tech startups operating in Africa have shuttered, and others have pivoted or scaled down operations.
- Kyosk's acquisition of KwikBasket: Kenyan retail distributor Kyosk has acquired KwikBasket, and has expanded its digital distribution offering to cover the fresh produce market in Africa.
- Eden Care, the first Rwandan company to join Y Combinator: Health-focused insurtech Eden Care is the first Rwandan company to join YC. The company is participating in the ongoing summer batch of the accelerator, alongside two other African companies.
- Layoffs at Medsaf: In March, Medsaf, a Nigerian healthtech startup, laid off all its full-time employees. Former employees allege that their salaries and benefits remain unpaid, TechCabal reports.
We carefully curate open opportunities in Product & Design, Data & Engineering, and Admin & Growth every week.
Product & Design
- Miva University — Senior Product Manager, Nigeria
- Flutterwave — VP, Product Engineering, Remote
- Kwame Nkrumah University — Product Design Lecturer, Ghana
Data & Engineering
- Eden Life — Frontend Engineer, Remote
- Interswitch — Software Engineer, Nigeria
- MTN — Cloud Engineering Lead, Nigeria
Admin & Growth
- Helium Health — Growth Manager, Nigeria
- BIC — Associate Brand Manager, Nigeria
- Zipline — Head of Partnerships & BizDev, Africa
Have a great weekend!
Reply to this email and let us know your thoughts about our letters.