This article was first published in Proparco’s latest Private Sector & Development magazine.
Launched in 2016 by Medef International, Index Up40 brings together French start-ups operating in Africa. It has become a key network that facilitates synergies and supports French entrepreneurship in African markets.
Here is some analysis and feedback from the CEOs of three of its members: CityTaps (connects water operators to consumers by offering a prepayment solution using mobile money), Baloon (insurtech platform that facilitates access to insurance in French-speaking Africa) and LAFAAAC (digital vocational training courses).
You are members of Medef’s Index Up40, which brings together French start-ups seeking to position themselves in the various African markets. What are the advantages of this network?
Grégoire Landel (CityTaps): This network makes it possible to benefit from Medef’s services (conferences, meetings, business trips, etc.) which can be difficult to access for small structures like ours. It’s also a customised programme, designed and developed for us. It responds to our needs and time frames, which are not the same as for large groups. This really helps.
Bertrand Vialle (Baloon): Doing business in Africa is very specific. Index Up40 helps us share common issues on the logistical or administrative aspects that are further complicated by the health crisis. This network also facilitates the creation of synergies by allowing us to meet political leaders and major business leaders operating in Africa.
Olivier Pascal (LAFAAAC): With Index Up40, we have the opportunity to regularly meet large companies and international institutions. I also find that being able to discuss business opportunities and good practices is extremely positive. This is especially important because internationally, and especially in Africa, it’s quite common to be faced with often unusual and specific difficulties.
What is your operational strategy in Africa?
Bertrand Vialle (Baloon): As soon as we launched Baloon, in 2017, we wanted to operate in several African countries. So, we opened offices in Côte d’Ivoire, Senegal, Cameroon, Niger and Gabon. This rapidly allowed us to promote our experience as a pan-African digital broker. We’re now planning to start operations in the Maghreb region and English-speaking Africa.
Olivier Pascal (LAFAAAC): We offer a solution for training in creative industries using a mobile application. One of the strong points of this digital solution is that it’s suitable for distribution in a number of markets. However, we’re fully aware of the marked cultural and economic differences in African countries. This is why in the short term, we’re focusing on developing in three West African countries: Côte d’Ivoire, Senegal and Nigeria.
Grégoire Landel (CityTaps): Our solution improves relations between subscribers to a water service and operators by allowing households, including the poorest, to pay as they consume running water. This solution is only developed for developing countries. Our entire business strategy therefore focuses on these countries, especially Niger and in East Africa.
According to the latest EY French venture capital survey, French tech had very good results in 2020 with a record amount of funds raised. Do you benefit from these dynamics?
Bertrand Vialle (Baloon): We’ve taken advantage of this interest in impact tech by investors by finalising a €1.8 million fundraising drive in June 2020. We’re also in the due diligence phase with several funds for an amount exceeding €3 million. This will make us the main digital insurance broker platform in Africa.
Grégoire Landel (CityTaps): The institutional impact investors we’ve convinced to support us (with an appetite for the objectively complex type of project we implement) are based abroad, in particular in the UK, Singapore and Monaco.
The African start-up ecosystem has been hard hit by the Covid-19 crisis. How is it affecting your activities?
Grégoire Landel (CityTaps): Since the onset of the crisis, it’s been very difficult for us to go into the field and our clients are themselves sometimes in lockdown (in Kenya, for example), which has an impact on our business activity. Furthermore, our clients – water operators – are in a critical financial situation. They no longer have the means to invest. But this crisis may also open up opportunities. We’ve identified Kenyan and Zambian banks that are interested in financing our solution through their lending activity.
Bertrand Vialle (Baloon): The Covid-19 pandemic would appear to be affecting African people less than we initially feared, which I’m very pleased about. However, in the countries where we operate, it’s had a real impact on the purchasing power of households, which have been hard hit by the restrictions imposed. But this has not affected the growth in our turnover. On the contrary, the crisis is increasing consumers’ appetite for digital services and encouraging them to be better insured.
What are the problems with access to African markets for a French start-up?
Grégoire Landel (CityTaps): We’re often faced with slow procurement procedures and a shortage of equity financing on the part of water operators. This can hamper our deployment in certain African countries.
Bertrand Vialle (Baloon): It’s essential to have the right network, the right codes with the right people locally. This is one of the main aspects of the markets we’re eyeing up. You have to be able to be supported by an African team and really take into account the specific aspects (which are often complex) of local recruitment.
Olivier Pascal (LAFAAC): For us, Africa is much more than a market. From the design to the production of our training courses, we want to include African experts in the objective of offering specific training, conducted with and for local people. It’s a partnership-based and inclusive approach, which is essential for our development and the sustainability of our structure.
Are you sensitive to local currency fluctuations?
Grégoire Landel (CityTaps): Not in the CFA franc zone. But this is the case in other African countries where currencies are extremely vulnerable. I have Zambia and Malawi in mind, and even Kenya where I’m not aware of any treasury instruments that would help companies protect themselves from exchange risks.
Olivier Pascal (LAFAAAC): Yes, especially in Nigeria. Even if there’s a risk on our revenue, we limit the impact by the fact that a significant proportion of our production costs for training content are generated on the spot, with all our training adapted to the local context or produced locally.
Bertrand Vialle (Baloon): The countries where we operate are all in the CFA franc zone and members of the Economic Community of West African States (ECOWAS) and Economic Community of Central African States (ECCAS), which ensure monetary stability in the sub-Saharan region.
In Africa, it is essential to find a good local partner. It is often a key factor for success. Do you share this view?
Bertrand Vialle (Baloon): Especially for a French start-up! In Africa more than anywhere else, it’s essential to find a local partner and it helps open doors. This is why we value our partnerships with the largest insurance companies on the market, as well as with Total, Orange, MTN and Jumia, which are completely integrated into the local environment. This reassures our clients. We also work with a number of local start-ups specialised in means of payment, logistics, etc., which we integrate into our ecosystem.
Grégoire Landel (CityTaps): I fully agree with this observation and I would extend it to other parts of the world without hesitation. In our countries of operation, we’ve identified operators, representatives and distributors. It’s absolutely essential. A French entrepreneur arriving in these markets with the vision of a uniform Africa, without using these local intermediaries, would most likely be heading straight for disaster.
Olivier Pascal (LAFAAAC): It’s especially true for us as we’re seeking to adapt our content with local experts, with trusted partners with whom an “industrial” approach is therefore essential. And this, of course, facilitates our business development. For example, without our partner Wazobia in Nigeria, we wouldn’t have been able to grow there so quickly. We were very lucky.
What advice would you give to a french start-up seeking to operate in Africa?
Grégoire Landel (CityTaps): You must first ensure that the products on offer meet a real need on the ground and become aware of the diversity of business and regulatory environments, etc. I also think it’s wise to avoid any “pan-African” commercial policy. For example, a product that works in Egypt might not sell in Mali, Uganda or elsewhere.
Olivier Pascal (LAFAAAC): Africa offers extraordinary opportunities for those who know how to seize them. However, it’s important to integrate certain characteristics that are specific to this continent where the perception of time isn’t the same as in Europe. Finally, the notion of a win-win partnership is essential there.
Bertrand Vialle (Baloon): It’s essential to draw on African experts, recruit local teams, be familiar with the infrastructure network and aware of certain recurring constraints (difficulty of access to electricity and the internet network, political instability in certain countries, etc.). But it’s an absolutely incredible human and entrepreneurial adventure.