Lessons from nearly two decades of investing in East Africa

Saskia van der Mast

Interview with Saskia van der Mast

Lives in: Nairobi, Kenya

Investor Saskia van der Mast had spent nearly two decades at DOB Equity, an investment firm focused on East Africa. Having recently stepped down as co-CEO, she spoke with How we made it in Africa editor-in-chief Jaco Maritz about the investment lessons she has learned and shared her insights on the region’s business environment.

Highlights from the interview include:

  • The most successful investment Van der Mast has been involved with
  • Agribusiness strategies for Africa
  • Changes in the East African market over the past two decades, the good and the bad
  • Why African startups need to focus on profitability much sooner
  • Her thoughts on how long to support a struggling business

From Europe to Africa

DOB Equity, founded by a wealthy Dutch family who made their money in the retail industry, is an impact investment firm focusing on East Africa. The firm has invested in over two dozen companies, including well-known businesses such as M-Kopa, Twiga Foods, Victory Farms, Ilara Health, and Moringa School.

Born in the Netherlands, Van der Mast grew up in London but developed a keen interest in Africa. During her university years, she even did a semester at Stellenbosch University in South Africa, and wrote her master’s thesis on private sector development from Tanzania. Starting as an investment analyst at DOB Equity in 2005, she rose to co-CEO in 2020.

Pay-as-you-go solar: A winning bet

One of the most successful investments she has been involved with is M-Kopa, which started out in Kenya in 2012 by providing rural and low-income households access to electricity through pay-as-you-go home solar systems. The company’s package included a solar panel, battery, and appliances such as light bulbs, a torch, a mobile phone charger, and a radio. Customers made daily payments via the mobile money platform M-Pesa. Sensors regulated usage based on payments received, allowing the system to be remotely shut down if credit was exhausted. Interestingly, the daily cost matched what consumers typically spent on kerosene, which releases harmful fumes when used for lighting.

M-Kopa has since expanded to multiple African countries and diversified its products to include smartphones and electric motorcycles.

DOB Equity sold part of its stake in M-Kopa in 2015.

Agribusiness dynamics in Africa

During Van der Mast’s tenure at DOB Equity, the firm made several agribusiness and food-related investments.

Vertical integration: Given the unpredictability of agriculture and underdeveloped supply networks, Van der Mast advocates for agribusiness enterprises to own as much of the value chain as possible, from inputs to logistics. In Africa, companies often need to expand beyond their core business. “You’re not building one business, you’re building multiple businesses,” she explains.

A prime example is Victory Farms, a fish farming company on the Kenyan side of Lake Victoria. Beyond operating hatchery ponds, deep-water cages, and a processing plant, Victory Farms has established an in-house distribution system and a network of retail stores. (Read more: Vertical integration important for profitable agribusiness in Africa, says investor)

Unlocking the potential of smallholder land: In Kenya, an estimated 80% of arable land is owned by small-scale farmers. Smallholder farming on the continent is often synonymous with low yields, limited use of quality seeds and fertilisers, minimal mechanisation, and general hardship and poverty. Van der Mast points out that many smallholder farmers in Africa are not necessarily interested in farming; for many, it is simply their only means of livelihood.

DOB Equity’s portfolio company Cinch Markets has tapped into this dynamic by aggregating smallholder farmers in Kenya and renting their land. Cinch then invests in essential infrastructure to support high-revenue activities, such as horticulture for export. Landowners receive a share of the revenue and can choose to either work on the land as employees or pursue other ventures, such as moving to the city or starting new businesses. This model significantly increases landowners’ incomes.

Van der Mast emphasises the need for a new approach in agriculture. “If you look at agriculture and the amount of money that has been spent over the last few years… unfortunately, little progress has been made in the way people are farming, what they are producing, and yields. That’s terribly sad. So I think the whole sector needs to be looked at differently… Yes, land is sensitive and people want to own land. But how can you still allow people to own their land but allow them to create more wealth from it?”

Lack of funding: She also highlights the scarcity of debt and working capital for agribusiness ventures in East Africa, especially for younger companies: “I’ve spent months of my life looking for working capital for some of our businesses.”

Innovative education models

Finding viable private education business models in Africa, particularly for the mass market and low-income populations, is challenging, according to Van der Mast.

One of DOB Equity’s most successful investments in this sector was Bridge International Academies, now part of Newglobe. It began in Kenya as a chain of affordable private schools, charging about $5 per month, and delivered significantly improved learning outcomes compared to public schools. Van der Mast highlights the company’s highly scalable business model. Instead of hiring teachers from colleges, it recruited smart individuals straight out of school and trained them internally. The curriculum was centrally produced and distributed on tablets for teachers to read to the class. By operating in basic structures rather than investing in fancy buildings, it kept capital expenditure low. The company has since expanded to several African countries, including Nigeria and Liberia, and offers an education-as-a-service model where governments outsource school management to Newglobe.

Another company that has found traction in the education industry is Kenya-based Zydii, which offers affordable, localised online training courses to enhance professional skills. Improving workforce skills is increasingly recognised as crucial for the success of businesses in Africa.

Investment insights

She shares key investment lessons learned over the years:

Take your time: Don’t be rushed into making an investment, not by the entrepreneur nor anyone else. Be patient and ensure all sticking points are resolved and there is 100% alignment with the entrepreneur before signing the investment agreement. “If you feel or know there is something that you still need to sort out, don’t get rushed into it,” she says.

Know when to let go: Deciding how long to support a struggling business is challenging. Van der Mast believes that, in most cases, it’s best not to continue unless there’s a material change on the horizon.

Learning from the funding winter

Africa’s startup scene has recently experienced a ‘funding winter’ as many investors fled the market. With the rise in global interest rates, investors found higher returns in more conservative investments, such as government bonds, and were less willing to take on the risk of investing in startups. This left many startups without the funding needed to continue operations. According to TechCrunch, companies like South Africa’s WhereIsMyTransport, a mobility startup, and Kenya’s Sendy, a logistics company, shut down after failing to secure fresh funding. Many other growth-stage companies also struggled to survive and were forced to scale back operations.

Van der Mast says that part of the problem was that investors pushed startups to prioritise rapid market share growth, and worry about profitability later. The lesson? To focus on profits much sooner.

Additionally, many investors favoured startups with operations in multiple African countries, encouraging companies to expand geographically, often before they were ready. Van der Mast emphasises that each country has its own unique challenges and that copy-pasting a business from one country to another, especially a loss-making one, is rarely successful. Instead, startups should first focus on making the business work in one country before considering expansion.

Progress and challenges in East Africa

When asked about changes in the East African market over the past 20 years, Van der Mast highlights the following:

The bad: Despite rapid economic growth, living conditions for many low-income and rural people have remained largely unchanged. “If you drive half an hour outside Nairobi, then nothing has changed. The only thing that’s changed really is that everyone has a mobile phone, which is amazing … but if you look at infrastructure, or the amount of people that still have no access to electricity, that is really dire.”

The good: The number of investors interested in East Africa has surged dramatically. “Another good change is that local investors are now also looking at supporting their own industries. We see pension funds [also] now coming into some of these [investment] funds,” she notes. Additionally, there has been a rise in local founders choosing entrepreneurship over corporate jobs.

Saskia van der Mast’s contact information

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