Main Highlights
- Fledge created Africa Eats about a year ago, a holding company with 27 agriculture and food-focused Africa-based graduates of the networks’ programs.
- The objective is to provide on-the-ground entrepreneurs with a deep grasp of how to best alleviate hunger and poverty in Sub-Saharan Africa.
- Africa Eats also gives access to critical support services that businesses require in order to thrive.
Fledge, which runs around ten impact accelerators across the world, created Africa Eats about a year ago, a holding company with 27 agriculture and food-focused Africa-based graduates of the networks’ programs. The objective is to provide on-the-ground entrepreneurs with a deep grasp of how to best alleviate hunger and poverty in Sub-Saharan Africa. Since then, the firm has raised over $2 million, and the portfolio companies are doing well despite the epidemic.
“These are entrepreneurs that understand the issues,” says Michael Luni Libes, founder of Fledge and CEO of Africa Eats. “They are not outsiders with grandiose notions that are doomed to fail.” Executive Director Jumaane Tafawa and COO Saif Ahmed round up the management team.
Spinning Out a New Company
The problem Libes set out to solve was this: despite the fact that the majority of Sub-Saharan Africa’s 1.1 billion inhabitants are farmers and food imports are a key source of money for Africa, there isn’t enough to feed the population at home, he claims.
Most governments there have responded by spending more than $11 billion a year on food to feed their people, the funding they cannot afford. At the same time, many entrepreneurs are attempting to solve these issues but are unable to secure enough finance. When companies do obtain funding, the donors tend to move slowly, so the interval between the demand for cash and when it is granted might be as long as ten months.
However, when Libes examined the Fledge portfolio of firms, he discovered something intriguing: about 27 Fledge grads were food and agriculture entrepreneurs in Africa. Why not spin out a new firm from these previously financed and tested ventures and pass over the portfolio in exchange for ownership shares (about half)?
In this manner, the holding company might handle one of the financial issues. Most potential investors were unwilling to sign the modest cheques sought by these businesses, instead directing them to return when they were larger. However, in aggregate, those 27 businesses produced $9.8 million in sales last year and $8.3 million in the first half of 2021. “That is not a little sum of money,” he remarks. They are also, for the most part, profitable. Furthermore, Libes predicted that the total would exceed $100 million by the middle of the decade and that the firms would be much larger by then.
As a consequence, they have raised around $1.8 million, the majority of which has been allocated. Farmers will also get a 1% ownership share in Africa Eats, as well as an additional 1% every year, in perpetuity.
Finance, Electricity, and Trucks
However, Africa Eats also gives access to critical support services that businesses require in order to thrive. This includes, for example, financial data, solar power, and logistics (specifically, trucking). One of the portfolio businesses provides services for the first requirement, which Libes characterizes as a “cheap Quickbooks for Africa.” The other two are or will be provided by solar power and logistics firms managed by Africa Eats. (According to Libes, leasing vehicles in Africa is tough.)
Take, for example, Chicken Basket, a Kenyan chicken processor. Three items were required. According to Libes, the firm first had to purchase property because local authorities had forced the company to relocate its slaughterhouses. As a result, Africa Eats made an equity investment to enable the company to acquire a new facility. The second issue was a remittance gap: customers paid 30 to 45 days after getting their items, while Chicken Basket had to pay farmers right away. The answer: Africa Eats loaned the firm operational cash.
Finally, there was the issue of regular power outages, which resulted in thousands of dollars in losses from hens that had to be thrown away. Africa Eats engaged a solar provider to install panels on the company’s rooftop to remedy this issue. The next stage is to assist with the leasing of more vehicles.
Frequent Check-Ins
Every day, Libes and his colleagues speak with at least one portfolio business. “We have a stronger relationship with them than a board member relationship,” he explains. “It is natural for a business owner to check in every now and again. We just check in more frequently.”
Despite the epidemic, the portfolio firms, according to Libes, are not only still in operation, but have grown by 40% from 2019 to 2020. They are on course to increase by 70% this year. Libes was taken aback by this. One Botswana firm, for example, was forced to close for six months. “We would have been content if last year had been flat,” he says.
The ultimate objective, he says, is to go public in “the next several years.” That should be “anywhere in Africa,” followed by the United Kingdom or Europe.
