Investor reveals industries in Africa that make him uneasy

Posted on: 29 April, 2020 at 2:21 PM

After 10 years of building and investing in African companies, Emilian Popa has seen it all. He launched online clothing retailer Zando in South Africa; started Jumia in Nigeria; founded the Naspers-backed Africa Internet Accelerator; did a stint as CEO of Groupon South Africa; and then spent four years investing in growth-stage tech-enabled companies through the DiGAME venture capital fund. He is currently the founder and CEO of Ilara Health, a Kenya-based diagnostic solutions company.

While Popa is upbeat about the continent’s opportunities, he revealed to Jaco Maritz there are some industries he is less enthusiastic about.

1. Consumer lending

In recent years, numerous fintech companies have entered markets throughout the continent with tech-enabled consumer lending solutions. Popa says while some of these platforms – such as Tala, Branch and GetBucks – are “doing a great job”, it is generally a risky industry because of the lack of adequate credit ratings in many countries. Other downsides of the sector are high customer acquisition costs and a large number of competitors.

However, he remains bullish about SME finance, especially if a lender has visibility of the company’s finances. He says many small businesses Africa generate good revenues but don’t have access to finance.

2. E-commerce

Popa spent a large part of his career in the e-commerce industry. While there has been considerable enthusiasm about the potential of e-commerce in Africa in the early 2010s, the industry didn’t perform as expected. “Back in 2012–2013, we were banking on the fact that online transaction penetration is going to grow significantly in Africa but it has not grown so much to date,” he says.

“It’s much more costly to do e-commerce in Africa than to do e-commerce in Europe or the US,” explains Popa, adding that deliveries are expensive. “I remember our first years in South Africa where one driver couldn’t do more than 20–30 deliveries a day in Cape Town because it is very [spread out], while in New York [a driver] can deliver hundreds of packages per day because it’s [compact].”

A lack of consumer trust in online commerce also remains a significant hurdle.

For these reasons, Popa believes companies which have adapted Western-style e-commerce models for the African market have a much better chance of succeeding. He gives the example of Copia, a Kenyan mobile e-commerce company which has built a network of more than 5,000 agents – typically small shopkeepers – who serve as ordering and delivery points. This allows customers to choose if they want to interact with Copia on- or offline.

Another example is Sokowatch, an East African B2B e-commerce company which enables informal retailers to order products from suppliers such as Procter & Gamble and Unilever via SMS or mobile app and receive free same-day delivery. This makes it easier for shopkeepers to source goods and helps manufacturers ensure their products are consistently available to consumers. Leveraging historic purchasing data, Sokowatch evaluates retailers to provide access to credit and other financial services typically not available to informal businesses.

3. Online education

DiGAME, the VC fund for which Popa previously worked, reaped huge rewards from its investment in South African online learning platform GetSmarter when US-listed company 2U acquired it for $103 million in 2017.

Despite GetSmarter’s success, Popa says it is tough to monetise education in Africa, particularly as it is usually subsidised by government. “As much as I love education… it’s just very difficult to monetise in markets where delivering high-quality content online is that expensive and where people have very little income to spend on anything else than the basics.”

Reach Africa’s private equity community by publishing a Showcase Article on Africa Private Equity News. Contact us at for our rate card and more information.