Doing business in Africa

  • Africa’s 54 countries have very different markets, and segmentation is key to business success in these markets
  • The mobile penetration is high and business models that leverage on it provide lots of opportunities
  • Cash is king and incentive structures should recognize filial obligation when trying to motivate and recruit

With over forty direct and indirect investments in Africa’s digital space, Jesper Drescher, chairman of Mdundo, and author of ‘Digital Africa: Investing In Africa’s Most Untapped Source’ shares key insights into doing business in Africa, including common misconceptions


My name is Jesper Drescher, and I invest in digital businesses across Sub-Saharan Africa.

I started actively investing in Africa as early as 2013, first in East Africa and then portfolio investments in South and West Africa. I’m now mostly focused on East Africa and involved in a couple of ventures in Europe as well.


I spent 10 years building several management consulting companies in Scandinavia, and after selling my last one to KPMG, I traveled with my family to Australia, returned, acquired a couple of businesses which I turned around and sold, and then decided to look towards the emerging markets because Europe and US were flat, and I had lots of experience traveling across Africa and was fascinated by the continent.

Early stages of Investing in Africa

Investing in digital businesses in Africa appealed to me because though a lot of things are not working in Africa, specific areas like the mobile infrastructure are quite good. So, my idea was to invest in business models that leverage the mobile infrastructure. I started screening lots of businesses, doing my analysis and due diligence on the continent and on the different mobile penetrations and adoption rates and what existed within the space.

I couldn’t really decide on something specific to invest in until I came across a Danish fellow who had gone to Kenya to set up an accelerator known as 88 mph. I flew down to visit his team and they sounded like they were onto something big, so I ended up investing in that accelerator, and in the funds behind it. We also did something similar in South Africa and a joint venture in Lagos. I then began visiting the continent more often, started doing direct investments, founded a business from scratch in 2016, and then became a very frequent flyer.

Building My Business in Africa

My direct and indirect portfolio investments across sub-Saharan Africa are somewhere around 40 to 50, all leveraging on mobile technology digital businesses, but I am directly active in the entertainment and e-commerce space.

On the indirect portfolio investment side, the performance mirrors what is obtainable in the US or Europe, with some not doing well, but the ones that do takeoff outperform the market by about 30x in some cases. And so, as with these early-stage investments anywhere in the world, the key is to let the losers go rather than continue investing in them, and just back the stars

Directly, I am chairman of three different businesses operating in Africa. One is an e-commerce business called Sky Garden, which is like Shopify for Africa, building a SaaS model for small and medium enterprises across Africa. We are having good traction at Sky Garden and have just closed a Series A with Aavishkaar Venture Capital funds and Finance in Motion, a German fund.

The other one is another e-commerce company called  BeautyClick. BeautyClick is a B2C e-commerce business that focuses on the whole beauty Segment running out of Kenya. Questions have been asked about why I chose to work with cosmetic, skincare, and hair products in Africa, and I always explain that the idea started back in 2010 in the United States when Amazon bought It was noticed at the time that Amazon, which typically outcompetes everyone, chose to purchase and they did this because had really excelled in a massive vertical area. We had this situation in mind when we started BeautyClick. What happened was that Jumia, which started in 2012 and is now Africa’s biggest e-commerce company, had invested around a billion US dollars into Africa’s e-commerce market, money which in my view was used to educate the African population about e-commerce. Not totally fair, but they did do a lot of the groundwork. Based on Jumia’s presence and some other reasons, I decided in 2016 that now was a good time to engage the e-commerce market in Africa. But we didn’t want to go head-to-head with Jumia because they’ve got deep pockets, so we settled on a huge vertical area after some analysis and that became the beauty market.


I’m chairman of a music company called, which was listed on the NASDAQ in Copenhagen, sometime in September last year. Mdundo was started within 88mph in Nairobi in 2013 and focused for the first couple of years on Kenya, moving onto the rest of East Africa and two years back expanded to West Africa. Today Nigeria is the largest user market for Mdundo and by the next time we communicate our numbers to the public, we will have about 9 million unique monthly active users.

The idea around is like Spotify or Apple Music for Africa, the difference being on the content side. African artists are organized differently from those in the western part of the world. Broadly speaking, they are much more independent and mostly do not work with labels. If you want to compete with Spotify today, and you get Universal, Sony, and Warner on board, you would effectively have captured 80 to 85% of the music you need. But the artiste landscape is different in Africa, and we’ve built a business that works directly with them, acquiring music, and now handling 120,000 artists directly as of today that focuses on the African mass market, where the consumer has less data to spare because data is still quite expensive across the continent. The devices they are using have limited storage, and they are listening to a lot of local African music. These three areas are important.

Our focus is on local and hyperlocal music in our core markets, not just as a key differentiator but also as a service that requires less data use. We are using a time download service in cooperation with Telcos in Tanzania and in Nigeria, where the consumer can buy internet bundle services and get access to the Mdundo music, and as part of that bundle, we create specific DJ mixes for that audience with local and hyper-local music.

My latest investment is a FinTech company that has gotten off to a very good start as well, called PawaPay

Understanding Africa’s Ecommerce Market

There is a perception out there that last mile distribution is a big barrier for e-commerce across Africa, in my view this is inaccurate. In some specific markets maybe it is, but I’ll say e-commerce hasn’t matured in those specific markets yet. If you look at a country like Kenya. Last Mile distribution is not really an issue. At BeautyClick and Sky Garden, we deliver everywhere within Kenya in 24 hours.

There is a perception out there that last mile distribution is a big barrier for e-commerce across Africa, in my view this is inaccurate

There are three main issues you need to pay a lot of attention to in the market, one is around trust. If you buy something on Amazon, you put in your credit card and you just order it, but it’s different in many African countries, people don’t really trust that they will get the goods they are ordering so payment on delivery is a big thing. For instance, in Kenya, M-PESA facilitates mobile money on delivery payments

The cost factor is another thing. For example, having the customer pay for deliveries could be an issue.

And then there’s segmentation. Sometimes investors entering the market tend to view Africa as a country. It is not a country; it is a continent with 54 countries that have lots of differences and it’s important to be realistic about the specific market you are entering and the details around that market. And with the customer segmentation, the top of the pyramid, if that’s your target customer segment in terms of buying parameters, looks probably a lot like the top of the pyramid in the US or Canada or in Europe, moving down the pyramid, to the mass market, however, the characteristic of the consumer, the willingness and ability to pay and the buying habits are very different,

But overall, COVID is really a friend to e-commerce, and when we get out on the other side. I’m quite sure that specific countries across Africa will probably leapfrog three to five years when we talk e-commerce penetration.

Unique to Doing Business in Africa

Africa is full of opportunities. But again, when we talk about uniqueness, it’s not fair to view Africa as a single market we need to drill down to a specific country or a specific market. Unique to all the markets where we operate in Africa, is that they are full of opportunities. It’s early-stage yet and there’s a lot of development going on and lots of opportunities. And like I said, the mobile penetration is high and business models that leverage them provide lots of opportunities. Again, it is extremely important to build trust, simplicity, and accessibility to move ahead.

It is extremely important to build trust, simplicity, and accessibility to move ahead


Moving physical goods across borders in Africa is very hard, and businesses that are built around this model will encounter some difficulties. Yes, there are free trade zones across Africa, but in practice, it’s still very hard to move goods across borders.

From an entrepreneur and investor perspective, finding the right founders and people to invest in is always hard. This is especially so if you are coming from the outside because you really need to understand the culture and find out what’s okay to do and where. In my case, I’ve had my share of learning about the continent from traveling and doing business there and am able to increasingly lean on the networks developed over the years to assess people in different ways and develop incentive structures.

Cash is King

Investors from Europe and the US come with the mindset of warrants and other deferred incentives, and in the beginning, I had the same mindset, but I learned quickly that you can’t pay your brothers and sisters school fees with warrants, so cash is cash and cash is king, and it wins over a ticket that is maturing in about three or four years down the alley.

A lot of young people in Africa, especially the firstborns, have welfare obligations to their parents and sibling, and their ability to help their family is a significant factor when choosing between the uncertainties of entrepreneurship or the predictable income from working at multinational. There are not many Silicon Valley millionaire role models in the area so it might not be culturally acceptable to move down the former path. That’s something to understand when you are trying to motivate and recruit people. So, while the eagerness to try something new is definitely there, there’s something around obligations. The employees might be coming with that, and you need to be realistic about it. I describe a lot of this in my new book, digital Africa.

My Book, Digital Africa

The book is about investing in Africa’s most untapped source which I really believe is the whole digital space. I’m a strong believer that if Africa is going to take off, and really grow quickly. It needs much more digitalization because that’s the only way to create more trust and transparency.

If you look back 30 years to China and Sub-Saharan Africa, both had a GDP of $350 billion, today the GDP of China is eight times bigger than the GDP across Sub-Saharan Africa. So, I believe an opportunity was missed here, but that there’s now a good chance to really get the development going.

In the book, I describe what I think needs to be done and some focus areas for stakeholders to consider and be aware of when investing in Africa. One of the clear recommendations I make in the book is around what I call ‘let them in.

Immigration can be very hard for a foreigner who comes into Africa to start a business. Just like in Kenya, it can be very hard to get a work permit, and this makes it more expensive for foreigners to do business in the continent because you then have to pay higher corporate taxes, and anyone who’s tried to start a digital venture knows that in the beginning, you don’t make a lot of cash, it’s a J-curve needing a lot of investment. So, you need to incentivize people.

If you compare the innovative societies around the world that have been successful, Singapore, Israel, UAE, even China, it’s all built on immigration. Israel opened up for Soviet Union engineers. Singapore made it very attractive to come there. China made a lot of programs to get ex-pats from the States, etc. So, countries opened their societies and invested a lot in getting competencies in.

Another recommendation is for international societies like the Foreign Direct Investment Funds, where there’s a lot of inflow to the African continent. These funds need to be directed much more into digitalization, most of it is currently going into traditional infrastructure, financial, and healthcare sectors, which are also important, but I think, if you move 5 to 10 percent of that inflow into digitalization, it will really have things take off. It’s key.

Navigating the pitfalls and opportunities.

For any foreign investor or company that wants to move into Africa for the first time, I’d say there are a few things to do. First, speak to people who have done it before. There are lots of people nowadays that are invested in the continent in a lot of different areas and have a lot of things to share, myself included, who are very happy doing consulting work as well. So, use other people’s experiences.

Secondly, be realistic. As I mentioned earlier, Africa is not a country it’s a continent with 54 countries, and there is a massive difference in doing business in Congo, Kenya, or Morocco, etc.

Thirdly, and equally important, is to put a lot of effort into your customer segmentation. This applies whether you are a foreign company moving in or you are a foreign investor assessing a business model. Be realistic when you see the high numbers because the demographics are lovely, the middle class is growing and this is where the market will be, but there are large differences when you do segmentation. What the different segments can and are willing to consume, is really important as well.

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