Welcome to Sati - Sourcing Africa to Invest

👋🏾 I’m Marge… ethnically Ugandan 🇺🇬 raised in the US 🇺🇸 and a dreamer 💭 

At 18, I envisioned investing in early-stage Africa-focused startups that would spur economic development and prosperity. I’m making that dream a reality.

Here at Sati, we’re on a journey to uncover Africa’s history of tech and private investment to understand the present and predict the future.

Join me; let’s see where this ride takes us 🚌

Let me formally introduce you to Ona, my co-author

Ona and I clicked over a call about the future of tech in Africa. We wanted to explore Africa-focused companies that have stood the test of time - an understanding we hoped would uncover the builders of our future.

Where to take Sati

Ona and I spent some time brainstorming the most effective way to understand the different types of innovation that have and will occur on the continent.

As we discussed companies, markets, and industries to research, we uncovered two trends. Influential Africa-focused companies often either:

1. Create markets

   OR

2. Disrupt markets

So moving forward, we will run two series.

One on market creation and another on market disruption.

The genesis and evolution of telecom on the continent is the first of several pieces we will write on market creation.

This is a captivating story.

Keep reading 👇🏾. It’s one you won’t want to miss!

But wait… what is market creating innovation?

Now I know you want to get into the meat of the story, but we thought it worthwhile to first define market creation.

Companies that create markets make complex and expensive products and services simple, affordable, and accessible for a whole new segment of nonconsumers.

A few examples include:

• Cameras: Kodak, founded in the US in 1888

• Cars: Ford Motor Company, founded in the US in 1903

• Electronics: Sony, founded in Japan in 1946

Before these companies built their products, the alternative was either too expensive or required a specific level of expertise to utilize, leaving millions unserved.

The more populous an unserved market, the larger the market opportunity and potential returns.

Market creators that unlock solutions for nonconsumers create billions of dollars in value. They catalyze economic development and prosperity by creating a virtuous cycle of more opportunities for new markets and innovation.

We started with telecom, the foundation for more

The evolution of telecom and mobile technology in Africa is the bedrock for many disruptive technologies we know and love today:

• M-Pesa and other mobile money solutions offered by Mobile Network Operators (MNOs)

• MFS Africa and their interoperable API for MNOs

• As well as several others…

So today, we’re focused on Celtel, the pioneer of mobile telecom in Sub-Saharan Africa (SSA), which in the late 90s, was the most underserved telecommunications market in the world.

Mobile in SSA wouldn’t be what it is today without Mo Ibrahim, Celtel’s founder.

This piece is dedicated to him and to our people. Oh, how far we’ve come.

This piece is also dedicated to the skeptics. Celtel was built over 20 years ago. Africa had, has, and will have, brilliant founders building for the future to come.

Now, let’s get into the meat and potatoes 👏🏾

Telephone usage in SSA in the 90s

Who had access?

SSAs first mobile phone operation was launched in 1986 by Telecel in what was then Zaire (now DRC).

Prior to this, landlines existed in several markets.

Both landlines and cellular never reached scale.

By 1998, 640 million people lived in SSA. Landlines and cellular covered <2% of the population❗️

Why didn’t landlines take off?

Landlines require that wires be installed on every road, in every community, with smaller lines installed in every household. Such an undertaking would be prohibitively expensive, especially in countries with poor roads, vast distances, and low population densities.

What would happen if mobile was adopted at scale?

Obviously, creating solutions for the millions of nonconsumers that lacked access to telecom was a massive opportunity.

What were the potential impacts?

Faster access to information, reducing search costs

How would you decipher input or output prices as a farmer in SSA without a phone?

Prior to cellular, a roundtrip to a market could take 2–4 hours, as compared to a two-minute call.

Using an average local daily wage of $1 per agricultural laborer, access to a mobile phone reduced search costs by 50% compared to personal travel.

Better supply chain management

Immediate communication could reduce stock-outs and interruptions in production, often a concern for small-scale firms in rural areas.

Research in South Africa and Egypt displayed that firms with mobile phones had increased profits, significant time savings, and improved communication with suppliers.

Job creation

To set up and expand mobile phone operations, a large labor force was required to build the underlying infrastructure.

Distribution partnerships were established with businesses in the formal and informal market, creating a multitude of entrepreneurial opportunities. For example, small shops that had traditionally sold dietary staples and soap now also sold mobile phone credit (airtime).

Celtel, the giant that took on SSA

Mo Ibrahim, the founder of Celtel, was the right person to implement

Sudanese born, Mo Ibrahim, had been in telecommunications all his life.

After getting an engineering degree from Alexandria University in Egypt, he returned home to Sudan to work as an engineer for the state-run phone company, Sudan Telecom.

His move abroad

In 1974, he moved to England to pursue a master’s in electronics and electrical engineering at the University of Bradford.

Later, he received a Ph.D. in mobile communications at the University of Birmingham, exploring radio coverage and cellular technology in urban and rural areas.

His contribution to the conception of mobile technologies

In 1983, he was invited to join British Telecom as a Technical Director to design the first mobile network in the UK. He also worked on the development of GSM to be adopted by Europe, a common standard that was essential for the growth of the industry to bring prices down and enable roaming between countries.

Wanting a more fast-paced, innovative environment, Mo left British Telecom after 6 years to start Mobile Systems International (MSI), a consultancy that developed planning and automation tools for mobile networks.

MSI became very profitable, and its tools became the industry standard. It had over 110 operators worldwide licensing its planning tools. They became the largest independent technology consultants in Europe. Through that process, they came to know all of the players.

What drove him to build Celtel?

Being an African and having previously worked for a fixed-line telecom monopoly in Sudan, Mo saw a massive business opportunity for cellular in Sub-Saharan Africa.

The pursuit was a mixture of business judgment and passion. Given he had left the continent very young, he felt he “needed to do something for his people.”

At this point, he’d built cellular networks in all corners of the globe.

But building for Africa would be different.

In markets outside of Africa, extensive landline infrastructure was built. Therefore, implementing cellular simply required an overlay of mobile technology.

In SSA, there was no infrastructure. The task would be built from scratch.

What challenges did he face along the way?

Post-Colonial policy

In countries where colonial influence remained post-independence, policy and regulation hindered progress.

For example, at the river border from the Democratic Republic of Congo to Congo Brazzaville, calls were routed through satellite connection via their former colonial rulers, France and Belgium.

To allow local routing of calls which would reduce costs by 75% per minute, Mo negotiated for an entire year to get this policy overturned.

This was a capital intensive endeavor

Building mobile infrastructure from scratch was going to be expensive.

Mo was building for areas that had no previous telecommunication service and often, no roads or electricity.

So, where there was no power, he created his own.

Where there were no logistics, he developed his own.

And where there was no education or healthcare, he provided that for his staff.

Despite the challenges, the opportunity outweighed the costs.

Fundraising

Typically, mobile companies were funded using 50% debt and 50% equity. But Celtel was funded entirely through equity. Banks at that time did not want to do anything in Africa, leaving Celtel with no other choice.

Therefore, to start, Mo funded the business largely himself and with his colleagues.

The first outside investors were development agencies. They immediately saw the value of what Mo and team were doing. Progressively, more investors joined Celtel on its journey.

In seven years (the lifespan of the company), Celtel had to raise nine rounds of financing before its $3.4B exit.

How did Mo do it?

In our last piece, we explored the common attributes of successful founders that had raised over $20 million between January 2019 through February 2023.

We uncovered that most successful founders had the following:

• A technical background

• Industry experience

• A degree abroad

Mo had all of these attributes.

But we still want to know how he did it!

Next week, we will take you 25 years back in time.

We will outline a roadmap on how Celtel expanded across Sub-Saharan Africa.

We will explore the company's economic impact and its path to a $3.4B exit.

Sign up to receive it in your inbox! 

Future Events

Starting today, Jasiel and I will host bi-weekly office hours for founders interested in practicing their 5-minute pitch. Sign up to join us!

Interesting Reads This Week

Whenever we publish, we plan to share an interesting article, book, podcast, etc., that we thought you’d enjoy. Here’s what we got for you this week:

1. It can be tricky to gauge the success of an investor meeting. Michael Houck shares 11 counterintuitive signals investors give when they are not interested.

2. Many Africa-focused founders are influenced by startup advice from Silicon Valley. But building for Africa has its unique nuances. Check out this cheat sheet for building startups in South Africa published by Philip Joubert.

That’s all we have for you this week!

Thanks so much for making it to the end!

Look out for our newsletter next week, where we round out this topic.

If there’s anything else you’d like us to explore, send me a note. I’d love to hear from you! You can find me on:

• Twitter

• LinkedIn

• Email (Reply to this email)

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A huge shoutout 🗣 to Ona!

This piece could not have been written without Ona, an amazing, kind-hearted, brilliant individual.

A little about her:

Ona is an Accounting and Financial Management Student at Loughborough University. She heads the Marketing Team at Initiator VC, a VC fund in the UK that backs student entrepreneurs.

Like me, Ona is Ugandan.

Also, like me, she’s passionate about ecosystem building in Africa.

We are a great pair.

Until next time!

👋🏾 Marge