AfricaEats: A fast-growing African company worthy of your consideration
Africa Eats started just four and a half years ago, and has achieved some remarkable milestones since. Indeed, one of the companies in its portfolio tripled its revenue in 2023 alone, to $6.4 million.
Now Africa Eats is about to go public. The company’s business strategy and unique structure – part venture capital, part impact investor and part Berkshire Hathaway – make it an intriguing investment prospect.
The principals also recognize that accessibility is important for non-African Investors. So, they have decided to list on a recognized international stock exchange, in US dollars, with trading accessible via a unique market-making App.
If you have been on the fence about investing in Africa, this could be a great opportunity to check out.
You will almost certainly not find any other company like Africa Eats. At least not yet. But CEO, Michael “Luni” Libes, believes that as soon as they go public, copycats will start showing up. I’ve known Luni for some time now, and I personally met him and his co-founder Jumaane at the recent AFSIC investment conference in London. Luni is a real go-getter that makes things happen; a serial entrepreneur in the traditional mold – identify a problem, and then SOLVE it.
In a nutshell, the story began with another company that Luni started in 2012 called Fledge. It is a global company that handpicks entrepreneurs from the world over with the best chance of thriving and building million-dollar, even multi-million-dollar businesses. Looking through the applications they were receiving, Fledge saw a pattern. Many of them were coming from Africa, and most were in the food and agriculture industry.
This gave birth to the idea of launching Africa Eats, which focuses on a specific niche: African entrepreneurs who can both help solve the massive food gap in Africa and return bountiful profits to investors.
A UN report stated that about 1 billion Africans were either food insecure or undernourished in 2022 with not much hope that this problem will be alleviated soon. Africa Eats is trying to change that narrative.
The company has already had some great achievements. A couple of dozen African startups in the Fledge portfolio, from 10 different countries, went from under $1 million in revenues, to sales of $36 million collectively in 2023. That’s over 50% CAGR revenue growth in a decade. Impressive!
Africa Eats has a simple recipe:
“… one cup venture capital fund, two cups business accelerator, and three heaping teaspoons of Berkshire Hathaway. Add in two dozen fast-growing, homegrown, bottom-up for-profit solutions to hunger and poverty across Africa. Stir vigorously. Feeds billions.”
Perfect candidate for ESG and Impact Investing
With a rapidly growing population comes a rapidly growing demand for food. Africa Eats is aiming to bridge the widening gap between the demand and supply.
One of the main challenges is that, even though majority of Africans are farmers, there is not enough food supply to go around feeding their countries, let alone the entire continent. Aside from the erratic climate making harvesting both tough and unpredictable, there is another factor at play: PHL or Post-Harvest Losses. To give you an idea here’s a big picture summary from the UN’s Food and Agriculture Organization:
And if you want to go deep into details, there is a website that tracks all postharvest losses in different parts of Africa, and you can filter the data based on your points of interest. Here’s an example:
What is Africa Eats’ role in eliminating Post Harvest Losses?
They buy the harvest from the farmers and manage the distribution to retailers professionally to prevent losses.
It’s a very simple, yet powerful solution in various ways:
- The farmers can focus on what they do best: cultivate the land and grow the harvest.
- It ensures that the farmers are paid fairly for their crops. Because their success is Africa Eats’ success.
- The process after harvest is being streamlined, making it easier to spot strengths and opportunities for improvement
One more thing that makes Africa Eats stand out from the crowd: Berkshire Africa
Africa Eats is adopting a successfully proven method of investing, the Warren Buffet style of investing. In one sentence: find excellent companies and keep them forever.
The founders of Africa Eats recently published “Berkshire Africa” which sets out their investing approach to a tee. You can purchase this book from Amazon (Disclaimer: I don’t get commission on this).
What’s the urgency?
Africa Eats has reached the next level and will soon be publicly listed on the Stock Exchange of Mauritius from next month, November 2024. This is the first of a few more listings in the pipeline.
Here’s an email I got from Luni, the CEO of the company:
“To share the details of the offerings and to answer questions on how to buy shares, there are four webinars scheduled. All with the same content. All at different times to ensure our global community of investors and potential investors have a reasonable time to join.
You can share this email with anyone in your network you think might be interested.”
We’ve missed the first three ones, but you still have a chance to join the last webinar on:
October 24th at 8pm PT / 11:00pm ET / after midnight in Europe / 6:00am EAT
Here’s the link to the Zoom room: https://us06web.zoom.us/j/99052713622
The good news is, you don’t need to have an account or broker for the Mauritius Stock Exchange to be able to buy shares in the company once they go public.
There is an app that you can download, create an account from anywhere in the world, deposit a minimum $100 and get started right away. You can get more information on the company website: Invest – Africa Eats
Luni has told me that the app is offering some incentives to the early-bird accounts: “We are giving away 10 shares of Ziweto and Elite Meat to the first 200 people to sign up.” Ziweto and Elite Meat are two of Africa Eats’ success stories and will also soon be publicly listed.
What’s in it for me and the African Lions Fund?
We are trying to increase interest, and available investment funds in Africa’s capital markets. We would like for more investors globally to have easy access to African investment opportunities and help bring investment capital to African companies that are creating employment, growing economies, and improving lives all over Africa.
In my assessment, Africa Eats and its founders are making a valuable contribution to these things. I am happy to back their efforts in any way I can, and at the same time help investors like you discover the opportunity.
African Lions Fund and I get nothing out of it beyond that. We may also invest. But given the size of African Lions Fund these days (>US$27, I think Africa Eats may be too small for us). We’d need to buy 5% of the whole company for it to be a meaningful position size for us.
I am also not convinced it fits our mandate, which calls for us to buy shares in companies we think can double their sales and earnings over 5 to 10 years and also buy them at valuation multiples low enough that we think the multiples can double over the same time frame. While definitely growing fast enough, Africa Eats will not be trading on a valuation multiple that I think has the potential to double.
But for growth investors, that should be less of a concern. If you can buy Africa Easts at slightly less than 1x book value, and the company’s book value triples or quadruples, you will still be making a very healthy return.
I am greedier. I want the company to double earnings in 5 years AND I want the valuation to double. Is there a scenario in which Africa Eats might trade at 2x book value? Possibly; but I think the odds are relatively low. Investment holding companies selling for such valuations are as rare as unicorns.
Even the very best holding company of all, on which Africa Eats has been partially modelled, Berkshire Hathaway, has never come close to that sort of valuation.
Africa Eats is also separately listing two of the portfolio of companies it has backed and financed. I still need to examine those.
For anyone interested, the data room for the IPO is open, and I’d encourage you to take a look.
Until next time,
Good Investing!
Tim Staermose
Founder, Global Value Hunter
& African Lions Fund Ltd.