Profit, Impact, and Growth: An Investment Model That Turns Small Farmers into High-Growth Agribusinesses with Luni Libes

[00:00:00] You're listening to the Unlocking Africa Podcast. We looked back at this portfolio and the companies that were not finding follow-on funding, more than less, were the African companies. So we created an investment company in Mauritius called Africa Eats. Our advantage is that we're providing equity and we have forever to worry about what it's worth. And if it truly is a hundred years from now and we still own it, we're totally fine with that.

[00:00:28] We're going to prove that there's money to be made as a market maker so that others follow. Right? We don't have any expectation we'll be the monopoly market maker. We're just the first. We're just the first. Stay tuned as we bring you inspiring people who are unlocking Africa's economic potential. You're listening to the Unlocking Africa Podcast with your host, Terser Adamu.

[00:00:54] Welcome to the Unlocking Africa Podcast where we find inspirational people who are doing inspirational things to unlock Africa's economic potential.

[00:01:04] Today, we have Luni Libes who is a serial entrepreneur, mentor and investor and chief executive officer of Africa Eats, an investment company lowering hunger and poverty across Africa by investing in profitable for-profit SMEs who are building food agriculture supply chains. Welcome, welcome, welcome to the podcast. How are you? I'm good. Thank you for having me.

[00:01:32] It's a pleasure to have you. How are things over at your end of the world? You're currently in Seattle. Yeah, things are cold and drab over here. It's winter. I've blogged about the fact I live in the wrong time zone, but the money to fund these things is over here. Yes, yes, I agree. That way it does make sense. Don't worry. I'm currently in the UK so the weather isn't much better over here either. Same weather. Yeah.

[00:02:01] So I'd like to get straight into it. I was hoping you can give us a nice brief introduction about who Luni Libes is. Yeah. So I started my career 33 years ago as an entrepreneur. I started a software company here in Seattle. And that's the one failure I had. But I dusted myself off and I did another one right after that. And then another and another and another.

[00:02:27] So there were five companies in 20 years. I founded four of them. They were backed by California venture capitalists. So I learned how venture capital works by taking the money of the experts, the California VCs. Yeah. And then I gave up all of the tech world in 2012 to start a business accelerator called Fledge. This was a text inspired accelerator, but for mission driven for profit companies, companies that actually fix real problems of the world.

[00:02:57] We we ran that until 2020. Invited in 100 something companies from 40 countries around the world, a large number of them from Africa and why Africa. No one else was really serving it. There's tons of needs in terms of impact. It just all clicked. And then when the pandemic hit, we we looked back at this portfolio and the companies that were not finding follow on the world.

[00:03:27] Funding more more than less were the African companies. So we wrapped them up. We wrapped up the food and ag companies in Africa, which like two dozen companies created a investment company in Mauritius called Africa eats raised money specifically for that cause and that mission. And here we are almost five years later and these companies are thriving and growing and we'd love to add more of them.

[00:03:54] And the big news, big milestone that we hit in December of last year is that now we're a publicly listed company. So anybody can buy shares in this company. Anybody can provide more capital and make money while we're lowering hunger and poverty in Africa. Amazing. Amazing. Great work. So as you mentioned, five companies in 20 years. So you've had a long career as a serial entrepreneur. So what initially drew you to entrepreneurship? It's just in my blood. I guess I've always been an entrepreneur.

[00:04:23] I do skip the one job I took out of college. But three months into that, I was supposed to start my own company. Okay. So I guess you founded multiple businesses and investment ventures, which has led you to what you do now at Africa eats. But what lessons from your early ventures have influenced what you're currently doing now? Oh, God. So I did in the midst of that transition, I did start teaching MBAs. Oh, wow. I taught MBAs for nine years.

[00:04:52] And what was most interesting in the beginnings of that was that I didn't know what I knew. So at that point, I was a 20 year serial entrepreneur with five companies under my belt. Four of them were still running at that point. And I had no idea why, because that's not normal. So the key lessons looking back and I did write some books to try and tease this out.

[00:05:20] The key lesson was get it into the market. Whatever your idea is, two things. One, you got to get the product into the market to learn what you don't know. And two, you got to iterate as quickly as you can to get that product to match what the market actually wants. And if you don't do that fast enough and if you don't do that at all, there's no chance of success.

[00:05:45] And when you're doing that level of planning, work backwards as well as forwards. So what I mean by that is envision what you think this is going to look like a few years from now. So we'll drop out of the hypothetical. I wrote the business plan for Africa Eats in late 2018. It said that we were going to be a publicly listed company by 2024, 2025. Why did it say that?

[00:06:15] Well, I knew that the investors needed a way to liquidate their investment, that that was part of the overall plan as they wanted. And I needed to provide a way for them to get out. And we can talk about exits later. And so that was the solution to how they would get their capital out. And so I got to work backwards from, OK, well, if we're going to do that step in this particular year, how big does the company have to be at that moment in time to fulfill that step?

[00:06:45] And how do you get there? What are the steps required to get to that stage? And I'm doing this in 2018 before we have any funding, before we even, you know, we had, I think, 17 companies that potentially were in the portfolio. And they were still tiny at the time. And so then once you know what the steps are to get where you're trying to go, great. Now you have to implement the first step like that. And then you're working forward again. And that's it.

[00:07:13] Like if you just keep doing that, you either find the market and succeed or you run out of money. One of the two. Thank you for sharing that. So if we take a few steps back, was there a specific reason why you transitioned from running or starting software companies to focusing on impact investments? Yeah, it's based on that teaching. So literally it was just one of those, one of those things, a happenstance.

[00:07:41] So I wake up one morning, I'm thinking about it's, it's, oh, it's, um, early two thousands. Uh, at this point I'm, uh, 17 years into my career. So, you know, 2005, 2006, 2007. Um, and I have four companies under my belt at that point, three of them still running. Uh, and I figure out why I must know something.

[00:08:07] I don't know what it is, but I must know something about this startup world. I should share that. Like I hadn't, by that point I hadn't had the big exit and the, and the giant success. And so I couldn't be an angel investor, which is a typical path for giving back, but I wanted to give back knowledge. So I was looking around for someplace to do that. And I found a few places here and there, but nothing great. Uh, and then in 2011, I stumbled across this, this business school.

[00:08:37] Actually, I think it's 2010. I stumbled across this business school that happened to be in my neighborhood. Uh, and I told them like, I, I just want to help and give back. And they said, okay, great. It's come, come. It's an executive MBA program. We meet in person once a month, come sit in the back of the classroom, do whatever you want to help. Right. You're you're, and then eventually they called that entrepreneur in residence. So I did that for nine months.

[00:09:05] Well, turns out that this was the first business school in the world to teach how to solve the real problems of the world using the tools of business, how to do good and do well at the same time. Uh, it was called Bainbridge graduate Institute. Uh, and so after nine months of helping out there at that point, my fifth software company, we merged it with another, another startup and it left town. And so I was free to do the next thing.

[00:09:32] And I had zero desire to do another software company at that point because of the business school, I wanted to go do something that, that had more meaning in the world, had more impact in the world. Uh, and I spent about six months first time in my whole career. I actually didn't jump straight into the next thing. Uh, and what I decided to do was not one company.

[00:09:56] I decided to start a business accelerator so I could help a lot of companies, uh, and specifically companies that were again, solving real problems instead of just saving a dollar. Fantastic. Very, very insightful. Interesting as well. Cause I know from what I've seen, Africa eats follows a unique investment model that focuses more on long-term equity rather than your typical VC fund approach.

[00:10:24] Can you kind of walk us through in terms of how this model works and why you chose it? Yeah, absolutely. The reason it got chosen was again, this, this idea of working forwards and backwards. Uh, a typical way to invest into young companies is the venture capital model. It was invented in the sixties. Uh, the model is pretty simple. Uh, you invest some capital into the companies, you take a percentage ownership, minority ownership.

[00:10:51] Uh, and then within 10 years, that company has to be acquired or go public because the, the investment firm needs its cash back, right? And technically it's trying to get 10 times its cash back. Um, but the key is the company has to exit as they call it so that the investors get their money and it has to happen within 10 years. So if you look at Africa and the African SME market, that doesn't happen. There are very, very few exits at all in Africa.

[00:11:21] Uh, and if they happen, they're not going to happen in 10 years. So that model just doesn't work. So you have to find another model. Well, you don't have to because there's a plenty of funds that are just following that model. And then they get to year 10 and they, they don't exit and they just have to get extended. So, uh, I don't do those things. So, um, I said, I have to find another model that could work in this context. Uh, and I thought about Berkshire Hathaway.

[00:11:49] So for those of you who don't know, uh, it is the seventh most valuable public company in the United States, eighth overall in the world. Um, it's an investment company. Uh, it was started in the 1800s, but it was taken over by a guy named Warren Buffett in 1967. So, and he's been running it for 60 years, uh, as an investment company. It was originally a textile company.

[00:12:14] Um, and again, it's the most successful publicly owned investment company ever. And there's a, some unique things about Berkshire Hathaway is that Warren Buffett writes a letter to his shareholders. He's got a gold funders every year and has since even before he, he controlled this company, he wrote letters to his, um, investor partners. And, uh, these are published. You can read them. And he has all sorts of great insights and knowledge about, um, you know, investing styles.

[00:12:44] Uh, he has a lot of quotes that are, that are out there on the internet. Uh, one of them is, uh, the best holding period for good investment is forever. So again, I've read the letters, I've read the biographies. I've watched him do Q and a, uh, and decided to adopt as many of his ideas as possible. Cause again, he's been highly successful over a 60 year period. So here's how it works.

[00:13:08] We make equity investments into young companies in Africa, just like a VC would. We make small investments for small percentages of the company. We do that over and over again until we own about a quarter of the company. Uh, we do everything we can to help them scale up. So most of the time of the team is spent at giving advice and making connections and helping the companies get from tens of thousands in annual revenue to a million in annual revenue.

[00:13:36] And then 10 and 10 million in annual revenue. Uh, and we've gotten, uh, eight companies now from literally from like 30, 40, 50,000 in annual revenue past, past a million. Uh, and then we hold it forever. So we're not interested in selling these companies and neither are entrepreneurs interested in, in selling their companies.

[00:13:58] They all envision owning and operating, uh, you know, the next big brands in Africa, uh, you know, in the next 10 years, these will be companies that are earning a hundred, a hundred million in annual revenues. Uh, and we just own a little piece of them. Uh, and eventually we will list them as public companies as well, uh, as well.

[00:14:21] And we will have, it will be a publicly listed investment company owning public companies, uh, instead of private companies. Uh, and then in terms of, uh, that's how it works on the entrepreneur side and how it works on the investor side is that they give us money so we can go do this. Uh, and now that we're publicly listed, they can leave whenever they want. Uh, so they don't have to wait for anything to happen. And literally some of our oldest investors have been doing that since December. They're like, okay, I doubled my money.

[00:14:51] I'm happy. Or I doubled my money. I'll take half of it. Now I'll leave the rest of it in the system. Uh, and when they do that, they're not extracting any money from these companies. They're literally selling the shares in the public stock market to other investors. Uh, and, uh, and so it's really, uh, capital flowing into Africa to create growth, uh, and then not flowing that capital back out, not extracting anything from the continent.

[00:15:19] So as you mentioned, Africa eats, holds equity forever. So maybe if we can look specifically at what advantages does this model have maybe for the investor and entrepreneur? All right, well, let's do the entrepreneur first. Cause there's, there's more of them. Uh, so right now the choices you have as an entrepreneur are kind of threefold. Uh, one, you can just keep applying for grants there. There's grant capital that flows. It comes in little bits.

[00:15:48] It's hard to get. Uh, and it always comes with strings attached, but it's there. And, and most of my companies that I've invested in started with a small grant, uh, five, 10, $20,000 grant. Uh, the next most common form of capital is debt. Uh, so you can't go to the bank to get debt, but there are impact investing funds that do debt to, to SMEs. Typically they're the larger SMEs.

[00:16:14] So, uh, past a half a million or a million in, in annual revenues, but there's debt out there. Uh, and of course the downside of that is you have to pay it back, you know, on a fixed schedule with interest. Typically that is in dollars. And typically the companies we work with are earning in local currency. So the cost of that capital can be really high depending on the, the devaluation of your currency in a given year. And then the other choice, which is the smaller amount of capital that's flowing around is equity.

[00:16:45] And if you take equity from a traditional fund, then they're going to press you to exit it within 10 years. Uh, and we see this cause we have co-investors. And again, the entrepreneurs I'm working with don't have a desire to sell it, even if there were acquisitions, which there really aren't. So our advantage is that we're providing equity and we have forever to worry about what it's worth.

[00:17:13] And if it truly is a hundred years from now and, and we still own it, we're totally fine with that. Uh, and then on the investor side of the picture, um, again, there's three, you know, same three, three buckets. So there are philanthropists to provide the money for the grants and they're in it for the impact with no return. There are the investors that provide the money for the debt.

[00:17:37] Uh, they're taking a risk that the, you know, if one loan goes bad, then they're going to lose money on that fund. Uh, the interest rates are, you know, fairly high in American terms, but not high enough to cover one out of 10 loans going bad. Um, and then on the equity side, if you're in a traditional, you know, traditional LP as they call it in a traditional fund, your return is tied to exits.

[00:18:04] You, you, you are being promised that you'll get your money back in 10 years, but you probably won't. It'll probably be longer if ever. Uh, and then the advantage of the Africa eats model is that you provide capital. We put it to work and that capital increases the value of the shares that you've invested in. Uh, and you can stay for a hundred years if you want and give it to your grandkids. Uh, or you can leave whenever you feel like, uh, given whatever return has, has accrued since then.

[00:18:32] Through this model, many of the companies in your portfolio have shown impressive growth. I've seen us some have scaled from tens of thousands to millions in revenue. What factors do you think have contributed to this success? Uh, there's a few, uh, first and foremost, we found all these companies through that accelerator that I mentioned 15 minutes ago. Yes.

[00:18:59] Uh, so they were all seeking help in addition to money. They, they, they, it was a self-selected group that was open to the idea of outside assistance. And so the relationship that we created with them was far more and is far more around providing help and guidance and training than it is just about writing a check. So this is what, why we're, we're, we're hands on where we are still, we think a growth stage accelerator.

[00:19:28] We think of it in those terms. So that's factor one factor two is that we provide capital in small increments, but quite often. So we don't do these big formal rounds like the VCs do. Uh, if, if the need of the company is $50,000 because they have an operational capital gap, like they're growing, the customers are paying them 45 days after they deliver the product.

[00:19:57] That creates a gap of capital. That creates a gap of capital. The banks don't fill that in. If they need that gap filled, they can come to us and say 50,000, 75,000, $100,000 for the next six months or nine months. We'll provide that. Uh, we provide not only equity capital. We, we do debt as well. Um, same things happens. Uh, a very common ask in our network is invoice financing. Uh, we'll get an email. Hi, uh, we have a problem.

[00:20:25] Uh, we got a new customer. They would like a container a month. And again, they'll pay us 30, 45 days after the container gets to their facility. We need to pay the farmers. Now we will get paid in again, 60, 75, 90 days from now. Um, we have the supply. We just can't afford to pay for it right now. Can we please have 25,000, a hundred thousand, $200,000 to fill this order?

[00:20:53] Uh, and you know, our answer of course is yes. Um, and then we get the asks around, uh, equipment. Um, there's an opportunity. If only we had this piece of equipment, we could scale up or if only we had this piece of equipment, we could extend into a new, a new product line, or we need some delivery trucks. So we need some trucks to go pick up the food at the farmers, you know, things that are equipment in which case we'll do that as equity.

[00:21:21] Um, so factor two is that we do, we're very flexible in what capital we provide and to a or to be, uh, we provide that capital rather quickly. Uh, we don't do diligence for nine or 12 or 18 or 24 months before we make an investment because we already know the companies because we already worked with them as an accelerator. Um, so let's call that factor three is that we're quick. Uh, when we have enough money, we're, we're quick.

[00:21:51] We, we don't always have enough money. Uh, we've never had enough money for all the needs of all our companies. That's, that's just reality of funding in Africa at the moment. Uh, and then the last factor is that we are with them forever. So we don't provide them any pressure like other investors. Well, we, you know, if they take a loan, we want to be paid back. Um, but we know things go wrong. We are, we are, the whole team are entrepreneurs.

[00:22:19] So we know that sometimes things go wrong. We know sometimes customers pay an extra 30 days later, or that there's glitches in the system. And what we thought was going to be 75 days winds up being 105 days. It's fine. We just, we just do extensions when needed. Um, and so our flexibility in our, in our, um, our understanding of what it's like to be an entrepreneur, we'll call that the last factor.

[00:22:45] Um, and so we do things that are just friendly and helpful to entrepreneurs as opposed to penalizing them because life happens because, because business is not always as smooth as it is. We would hope it would be. Yeah. Yeah. I mean, we've managed to outline the positives, but obviously this comes with some risks. So what are some of the biggest risks that you've encountered when investing in African agribusiness?

[00:23:13] Um, biggest, absolute biggest one is weather. Oh, wow. So we've had crops wiped out by both floods and droughts and too much rain and not enough rain. Um, there were locusts one year, but luckily they didn't hit our farms. Um, and then the second ones would be just the risks of young companies finding new customers. We had one company where we thought we had a great customer, but they just didn't pay us a half a million dollars.

[00:23:44] They have the product, they sold the product, but they never paid us the cash. Uh, it hasn't happened too often, but it did happen to one company in one country. And, uh, that company shrunk by 80% because they never got paid. Wow. Wow. So you highlighted weather destroying your crops. I know in the past, you've also spoken about the issue of post harvest losses in Africa.

[00:24:07] So at Africa Eats, how are you working to reduce some of this food waste and also improve food security within the agriculture sector? Yeah. The actual solution is rather simple. Um, buy the food from the farmer. Yes. Um, this sounds really, really simple, but, uh, the traditional supply chain that gets the food from the rural areas to the cities, uh, it just touches too many hands and too many informal trucking companies.

[00:24:34] So typically what would happen is the farmer would grow food and have a surplus. Uh, some middleman would come along, uh, some aggregator would come along sometimes, not always, uh, and buy that surplus. And they would get it to a small town or a small city. And they would do that in the back of a flatbed truck or in a van or, you know, it's strapped to a, to a boda boda.

[00:25:00] Uh, and in that process of getting the food over there, some of it would get crushed. Uh, it would get wasted just in the, in the handling, but it wouldn't be in the city yet. It would be in a small town or again, a small city. And then that aggregator would sell to another aggregator who might put it in a box truck.

[00:25:19] And so if you just think of tomatoes, like very common crop, like those, the tomatoes at the bottom of the pile in the back of the pickup truck or on the flatbed, they're going to get crushed. You're going to lose 10 or 15 or 20% of the crop as it gets driven for an hour or two. Uh, and then you're going to lose some, some of that crop as it literally just gets moved from truck to truck.

[00:25:44] Uh, we get rid of the post harvest losses because we're buying as close to the farm as we can get. We're taking ownership of that food so that any losses are, are our bottom line losses. Uh, and we're just taking good care of the food as it gets to the, to the cities. And so the measured researched losses in our system are typically like three, four, 5%. It's it. We just have a well taken care of box truck.

[00:26:13] And if it's a product that could get crushed, you know, we're putting the food in basket in plastic crates and, and other baskets so that the bottom layer doesn't get crushed. So as you mentioned, you buy the food from the farmer, which has clear economic and business impact. But how do you go about measuring or tracking the social impact of your investments? Uh, there's been some 60 decibel studies that go out and actually talk to the farmers.

[00:26:38] Uh, and in those studies, you know, the anecdotally, my entrepreneurs always say, yeah, we double the income of farmers. Uh, but we actually have quantitative research showing that we double the income of farmers. Um, and it was only 90% of the farmers, not, not a hundred percent. Um, but we're doubling the income. So typically these are subsistence farmers or just above subsistence farmers.

[00:27:04] When we double their income, they're now median income owner, uh, median income earners for their country. So I don't want to call that middle class, but technically that's, that's middle. And the ones that don't get doubled, I did ask about that when the research came out. Uh, those are the ones that don't listen to the trainers. So we do buy from farmers, but we also send trainers out to improve the quality of the food, uh, and improve the yields on the farms. Right. Right.

[00:27:32] Cause it's, it's cheaper for us to have a farmer grow more food than to go and try and sign up another farmer. So there, there's a win-win in training them. Uh, and when I asked, they said, well, yeah, you know, 90% listen and 10% don't. And those, those are the 10% that didn't double their income. So I guess a lot of data is required to analyze and quantify this. So what role does technology play in scaling your agribusiness investments in Africa? Not much. Oh, not much.

[00:28:00] Not, not way less than everybody thinks. So the two key technologies for what we do are the cell phone and the truck. And people don't even think of trucks as technology, but you know, 140 years ago, we didn't have trucks. Uh, it is a technology that that's the key driving technology to make this work. Uh, and then the cell phones are there so that we know when the food is ready to be picked up.

[00:28:25] There is some other technology used by some of our companies to optimize that process, but it's all off the shelf. Except for one of our companies, nothing's built bespoke for the operations of their company. So I guess moving on from the technology, what role does government policies or government initiatives play in enabling or maybe obstructing your efforts? Yeah, not a lot. Um, biggest thing we see. So our companies tend to aggregate everyday foods.

[00:28:55] So, um, that's potatoes and bananas and rice and, and beans and, uh, and chickens and goats. Um, so we're not doing cash crops. We're doing everyday foods. And I think about 95% of the food that we're buying from farmers is sold in the country where it's grown. Uh, so we don't rub up against a lot of government policies and there aren't a lot of restrictions on food products sold inside the country because this is how the people get fed.

[00:29:25] Uh, what we tend to see is what happens when our companies get big enough that they want to start working across borders. And there is the free trade zone nominally, uh, but it's not the same as the free trade zone in Europe where the truck just drives across the border.

[00:29:43] We're in the free trade zone where the truck sits at the border for half a day, fills out some paperwork and maybe doesn't have to pay a fee to, uh, based on the, on the value in the back of that cargo, but still pays a fee across the border. That's the biggest obstruction we have at the moment is free movement of food. If we look at some of the other initiatives you're involved in, I guess, primarily CEMEX. Can you explain to us what this is? Sure.

[00:30:11] So we started working on this in October of 23. This project was a hypothesis that there is capital available for SMEs, African SMEs in the public capital markets. And so when I was explaining like the sources of capital, all those funds that are providing money to African SMEs, they're all in the private equity and private debt space. Right. Some of them are funded by governments.

[00:30:39] Uh, the rest are funded by high net worth individuals, but the money's all privately invested in private companies in structured in private investment vehicles. Uh, and we asked the question, well, why, why can't the public capital markets fund these companies? And there was no good reason why they can't. There was just no history of, of these capital markets doing that.

[00:31:04] So we reached out to, we looked at all the stock markets in sub-Saharan Africa and we chose the stock market in Mauritius to start with. And so we reached out to them in October of 23 and asked if they were interested in creating a new segment on their stock market focused on fast growing profitable companies. And specifically, we're going to bring them African SMEs. Uh, and they said, yes.

[00:31:29] So we spent most of 2024, uh, until December 3rd of 2024, um, creating this segment, um, warming up the market for launching three companies in this segment. Uh, and we got that done by December 3rd.

[00:31:47] So Africa Eats, Elite Meat Processing, and Zueto Enterprises are the first three companies listed on the CEMEX, uh, which is part of the CEM, just to be clear, the Stock Exchange of Mauritius. Uh, and we successfully raised money from 88 investors, uh, eight of which were institutional investors.

[00:32:07] Uh, and we proved in a very small way, in a baby step that yes, the public capital markets will in fact fund African SMEs if they are fast growing and profitable. That was the constraints we put on. Uh, and a few things we did with this, which was novel, um, besides this, the style of companies we were bringing. Um, this is a part of the market that's harder to get onto than normal.

[00:32:36] Um, if you look at what's been tried in the past, there's this thing in London called the AIM. I don't remember what it stands for. Um, they watered down the rules. They made it easier to list. It's a separate board on their Stock Exchange. It's the lesser board. It's the, it's the, you know, the warmup board. Uh, and because of that, few of the institutional investors care about the stocks that are listed there. But nonetheless, it was London. So it got copied in, uh, Nairobi as the gems.

[00:33:06] It got copied in, in Mauritius as the dem. It got copied all over the world in all sorts of different stock exchanges. Uh, and I've never seen it work. We, we'd never seen that style work. So we went the other way. We said we want to make it harder to get on the stock market than normal. Uh, and so in order to be listed on the CEMEX, you have to follow all the rules of the normal stock market.

[00:33:28] And the companies have to be growing, uh, top line revenue growth has to be at least 25% compounded over the last five years. You have to have profits. Um, so none of the stuff that we do in the tech world with, with, um, promises of future profits. Nope. You have to be a profitable company in order to be listed. Yeah. Can't be all built on debt. You have to have a decent debt to equity ratio, uh, and a few other things to, to make it harder to get on the normal.

[00:33:56] And, uh, we at Africa Eats, we have, uh, seven companies that qualify for this. Uh, we listed the first two last year. We will list more each year. Brilliant. Brilliant. So as you mentioned, the CEMEX initiative, the aim is to bridge the capital gap for African SMEs by accessing public capital markets. So how exactly does it work? So these are companies that are live listed on the stock market.

[00:34:25] If you happen to have a brokerage account in Mauritius, you can buy shares. Okay. Now, of course, that sounds a little flippant. Most people in the world don't have a brokerage account in Mauritius. So we did something else to help make this useful for the rest of the world. We created another company. It's called Tuesday markets. Uh, and it does two things. One, I built an app.

[00:34:48] So if you go to Tuesday.Africa, you will find an app that lets you buy and sell shares on the CEMEX. Just these three companies for now. Uh, anybody can sign up. In signing up, you wind up with a brokerage account in Mauritius. And then, you know, again, it's open to anyone in the world. The shares are $2.32 down to $1.65, I think, for, for Zueto. Uh, one share. You can buy one share if you want.

[00:35:17] Um, so minimum, minimum investment is now down to dollars instead of tens of thousands of dollars. Uh, you can sell those shares anytime you want. Uh, and then the other thing that Tuesday markets does is it's the first equity market maker in sub-Saharan Africa. So it's providing the buyers when no one is buying and the seller when no one is selling. And so these shares are liquid. They're as liquid as they would be in New York or London. Five days a week, whenever the market's open, you can buy and sell the shares.

[00:35:47] There's always a buyer and there's always a seller. Uh, that's Tuesday markets. So why was Mauritius chosen as the initial listing location for the CEMEX initiative? So Mauritius is part of the African Union. It's off out into the Indian Ocean. So it's kind of, it's kind of Africa and it's kind of not Africa at the same time. Um, but what's, the reason we picked it was it's a stable country with a very good international banking system.

[00:36:16] Uh, a trusted place to create a, a pan-African company. Uh, and they have a stock market that has a 36 year history. And probably on top of all of that, the reason we picked it was it had a stock market where we could list in dollars. And a history of doing that. Like we didn't, we didn't have to create that for them. Uh, and so we do all our business in dollars because we're pan-African. Our companies are in eight different countries.

[00:36:44] They work in, in nine different currencies, right? Dollars being one of them. But the only, uh, commonality we have is we can measure everything in dollars. So our shares are priced in dollars. They trade in dollars. And we couldn't do that in Johannesburg or Kenya or Nigeria or, um, or, or anywhere else on, on the continent. It makes perfect sense as it reduces risk and certain challenges.

[00:37:07] But I was wondering what challenges from your experience do African SMEs face when trying to go public? Well, I, we don't know cause I, this is the first two I've ever seen. Um, so, uh, the biggest challenge SMEs face period is lack of capital. Uh, and so again, going back to the stories of operational capital, you can only get to be bigger by having operational capital gaps.

[00:37:36] I've only seen it once where you can grow your company past a million in dollars because your customers are paying you when you need the money, as opposed to after, you know, a month or two after you, uh, you deliver the product. Uh, and so it's hard to get to the scale where you could go public. And then once you're even in the, in the process of, of the roadshow that we did, um, to, to sell these companies to these public equity investors,

[00:38:05] well, they don't know. They don't know all these was they don't. There aren't a dozen SMEs listed in Africa that they have experience with. These are the first ones they've seen. Uh, so we had to do a lot of education about how did we get these companies from 30,000 in annual revenue to a million and a half ish. Those are the two we listed. Um, one was like one of 1.4. That was 1.6 ish.

[00:38:31] Bringing novel things to the market is scary to public equity investors, just like it is to private equity investors. Uh, the public equity investors are used to investing in banks and insurance companies, uh, and conglomerates and other, other businesses that are big and old and slow growing and not scary in any way.

[00:38:53] Uh, and here we were bringing, um, pretty young companies that were growing at 25, 30, 40, 50% annual growth. That didn't look anything like they were used to. Um, you mentioned the lack of capital. I know previously you've mentioned, uh, African stock exchanges suffer from, um, illiquidity issues.

[00:39:16] How would the CEMEX is structured IPO and the market making mechanisms solve some of these issues? The market makers there to provide some peace of mind and comfort to the investors. So again, if we, if you go back to the model I said doesn't work where the investors provide the money and they're promised that they'll get it back in 10 years. That's illiquid. Like that's, that, that's the poster child for illiquid.

[00:39:45] Um, the public equity investors worry that they'll buy the shares of Africa eats or these companies and that they won't be able to sell them, that there won't be a buyer when they want to sell their shares. So by creating a market maker, there's a guaranteed buyer and the market maker lists always on the market, a price they're willing to buy and a price they're willing to sell. So not only is there comfort that there will be a buyer, but the investor knows what the price will be.

[00:40:15] It's listed publicly. It's, it's sitting there on the stock market for them to act on no negotiation needed. No, no paperwork needed. Literally there's a buyer there when they want to sell. So that's why the market maker exists. When we sat down with them back in October of 23, there were 20 chapters to their rule book on, on how to list on their stock exchange. And now there's 21.

[00:40:40] So chapter 21 describes what I said before about, um, raising the bar, making it harder to list. Uh, and then the second half of chapter 21 is how market makers work with these shares, with these companies. Uh, and the, the first line of that second part is if you're listing on the CEMEX, you should bring a market maker. And again, Tuesday markets is the first one.

[00:41:04] And the expectation we have is that we will prove that Tuesday markets, a for-profit company. It's, it's got a, its own funding. It's got its own investors. Uh, we're going to prove that there's money to be made as a market maker so that others follow. Right. We, we don't have any expectation. We'll be the monopoly market maker. Uh, we're just the first. Amazing. Amazing. So with what you're doing, do you see CEMEX expanding beyond agriculture into other industries? Yeah.

[00:41:34] So there's nothing in the CEMEX rules that say anything about agriculture or SMEs or, or any of that. It's, it is a public set of rules that's open to anybody who would like to use them. And the stock market would, would love to have more listings. And we expect others will follow us. We're just pioneering this space. Uh, and then for, uh, expansion, we are talking to other stock markets on the continent to

[00:42:01] join in this effort to make this CEMEX, although probably won't be called that in other stock markets, but to make this segment of fast growing profitable companies, something that they have too. Uh, and, um, our long-term vision, again, working backwards, our 2030 vision is that when an SME wants to list on the CEMEX, that, that winds up having them being, being visible and listed on every

[00:42:30] important stock exchange in sub-Saharan Africa, just all in one, all in one go. So you list and you're suddenly visible on seven or eight or nine stock markets. And, and you have access to all of the, all of the investors with brokerage accounts in any country in sub-Saharan Africa, not just Mauritius. Brilliant. So if we look ahead, where did you see Africa eats in five years time? Uh, five. So that's 2030.

[00:42:58] Um, by 2030, we should be talking about when we'll hit a billion dollar market cap. Uh, I don't know how close we'll be by then. I don't think, I don't think it'll be 2030. Um, but we, you know, we'll be past a hundred million by then. And, uh, at that point, again, the same vision, we should be a public company listed on many stock exchanges with tens of thousands, hopefully of shareholders, right. As opposed to 175 today.

[00:43:28] Um, in five years, we should have more than doubled the portfolio of companies. We have 23 active companies today. So hopefully we're, we're past 50 by then. It'd be lovely if it was counted in the hundreds by then. Um, and, uh, in terms of, uh, growth of these companies, uh, last year, our companies did

[00:43:52] more than $40 million in revenues combined, uh, you know, up from a million in 2015. So 10 years it took to get 40 X growth. Uh, so, you know, again, well past a hundred million in aggregate revenues across these companies by five years, it should be two or 300 million. Um, and, um, we should have at least one that's talking about being a hundred million just on its own.

[00:44:22] Um, we should be just about there in about five years. Uh, and again, five years, that's a drop into the bucket. Um, this is a permanent vehicle. We compare ourselves to Berkshire Hathaway. Uh, they're 60 years into their business or a business model. Uh, in five more years, we'll be 10 years in. So we got a lot more growth to go after five years. Brilliant. Brilliant.

[00:44:47] So if you look at the future of Africa, the agriculture space, how do you see Africa's agriculture investment space evolving in five years? Hopefully other people wake up and start, uh, investing alongside us, um, uh, as well as through us, but, but, uh, it, it's the biggest sector there is in the economy of Africa. Yeah. Uh, it's the one industry where the addressable market is the entire continent.

[00:45:16] So there's 1.2 billion sub-Saharan Africans. They eat every day or they want to eat every day. Um, in five years, there's going to be closer. There's going to be more than one and a half billion. Uh, population will be double in 2045. Uh, so the opportunity size is growing tremendously. Uh, and then in terms of impacts, we know there's enough land and enough farmers to grow all the food needed for 2 billion Africans.

[00:45:45] It's just a matter of getting the supply chain built out. So this is why we focus. It's like, again, we're trying to solve hunger and poverty. And we do that by building out a modern supply chain, which sounds weird. Cause when we say hunger and poverty, people think of charity. People think of philanthropy. That's not the solution. The solution is literally the supply chain. It's the same way that America became rich in the same way Europe became rich.

[00:46:11] They built out their food and egg supply chains in the middle of the 1800s. Like just when trains were starting to roll out, then the people could leave the rural areas, work in the cities and build out the factories and whatnot. You can't do that until you have a less than half your population growing the food. Quote of the week. As people, we often have quotes, proverbs, affirmations that keep us going when times are challenging or when times are good.

[00:46:39] Do you have one that you live by that you can share with us? Yes. One I learned in visiting the Dalai Lama in India. Oh, wow. They have a saying. It's another story. They have a saying in Tibet, which is tomorrow will be worse and then it'll get better. So, you know, I grew up and kind of the repeated phrase and proverb here in the States is things will get better. It'll turn around.

[00:47:09] It'll work out. It'll get better. But it really struck me that the saying in Tibet over and over again was, yeah, things will get worse. So I'm an entrepreneur. There's ups and downs. By now I'm used to it. I know that it'll turn around at some point. But I just love this idea that, yeah, no, it probably will get worse before it gets better. I've not heard that one before, but I actually love it. So thank you for sharing it. We've come to the end of today's conversation.

[00:47:38] It's been a very enjoyable conversation. Looney, thank you for sharing your journey, wisdom with us. We'll be watching closely as we see Africa Eats and the CEMEX initiative continue to grow and drive change. So fantastic. It's been an absolute pleasure having you on the podcast. My pleasure. Thanks for letting me share the stories. Thank you to everyone who has listened and stayed tuned to the podcast.

[00:48:07] If you've enjoyed this episode, please subscribe, share or tell a friend about it. You can also rate, review us in Apple Podcasts or wherever you download your podcast. Thank you and see you next week for the Unlocking Africa podcast.