The Circle of Life, Capital and Everything

Many smart people believe that the observable universe is a sphere from the perspective of whoever is looking. Some think it is flat.

At any rate, both groups concede that we may not truly know the universe’s shape since the universe is unimaginably large and we are constrained by what we can observe. We may not know if we live in a spherical universe, but we know that life on earth seems to follow a circular path whether it is economics, business or just being human, with expanding eccentricity.

Live, reproduce, die, live… Boom, bust, boom… winter, summer, and so on. You get the picture. As the writer of Ecclesiastes put it: “What has been is what will be, and what has been done is what will be done, and there is nothing new under the sun.” 

One place where this is happening with a bit more drama than usual is in the global world of money. Private equity is now “public lending” as companies are turning to private fund managers for debt. Simultaneously public lending represented by banks is increasingly funneling deposits to private equity entities which then turn around and compete with bank loans in the corporate lending market.

Meanwhile adventure capital is warming up to the idea of transmuting into buyout funds, and people are bundling up (the promise of) private tech shares into exchange-traded funds and listing them on the public stock market. Everything is a circle of everything and everyone is trying to become something else in an ever-expanding search for profits, yield, returns and exits.

Long story short, as tailwinds dissipate, everyone is reorienting towards the centre and searching for new tailwinds as they all find that the centre has shifted. Technology markets in Africa are not exempt from this General Theory of Eccentricity.

If you go back 14 years to the end of the 2000s in Africa, you will find that some of what was almost universally hailed as tailwinds for the continent are now looked on unfavourably as headwinds or sources of headwinds. But it didn’t take 14 years for the initial rosy assumptions to fade—a point which Efosa Ojomo makes in his article, The great miscalculation–and exit–of multinationals in Africa… again.

By 2015, the song had already changed, not only were multinationals leaving, but large private equity firms also pared grand ambitions for buyout deals in Africa and exiting early deals. Again this was happening less than 6 years after Barclays declared Africa the then second fastest growing region in the world and a ripe fruityard for buyout-style private equity dealmaking.

By 2017 the “Africa Rising” schtick was becoming a pejorative. 

Two years later, in 2019, the story started making a comeback, and by 2021, we were fully submerged in the tide as the demographics+ growth story picked up pace—again. And faltered again two years later. Technology markets are not exempt from this General Theory of Eccentricity. 

The point is that the so-called downturn is not completely new. It is just an expanded wave in the eccentric spiral that has driven economic optimism, dashed economic boom times, and created some progress/made things different through the chaos. 

Some of the causes of these cycles are tangible and measurable, like the outcome of poor policies, downright bad behaviour, and occasional natural disasters. But we also do not really understand, document or widely distribute knowledge about other drivers like corporate mismanagement, short-term thinking, untethered ambition, and unnoticed market undercurrents that also help make market cycles eccentric.

One unfortunate result of this emptiness is that we are more vulnerable as a market when the centre of orbit changes. As it has now. Another unfortunate result of relying on narrative tailwinds is a temptation to perpetually run on thin public relations ice to try and whip up another gust.

Unfortunately, or fortunately, markets are not perfectly fractal, and while the broad brush strokes may remain, markets are more eccentric than concentric. This means that every time a market cycle ends, the focus (or centre) shifts. So when (on the product side) the mobile telephony market boom subsided, the mobile content/services boom was just getting started—and the winner became financial services, payments specifically. 

Narrative tailwinds tend to build up much later after undercurrents become waves. As the payment tailwind begins to dissipate today, it is worth pondering where the undercurrent is flowing. Commerce and trade broadly speaking is one long-running undercurrent that may just truly become a wider wave despite its ugly flaws.

Think about it, would you want to spend your evening arguing over another chart showing how little African consumers earn? Or spend time working out how much has shifted as the market space works itself out of the bottom of another cycle? 

I can propose one fun exercise. Now that we are all convinced beyond reasonable doubt that spending power on the continent averages towards the low end of global income levels, how about we figure out the kinks that hide how Africa’s spending power is lost/distorted because it simply flows through existing inefficient market structures?

How much more money needs to be invested to get the people playing the game to understand that depending on, blaming narrative tailwinds or relying on simplified momentum-style checklists will not replace continuous learning and progressive market depth?

Tailwinds come and go. No airline depends on wind currents to keep flights airbone. Working our way out of the current slump will not happen by burnishing the narrative, sulking over low-income data, or bashing the cycle. It will come from information and market depth.

How much do you not know? And how much are you willing to learn?

Abraham Augustine writes on Money, Myths & Digital Africa here.