South African government has killed Section 12J of the country’s Income Tax Act of 2009, which allows investors who make investments in approved Venture Capital Companies (VCC) — that then invest in qualifying small companies, including startups — a tax deduction. This is the most prominent shock delivered in the country’s 2021 national budget statement. Although the scheme was set to expire on 30 June 2021, after being in existence for about 12 years, it was the hope of industry players that government would consider an extension.
Tax
By the terms of the Budget 2021 statement issued by the country’s treasury, the scheme was cancelled because it did not “sufficiently” achieve its objectives of developing small business, generating economic activity, and creating jobs.
“Instead, it provided a significant tax deduction to wealthy taxpayers,” the Treasury said, in the statement.
“Far from investing in small businesses and riskier ventures, Treasury found that the majority of the S12J investments were “low risk”, and offered guaranteed returns “that would have attracted funding without the venture”.
According to the treasury department, more than R11 billion ($756m) was invested in some 360 S12J venture companies, but only 37% of these companies added new jobs after receiving funding. Many of the companies offered property investments.
Simplifying Section 12J, In Full
In simple terms, Section 12J of South Africa’s Income Tax Act of 2009, allows investors who make investments in approved Venture Capital Companies (VCC) — that then invest in qualifying small companies — a tax deduction.
Thus, by investing in a Section 12J venture capital company, the investor not only qualifies for a full deduction of the total investment amount from their taxable income in the relevant tax year, but they are also indirectly supporting the South African economy and the growth of local SMEs. Section 12J is similar to Venture Capital Trusts (VCT) in the United Kingdom, which allow individuals with high net worth to save tax and instead invest in a VCT, which will then invest in startups.
A South African tax-paying entity approaches a VCC with its investment.
The VCC accepts the investment for investments in its portfolio companies and issues the investor with a certificate for the amount invested.
With this certificate, the investor approaches the South African Revenue Service (SARS) and presents the certificate. The certificate empowers the investor to deduct the full value of the investment from their taxable income in that tax year.
Section 12J is so attractive to investors that using it investors can offset any tax on capital gains incurred from the proceeds from the sale of an asset. What this implies is that if in the current tax year a South African taxpayer has a capital gains tax case, the taxpayer will use a portion of his/her income to make an investment in a Section 12J business and write off a portion or all of the tax on capital gains owed.
This explains why there are, today, many VC firms in South Africa and why South Africa collected more than 21% of all VC funding deals in Africa between 2014 and 2019, whereas Nigeria only received 14% of the deals, even though Nigeria is the continent’s largest economy and has more than 3 times South Africa’s population.
What Will Replace Section 12J And What Happens To Newly Launched Funds Under Section 12J After June 30, 2021?
Nothing more specifically stated, but the country’s Treasury said it is currently reviewing tax incentives for research and development. Although the proposed tax incentives are welcome, it is time South Africa pushed for a law, such as a Startup Act, which will more specifically target startups, as against the wider net cast by Section 12J.
For newly launched funds under Section 12J, the implication of the Sunset Clause relating to the section is that no deduction shall be allowed in terms of the VCC incentive in respect of shares acquired after June 30, 2021.
However, there is still uncertainty as to the provision of Section of 12J which states that South Africans investing through section would also have to wait for at least 5 years to get back (if at all) their earnings, alongside the accumulated profit, if any.
In worst case scenarios, the June 30th, 2021 deadline will only have an impact on VC’s ability to raise capital after the date, and not materially affect the functioning of Section 12J on the investments made under the section before that date.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
The Ivorian Minister of Youth Promotion and Youth Employment, Mamadou Touré, has launched, in Abidjan, a college of technological and innovative companies called “Côte d’Ivoire Innovation 20 (# Ci20)” aimed, in particular, at uniting all startups in the west African country. The organization comprises 15 young entrepreneurs, including 11 winners of the National Award of Excellence and more than 85 national and international awards.
Ivorian Minister of Youth Promotion and Youth Employment, Mamadou Touré
“For us, it is indeed a question of celebrating the creative genius of young Ivorians,” said Mr. Mamadou Touré.
“With a view to supporting them, I have instructed my department to set up a special fund for our startups, and this fund will initially amount to 500 million CFA francs ($1m) as a starting fund,” said Mr. Mamadou Touré.
Here Is What You Need To Know
The CI20 is not just another startup association; it has gone ahead to design a programme which will last two years per cohort, the founding members constituting the first cohort.
The goal, according to Steven Bedi, president of the CI20 association, “is to create 2,000 jobs at the end of these two years with a 30% impact on women.” The program is estimated at 4 million euros (2.62 billion CFA francs).
CI20’s objective will also be to promote 100 national startups in five years, strengthen their capacities as well as structure them to international standards in order to help them attract investments.
In 2019, African startups attracted USD 2 billion in investments and 85% of the funding went to four countries: Nigeria, Kenya, Egypt and South Africa followed by Ghana.
“We said to ourselves, why not position Côte d’Ivoire as the next hub for capturing this funding and this economic dynamic represented by tech companies,” said Steven Bedi, president of the CI20 association.
“Today, the CI20 has 15 founding members. We manage to accumulate a turnover of 7 million euros and 300 jobs,” he said, stating that the organization aspires to become the federation of the ecosystem of startups to be able to speak with one voice.
The Ivory Coast is also preparing a startup law which should make it possible to support the technological innovations of young people.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Cote d’ivoire college of startups Cote d’ivoire college of startups
The pressure is mounting, and gradually ride-hailing drivers are questioning the entire construction of the gig economy. Next stop is the UK, after platforms such as Uber and Lyft had a field day in California last year. In a landmark judgment, the highest court of the United Kingdom has ruled that a group of former drivers for Uber Technologies Inc. were entitled to a minimum wage and other benefits while working for the company. Although the case specifically concerns the 25 drivers who instituted a case against Uber a few years ago, the judgment has set a dangerous precedent against the entire gig economy especially in the United Kingdom, where mushrooms of cases could spring up leaning on the court’s latest judgment.
“New ways of working organised through digital platforms pose pressing questions about the employment status of the people who do the work involved. The central question on this appeal is whether an employment tribunal was entitled to find that drivers whose work is arranged through Uber’s smartphone application (“the Uber app”) work for Uber under workers’ contracts and so qualify for the national minimum wage, paid annual leave and other workers’ rights; or whether, as Uber contends, the drivers do not have these rights because they work for themselves as independent contractors, performing services,” Lord Leggatt, noted in the lead judgment.
What Do We Learn From The Court’s Judgment?
While there are so many insights to be gleaned from the judgment, the following points stand out:
From California To The UK, The Central Question Has Always Remained: Are Gig Workers Really Independent Contractors And Not Employees; And If Not, Why?
Although the UK case has been on for as far back as 2018, it fundamentally asked the same question asked by drivers in the US state of California recently. The question is as to whether drivers, based on the nature of their engagement with Uber, Lyft and others, are not employees but independent contractors.
The Californian controversy started when the state’s parliament passed a law, popularly referred to as Assembly B5, which laid out new rules for classifying a worker as an independent contractor.
Under the rules, for a Californian company to classify a worker as an independent contractor, it must prove three things (you may hear this being called the “ABC Test”). If they can’t, then the worker is treated as an employee.
First, companies must prove that “the worker is free from the control and direction of the hiring entity in connection with the performance of the work.” In other words, companies can’t manage contractors the way they would employees. As an example, if a catering hall contracted a chef to prepare food events, but controlled how the chef prepared the food — giving them custom orders from customers, giving a strict schedule for production, and instituting standard procedures — they would likely not satisfy this part of the test.
Second, companies must prove that “the worker performs work that is outside the usual course of the hiring entity’s business.” This means that a company like Uber has to prove that driving users from location A to location B is outside the company’s usual course of business. Uber said as much in a press release, contending that the company is actually a “technology platform for several different types of digital marketplaces.”
Third, the companies must prove that “the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” For example, an electrician doing contract electrical work is still a contractor. It’s unclear if ride sharing or meal delivery companies will be unable to clear this bar.
Consequently, under the law, all of these independent contractors could earn employee status if the companies can’t satisfy the ABC test.
But the controversies surrounding the new rules have long been laid to rest in California following the success of Proposition 22. Proposition 22, conducted at the same time as the US general elections on November 3, 2020, invited eligible voters in California to vote, for or against, on whether Uber and Lyft be granted an exemption from the law.
Now, the UK case continues on the same trajectory. That is, in arriving at whether Uber drivers are employees and not independent contractors, the court followed almost the same methodology used by lawmakers in California.
It asked whether the drivers could be called employees and not independent contractors under the UK law. After a very strict interpretation of all the applicable laws, it ruled that the drivers are not employees strictly so-called, but workers.
In arriving at this conclusion, the court was assisted by the fact that drivers provide their own car, meaning that they have more control than would most employees over the physical equipment used to perform their work.
The implication of this conclusion — of calling Uber drivers workers — is, therefore, that although the drivers are not entitled to rights available to a full time employee, they are entitled to general rights available to workers under the UK laws— such rights include rights to minimum wage, annual paid leave, among others.
One fundamental element which, however, easily assisted the court in reaching the above conclusion is the element of “control”, which we would consider next.
The Element Of Control Is Uber’s Final Nail In The Coffin
At this stage, one particular element that the entire gig economy, especially the ride-hailing apps — mostly in the UK — should consider while building their products, to run away from this precedent set by the country’s supreme court, is the element of control.
If Uber had been loose around how its controlled drivers using its apps, the latest judgment would have ended up in its favour.
More particularly, the court noted that since Uber:
Controlled the remuneration paid to drivers for the work they do and the drivers have no say in it (other than by choosing when and how much to work);
Controlled the contractual terms on which drivers perform their services;
Controlled the choice of a driver about whether to accept requests for rides once a driver has logged onto the Uber app;
Controlled the driver’s rate of acceptance (and cancellation) of trip requests;
Controlled the types and quality of car that may be used by the drivers;
Controlled communication between passenger and driver to the minimum necessary to perform the particular trip and took active steps to prevent drivers from establishing any relationship with a passenger capable of extending beyond an individual ride;
then it could not be said that Uber’s drivers enjoyed an independent contractor status. Consequently, the court ruled that they are workers.
It Is Interesting To Note That By Comparing Uber’s Case With Other Gig Economy Models, The Court May Have Narrowed The Battle Down To Uber And Its Competitors And Not The Entire Gig Economy Generally
This is one part of the judgment that leaves hope for other gig economy models, which are not Uber or its type of ride-hailing. For those others, the court emphasized the element of choice or freedom as the single most powerful element that defines whether the relationship they maintain with their users is that of an “employee” or an “independent contractor”.
“It is instructive to compare Uber’s method of operation and relationship with drivers with digital platforms that operate as booking agents for suppliers of, for example, hotel or other accommodation. There are some similarities,” the court said. “For example, a platform through which customers can book accommodation is likely to have standard written contract terms that govern its relationships with suppliers and with customers. It will typically handle the collection of payment and deduct a service fee which it fixes. It may require suppliers to comply with certain rules and standards in relation to the accommodation offered. It may handle complaints and reserve the right to determine whether a customer or supplier should compensate the other if a complaint is upheld.”
However, the court noted that such platforms differ from Uber in how they operate in several fundamental ways.
“Customers are offered a choice among a variety of different hotels or other types of accommodation (as the case may be), each with its own distinctive characteristics and location. Suppliers are also responsible for defining and delivering whatever level of service in terms of comfort and facilities etc they choose to offer…They are properly regarded as carrying on businesses which are independent of the platform and as performing their services for the customers who purchase those services and not for the platform,” the court said.
Finally, We Learn That The Fate Of Uber And The Entire Gig Economy Is Almost Always Jurisdictional
This point is noteworthy because what may be classified as “employee” in the UK, may not be so in Brazil, India or even across the states of the United States. It then behooves players in the entire gig economy ecosystem to evaluate their models in light of existing national and local laws applicable to their territories of operations. This will assist them in adapting their products to fulfil existing legislations as well as help them to innovate ahead of potentially bad legislations.
Find out how the gig economy might be interpreted in Africa’s leading economies — Nigeria and South Africa — in light of national labour laws here.
Comparing Africa‘s attempt to regulate Uber, other ride-hailing companies with the rest of the world. Source: — Daily Mail
UK’s Uber And African Ride-hailing Startups — What Is The Likely Fallout Of The Supreme Court’s Judgment?
There are already signs on the wall that UK court’s latest judgment may be replicated in Africa. At least, governments of all major African countries and cities housing the continent’s gig economy ecosystems have spent the past few years caressing and testing their power to make laws which will severely touch tech startups wherever they may be located in the world.
Lagos, Africa’s most valuable startup ecosystem, recently introduced a set of new regulations which took off from August 27, 2020. The regulations, among other things, state that each e-hailing company must pay N8 million ($20.5k) per 1,000 cars as fresh licensing and renewal fees; that the companies will have comprehensive insurance for each driver while the driver is working with them; that a flat fee of N20 ($0.052) per trip, called a Road Improvement Fund, will be levied per trip.
Under South Africa’s National Land Transport Amendment Bill, which has been passed in parliament and sent to South Africa’s president for assent, drivers on car-hailing platforms like Uber and Bolt who do not have operating licenses — not driving licenses — may incur a fine as much as R100 000 ($6000) for those platforms (Uber, Bolt and others), which would definitely be levied against the affected drivers directly or indirectly.
In Ghana, from Uber to Bolt to Yango, drivers who rely on ride-hailing to sustain their livelihoods would start paying a mandatory GHC 60 ($11) annual fee, in addition to their cars undergoing roadworthy tests every six months. Ghana’s Driver and Vehicle Licensing Authority (DVLA), which imposed the GH¢60 ($11) annual fee noted that the guidelines will cover the current ride-hailing platforms like Uber, Bolt, and Yango and will also cover companies who intend to operate ride-hailing platforms in Ghana in the future.
Therefore, it is only a matter of time before African governments’ regulatory attention reaches across to this spectrum. It is also noteworthy that judgments of English courts (UK by implication) are highly persuasive to most courts of former British colonies, a majority of which are in Africa.
The Bottom Line
As startups practicing in this sector, the “control” of gig workers is everything. InDriver is leading by example and may survive the new tests being rolled out across multiple jurisdictions. Its only challenge may be that it is Russian.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
UK Court ride-hailing Africa UK Court ride-hailing Africa UK Court ride-hailing Africa UK Court ride-hailing Africa UK Court ride-hailing Africa UK Court ride-hailing Africa
Mali’s promise of delivering a Startup Act to its startup ecosystem is not dead yet, even as the country suffered a major political set back last year.
According to the country’s new minister of communication and digital economy, Dr Hamadoun Touré at an event organised by Impact Hub Bamako — aimed at promoting the professional integration of young people through self-employment and which aspires to improve knowledge , practical exchanges and conditions for young entrepreneurs — the Malian government is currently in the process of developing a set of strategies towards improving the lives of startups in Mali, including the enactment of a Startup Act.
minister of communication and digital economy, Dr Hamadoun Touré
Minister Hamadoun Touré said the bill will pass before the National Transition Council (CNT) in the coming weeks. He said the adoption of the law would provide a solid foundation to help set up a startup development plan, which, he said, would give the industry a certain boost and create new businesses.
Minister Touré also announced the creation of a Hub in each of the regions of Mali. He said the Malian government is currently working with the startup ecosystems of other countries to boost startup development in Mali.
Impact Hub Bamaka belongs to a network of more than 100 Hubs around the world. At the end of the program, a competition will be organized between 10 young entrepreneurs among whom two awards will be made. The first will have 750,000 Euros while the second will pocket the sum of 500,000 Euros.
Timeline, Startup Act in Africa, 2020.
The Era of Startup Act
The first specific startup law globally was passed in Italy in 2012, and Africa is increasingly catching on. Tunisia and Senegal are the only countries in Africa that have passed the Act, although plans are being mulled by Rwanda, Kenya, Ethiopia, Mali to follow suit.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
There is no express regulation on investment-based crowdfunding, otherwise known as equity crowdfunding, “susu”, “nnoboa” or “ntoboa” in Ghana, but Bank of Ghana (BoG), the country’s apex bank, is leading a campaign to change that. In a new policy document, the bank has not only expressly given a go ahead order for the operation of donation or reward-based crowdfunding, but it has, for the first time, spoken about the legality or the illegality of engaging in crowdfunding operations in the west African country.
Bank of Ghana
“With the introduction of mobile money, associations and corporate entities have found crowdfunding to be an efficient channel for collecting donations and for raising funds. Mobile money platforms have been used to raise funds for old student association contributions, development contributions, funeral donations and donations towards medical expenses of vulnerable persons,” the bank stated in its latest document.
“This development signals the potential of digital platforms in transforming the traditional crowdfunding model to enhance its contribution to the implementation of the National Financial Inclusion Strategy and the Digital Financial Services Policy objectives of the country,” it added.
In Simple Terms, What Does The New Policy Say?
BoG’s latest document establishes the following certainties about crowdfunding in Ghana:
That Bank of Ghana has the power under Ghanaian laws to regulate crowdfunding of any type. The bank quoted certain laws in Ghana that make this possible. These include: the Payment Systems and Services Act 2019 (Act 987); the Data Protection Act 2012 (Act 843); Banks and Specialised Deposit Taking Institutions Act, 2016 (Act 930); the Securities Industry Act, 2016 (Act 929); and the Cybersecurity Act 2020.
That debt crowdfunding (or Peer-to-Peer lending) and equity crowdfunding (that is, let the public come invest in my company and they will get shares) platforms will be regulated, but not yet regulated by the Bank of Ghana — since they deal with securities and loans and leverage payment platforms for the collection and disbursement of funds.
That debt crowdfunding (or Peer-to-Peer lending) and equity crowdfunding, by their nature, fall within both the regulatory jurisdiction of the Bank of Ghana and Ghana’s Securities and Exchange Commission (SEC). And so, Bank of Ghana will work with SEC, which is currently putting together a set of crowdfunding regulations, to prevent possible regulatory lapses with regard to both types of crowdfunding.
That Bank of Ghana does not need to issue further regulations on any crowdfunding, which has to do with donation or giving back non-financial rewards to investors, as the bank’s policies currently support and encourage anyone wishing to do so to go ahead.
To be clear, Bank of Ghana goes ahead to state what it means exactly by donation or reward-based crowdfunding. The Bank says the two models — that is, donation and reward-based — involve the collection, holding and disbursement of funds.
The bank therefore says that its current policy permits Ghanaian banks — such as, Specialised Deposit-Taking Institutions (SDIs), Dedicated Electronic Money Issuers (DEMIs) and Enhanced Payment Service Providers (EPSPs) — to allow anybody wishing to run these types of crowdfunding campaign to do so.
It says, however, that if the donation or reward-based crowdfunding is run through a Dedicated Electronic Money Issuer (DEMIs) — such as ZeePay currently does — then merchant wallets must be created and dedicated to the collection of donations.
For startups that hold the EPSP license — such as PalmPay — they would need to partner with a bank to fully deliver the service since they do not issue electronic wallets or accounts to their customers.
The Bank also goes ahead to demand that Ghanaian banks which host crowdfunding platforms must go ahead to conduct due diligence in accordance with BoG’s NOTICE NO. BG/GOV/SEC/2020/15 dated 3rd December 2020.
In Summary, What Does The New Policy Imply?
The implications of Bank of Ghana’s latest policy are fivefold:
First, the policy implies that Ghanaian banks are only authorised to host companies that run donation or reward-based crowdfunding, pending when the BOG and SEC issue out regulations on equity or investment-based crowdfunding. This implication presents a big loophole as a smart startup running a crowdfunding campaign may call it donation while it is investment-based.
Second, BoG did not expressly prohibit equity crowdfunding, but discourages Ghanaian banks from hosting equity crowdfunding platforms.
Third, the policy implies that only crowdfunding companies expressly hosted by Ghanaian banks are legal. Therefore, the policy did not catch foreign-based crowdfunding firms targeting Ghanaian investors, thereby leaving investors to their fate.
Fourth, in the case of the disappearance of investors with the funds raised from crowdfunding platforms, the policy implies that BoG may go after those investors’ accounts to recover the funds.
Fifth, the new policy implies that BoG wants to monitor funds flowing through crowdfunding platforms. Thus, from now on, banks are expected to designate bank accounts associated with crowdfunding, appropriately.
Last year, Ghana’s Securities and Exchange Commission (SEC) said it plans to introduce a framework for the commencement of crowdfunding services by 2021 and hopes to have a system up and running, backed by the requisite legislation. Emmanuel Ashong- Katai, the SEC’s head of policy, research and IT, said the framework being designed by the SEC aims to ensure that investors are protected from fraudulent entrepreneurs
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Last June, Safaricom, alongside 11 other international telecommunications companies submitted their applications with the Ethiopian Communications Authority (ECA) for full-service telecommunication licenses in Ethiopia, a month after the Authority had invited interested firms to submit their Expression of Interest (EoI). Now, after so many adjustments to the timelines, the list is down to just six and Kenya’s Safaricom is on it.
Michael Joseph, Safaricom chairman
And although the Ethiopian Communications Authority is yet to disclose which of these firms have been dropped from bidding, Safaricom’s appearance on the list is not a surprise. The company had, last year, signed an agreement to borrow up to $500 million (Sh55.7 billion) from the US International Development Finance Corporation (DFC) to fund its expansion to Ethiopia. Safaricom is also seeking the telco license in Ethiopia under a consortium capacity, further boosting its chances of scaling through. The company had previously said it was prepared to take on more debt in its position as the consortium’s majority shareholder with a 51 percent stake. In the joint venture, Vodacom has a five percent stake, with the remainder of the ownership shared among undisclosed strategic financial investors.
The initial full list of the 12 applications included:
Global Partnership for Ethiopia (a consortium of telecom operators made of Vodafone, Vodacom, and Safaricom)
Etisalat
Axian
MTN
Orange
Saudi Telecom Company
Telkom SA
Liquid Telecom
Snail Mobile
Two non-telecom operators — Kandu Global Telecommunications and Electromecha International Projects.
The shortlisted firms will be required to submit their technical and financial bids by April 5, compared with a previous deadline of March 5.
“There are about five to six consortia who are qualified to bid. Bids are due to be submitted in April,” said Michael Joseph, Safaricom chairman, in an interview. “We are working towards the final submission around March/April.”
Plans have been on since October 2019 to allow two private companies to take 40% stake in the Ethiopian telecom market.
The regulation further opened up the country’s financial services sector to include that a licensed payment company may, with the relevant agreement with regulated financial institutions and pension funds, be allowed to provide micro-saving products; micro-credit products; micro-insurance products; or pension products in the country. Banking, insurance, brokerage services, and legal consultancy, however, still remain off limits for foreign investors, according to a new set of investment rules published on the Ethiopian Investment Commission’s website. The implication of these is that the two telcos that will be selected from the ongoing licensing process in Ethiopia will not be allowed to engage in mobile money services.
“When the telecom sector is liberalised,” said CEO of Ethio Telecom, Frehiwot Tamiru, at a consultative meeting Ethio Telecom held with IT and startup companies last year, “there are guiding policies and directives. We are not opening up completely.”
A 2018 report by the GSMA has described Nigeria, Ethiopia and Egypt, home to a combined adult population of over 242 million, as Africa’s mobile money sleeping giants.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Morocco has been making waves in North Africa when it comes to startup development in recent times. Apart from recently passing into law a bill that will allow startups in the country raise funds from the public, the country has just launched another initiative called “Tatwir — Startup” to support startups working towards the industrialisation of the north African country. Launched in Rabat by Moulay Hafid Elalamy, the country’s Minister of Industry, Trade and Green and Digital Economy, “Tatwir — Startup is part of the deployment of the Industrial Recovery Plan 2021–2023 which, among other things, aims to develop innovative, industrial and high value-added service projects led by startups.
Moulay Hafid Elalamy, the country’s Minister of Industry, Trade and Green and Digital Economy
The initiative has already taken effect, and will be executed through a partnership between the Minister of Industry, Trade and Green and Digital Economy, the National Agency for the Promotion of Small and Medium Enterprises (Morocco SME Agency) and Federation of the Startup Ecosystem of Morocco (MSEC).
The “Tatwir — Startup” initiative, designed by Agence Maroc PME and the MSEC, will offer intensive support for startup projects ranging from idea to industrialization through the various phases of development and incubation.
Particularly, the initiative will cover the following areas:
Pre-incubation
This stage will include the selection of innovative ideas. It will assist through structuring of their ideas and will be accomplished through dedicated workshops organized by the incubators. The objective of this phase is to support 5,000 startup project leaders over a period of 3 years.
Incubation
This stage will support startups project leaders to transform their ideas into viable projects. This support will continue until the startups fully take off. The objective of this phase is to support 300 startup project leaders over a period of 3 years.
Investment
Under this phase, the partnership will ensure that it covers 30% of the tangible and intangible investment needs of the selected startups.
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
A new law for raising capital from the public has arrived in Morocco, with no specific mention on how much a business can raise. This follows the unanimous adoption by Morocco’s House of Representatives of Bill 15–18 on collaborative financing “Crowdfunding”.
Eric Asmar, CEO Happy Smala
“This law will allow platforms to operate freely in the Moroccan market with Moroccan payment systems, thereby reducing costs and expanding the portfolio of potential projects to be funded. For startups, it is a tool for validating the project with the crowd, for communication and for fundraising, of course; and the fact that it is governed by Moroccan law widens the community of potential backers / contributors, ” said Eric Asmar, CEO Happy Smala, a Moroccan startup consulting firm.
Presented in March 2018 by the Minister of the Economy and Finance, the new law is part of the efforts of authorities in Morocco to strengthen the financial inclusion of young project leaders and support economic and social development.
The bill was approved by the government council in August 2019, then presented to Parliament in December of the same year.
Following the passage of the bill into law, the next step is to publish the new law in the Official Gazette in order to allow the law to fully come into force.
Three types of crowdfunding are permitted under the new law. These are loan, equity and grant crowdfunding.
The law only regulates crowdfunding portals, and goes ahead to state that to be eligible for license to own any crowdfunding portal, the applicant must:
Hold a minimum share capital of 300,000 dirhams ($33.5k). In Nigeria, this is $262k.
Have themselves a prevention and risk reduction policy to identify the origin and destination of funds.
Request additional information regarding the relevant funds.
Check the banking prohibitions of the various actors.
All activities related to crowdfunding under the new law will be regulated by Morocco’s central Bank, Bank Al-Maghrib.
Nigeria’s Securities and Exchange Commission recently approved a new crowdfunding regulation. Under the new rules, startups are only allowed to raise a maximum of the following amounts within a 12-month period: i) The maximum amount which may be raised by a Medium enterprise shall not exceed N100Million ($260k); ii. The maximum amount which may be raised by a Small enterprise shall not exceed N70Million ($182); iii. The maximum amount which may be raised by a Micro enterprise shall not exceed N50Million ($130k).
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
SafeBoda, one of the leading bike-hailing startups in Africa, is under some serious accusations in Uganda, its original place of birth in Africa before it expanded to Nigeria, and to Kenya (which it had since abandoned). In a volcanic eruption of anger, the startup’s users in the east African country have taken to the internet to haul some unsavory words in its direction.
Let's just remove the safe and remain with Boda ! @SafeBoda
The anger stemmed from SafeBoda’s newest terms and conditions under which it removed itself from a lot of responsibilities.
“We have no responsibility whatsoever for the actions or conduct of any service providers or users. We have no obligation to intervene in any way in disputes that may arise between drivers, riders or third parties,” a section of the new Terms & Conditions reads.
In the terms and conditions, SafeBoda also announced that it would no longer be responsible for any damages, direct, incidental, and/or consequential, arising out of its use, including without limitation, damages arising out of communicating and/or meeting with its other participants.
In simple terms, the implication of Safeboda’s new terms and conditions is that the company has removed itself from being dragged to court or to any dispute resolution panel, if a driver on its platform, for example, lands a major blow on one of its users for using cashless. The new terms and conditions also mean that none of the company’s users now has the ability to bring a case in court, for example, to recover any damages for loss of life or property, injuries, etc., which was caused by any of its drivers.
One way a critic summarizes the effect of the startup’s latest policy is the one below:
But the company has yielded. In a series of tweets on Monday, a week after it released the new terms and conditions, it said it was going to step back and review them.
1/3-To our customers: We’ve listened and understand your concerns regarding our terms and policies.
We are currently reviewing them and want to reassure you that we haven’t changed. Safety has and will always be our number one priority. pic.twitter.com/5ghDoetyOV
Apart from contending with a sizeable number of its users who must accept the new terms and conditions or stop using its app, Safeboda is also presently embroiled in a data-sharing scandal. According to National Information Technology Authority — Uganda (NITA-U), an Ugandan agency mandated to coordinate, promote and monitor information and technology developments in the country, the boda boda ride app, failed to disclose information to its users that it was collecting and sharing their data with CleverTap, a US-based data processor.
“The SafeBoda privacy policy and data protection policy versions of 2017 and 2019 respectively did not provide information on recipients with whom its users’ personal data will be shared,” the report partly reads.
The NITA-U investigation also found that Safeboda revealed users’ email addresses, telephone numbers, first and last names, operating system for mobile devices, version and type of application, as well as user login status to CleverTap. NITA-U further noted in the report that while CleverTap committed to keeping user data confidential, as mandated by the data protection law, there were no security measures to ensure the confidentiality of the data.
However SafeBoda said it maintains a contract with CleverTap for the purposes of knowing consumer behaviors on the app for behavioral analysis.
“We are working on this to make sure that customers can find our policies more easily on both the website and our app. This is something we strive to do to improve service to customers,” Ricky Rapa Thompson,SafeBoda co-founder.
The company has since updated its data collection policy on its website.
After a plea from a complainant to the Office of the Speaker of Parliament in 2020 alleging that the Safeboda app had been involved in an investigation report, NITA-U launched an investigation into SafeBoda’s data privacy policy, accusing it of exchanging personal data of users with third parties without the consent of clients. However, the report — until the recent finding by NITA-U — noted that there was no proof to show that SafeBoda was selling data to consumers.
In 2019, Uganda passed the Data Security and Privacy Act to protect Ugandans from businesses collecting information that is later sold or used to intimidate owners. The law also regulates collection and processing of personal information in and outside Uganda. By the terms of the law, users must be told that their personal data are being transferred to one or more third parties.
Failure to address and comply with NITA-U directives could attract prosecution under section 35 of the Data Privacy and Protection Act 2019.
While Safeboda’s latest ordeal could best be described as self-inflicted, the startup has in recent times been shaken by the city of Kampala, home to about 1.5 million people, which attempted to do what Nigeria’s most populous city — Lagos — did to its famously known okadas back in February last year — the city’s government banned them from operating on its highways.
A widespread agitation against the directive banning commercial cyclists from accessing the Kampala city center and surrounding places had, however, led to the suspension of the proposed ban.
Nevertheless, Safeboda’s latest terms and conditions of use are a threat to the startup’s core business model, which preaches safety for riders. One of the reasons why the startup recently shut down its Kenyan operations was because its drivers allegedly became so powerful and unchecked. Similar complaints are now gradually creeping up in Uganda. For example, a SafeBoda rider preferring anonymity recently told Daily Monitor that the company had ceased to give them ‘appropriate’ earnings arising from the ‘wallet’ payment option beginning at the end of 2020.
What has been your worst experience with @SafeBoda ? Me: The guy ended the trip in the middle of that jam packed road in front of Mega standard after he discovered I was using Cashless. I have never recovered from the stare he gave me 😭😭😭😭.
This, coupled with SafeBoda’s recent deficiencies in regulatory compliance, if care is not taken, may severely cut deeply into its remaining life in Africa, although President Museveni had during one of his Covid-19 addresses in June 2020 tagged the startup as “organized.”
In Nigeria, where SafeBoda’s remaining life outside Uganda is, the future is blurry, and all is tied to government’s body language. Currently, the startup is now operating in Nigeria’s south western city of Ibadan.
SafeBoda has up to $1.3 million in funding with most of the investments coming from Allianz X, the digital investment unit of international financial services provider Allianz Group. Go-Ventures, a venture fund whose cornerstone investor is the Indonesia-based “Super App” company GO-JEK also participated in that investment. Investment in Safeboda was Allianz X’s first ever investment in an African-headquartered company
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Interested in buying shares listed on the Central African Securities Exchange (BVMAC), based in Douala Cameroun, through mobile money? La Régionale, a microfinance bank in Cameroon, has just launched a major innovation to make this happen. Consequently, subscribers to the bank’s Initial Public Offering (aka IPO, or simply the first sale of shares by a company to the public) can now also buy the shares offered for sale via Orange Money. This will be the first in Cameroon, and in the whole of Central Africa.
Rollin Ombang Ekath, the Managing Director of La Régionale
“The objective of this operation is to bring the capital of 8.04 billion FCFA, fully released and validated by Cobac [Central African Banking Commission], to more than 15 billion ($27.5m), with a view to transforming La Régionale as a universal bank,” explains Rollin Ombang Ekath, the Managing Director of La Régionale.
Here Is What You Need To Know
By giving Cameroonian investors, for the first time, the possibility of buying shares of a company on the stock exchange via the mobile payment service of the local subsidiary of the telecoms operator Orange Cameroon, La Regionale intends to democratize access to stock exchange services.
Introduced in Cameroon in 2006 by mobile telephone operators, Mobile Money is certainly the most common electronic payment method in the country today. Officially, Orange and MTN, the two leaders in the mobile market, have nearly 10 million customers (4.5 million for Orange and 5 million for MTN) on their respective mobile payment services. According to figures from the International Monetary Fund (IMF), transactions via Mobile Money in Cameroon peaked at 3.5 trillion FCFA in 2017 ($6.4bn), against 300 billion in 2016.
The market capitalization of companies listed on the 14 largest stock exchanges in Africa amounted to $ 1120.78 billion as at 2017. The purchase of shares in Cameroon via mobile money may help bring the language of a stock exchange home to more people. Source: Agenceecofin.com
This explosion in the volume of transactions over one year can be explained by the diversification of the uses of Mobile Money in the country. In fact, initially used for merchant payments, Mobile Money was later adopted by the government for the payment of certain taxes and official exam fees. Virtually all schools, both public and private, have also adopted this payment method for paying tuition fees.
Thanks to the fundraising of La Régionale, whose subscriptions begin on February 9 and end on February 26, 2021, this method of payment will make it possible, for the first time, to buy the shares of a company within the framework of ‘an IPO’.
A microfinance institution among the leaders of the local market, La Régionale was founded in 1993. After launching its activities 28 years ago, the company recorded a deadweight loss of more than one billion FCFA at the start of the year. year 1998. This led to the suspension of its general management. But, at the end of that year, this microfinance institution regained its serenity with new capital contributions from its shareholders.
As of December 31, 2020, this microfinance institution posted net equity of around 10 billion FCFA ($18.3m), and maintains a portfolio of 110,000 clients through its network of 41 branches in Cameroon. Its international presence is visible in Gabon, where La Régionale has a network of four branches.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
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