South Africa has been ranked 37th on the world’s fintech startup ecosystem map, closely followed by Kenya at 42 and Nigeria at 52, Ghana at 58, Egypt at 60 and Uganda at 64, according to the latest Global Fintech Index City Rankings 2020. The Global Fintech Index City Rankings 2020 identifies emerging hubs, fintech companies and trends. The Index algorithm ranks the fintech ecosystems of more than 230 cities across 65 countries incorporating data from global partners including StartupBlink, Crunchbase and SEMrush.
“The rankings in the report are proof of how much, and how fast, the world is changing, ” noted Simon Hardie, CEO and Founder of Findexable — the company behind the Ranking
‘‘The Index is the inspiration of thousands of hours of interviews, surveys and internet searches — and the product of four months of algorithm development to create, for the very first time, a fully global ranking of fintech countries and cities,’’ he further added.
Here Is All You Need To Know
The ranking of 238 cities was compiled by Findexable, a fintech research firm, in conjunction with partners like Crunchbase, the global startup funding database, and the Africa Fintech Network.
According to the report, the city of Johannesburg, South Africa is ranked the 62nd fintech city in the world and first in Africa. This is closely followed by Kenyan city of Nairobi at 63, Lagos; Nigeria at 71 Cape Town, South Africa at 87; Accra, Ghana at 123; Kigali, Rwanda at 132; and Kampala, Uganda at 168.
The report describes Africa as the fintech the gamechanger, stating that the Africa region has the greatest need (fewer than half of all citizens there have a bank account) as it is currently still trailing the rest of the world — with the smallest number of fintech hubs in total, and only 6 in the top 100 globally.
It however notes that Africa, which is the home of mobile payments,and which currently lacks banking legacy, is the region where the fintech’s future is likely to arrive fastest.
With Johannesburg, Cape Town, Nairobi and Lagos all ranked among the top 100 cities for fintech ecosystems, it further conforms with a trend which sees nearly half of the top 100 cities located in emerging markets.
The rankings also reflect that those cities are home to Africa’s most valuable tech ecosystems and typically accounting for the most startup investment received on the continent annually.
In recent times, however, there are clear signs major Western industry leaders think so as well with PayPal, Visa, Mastercard and Stripe all investing in African fintech startups in the past 18 months. There is also strong concerted interest from the East as China has emerged has a strong player in the space over the past few months: OPay and PalmPay, two fintech companies in Nigeria have jointly received over $210 million in funding mainly from Chinese investors this year alone.
Top of the Global Fintech Index City Rankings 2020 is the San Francisco Bay area, followed by London, New York and Singapore. The United States also tops the list for fintech countries followed by the United Kingdom and Singapore. Lithuania, a country with a population of about a third of that of London, lies fourth in the global list thanks to its active encouragement of fintech companies and regulatory approach.
By country and region, the USA and the rest of the Americas form the biggest single area by number of fintech hubs. At the same time Europe’s diversity of centres (both old and new), its commitment to progressive regulation, and to ensure that rules are applied evenly, contribute to its position as the region with the second highest number of hubs globally.
The rankings were compiled by scoring several factors including the number of fintech startups and hubs in cities, the scale of investment in those startups as well as the local regulatory environment — ranging from ease of doing business to startup incentives and internet censorship — where the startups operate.
Many of the cities which traditionally top the lists of leading financial centres are conspicuously absent from a new league table of global fintech hubs. Financial giants such as Frankfurt, Shanghai and Zurich have been replaced by cities including Sao Paulo, Bangalore, Mumbai and New Delhi.
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Nigeria ’s parliament has finally passed a new finance bill that will increase Value Added Tax in the country from its current 5% to 7.5%. Of course, there is no gain saying the fact that President Mohammed Buhari will quickly sign the Bill into law since it originated from the President’s office and would form the backbone of the country’s budget financing next year. One sect of people who escaped the government’s tax net this time are companies whose yearly profits do not exceed N25 million ($69,000). However, for large companies with yearly turnover of N100 million and above, added to the 30 percent flat-rate corporate tax and other range of taxes and levies already in place is now an increased Value-Added Tax 7.5%, in place of the former 5%.
Below are some of the important changes you should know about:
Changes In The Companies Corporate Tax Rate
Under Nigeria ‘s new Finance law:
Small businesses with annual turnover of less than N25m will now be exempted from Companies Income Tax. However, to benefit from such incentive, such small businesses must first register for taxation in Nigeria and must continue to file tax returns during the period their profits are below the tax N25mn threshold.
A lower Corporate Income Tax rate of 20% ( as against 30%) will however apply to medium-sized companies with turnover between N25m and N100m, to benefit from such incentive, they must first register for taxation in Nigeria and must continue to file tax returns during the period their profits are between the N25m and N100m threshold.
The law now allows a minimum tax rate of 0.5% for every turnover and this provision will only apply to small companies (less than 25m turnover), thus allowing non-resident companies in Nigeria to pay minimum tax.
For companies or businesses that pay their tax dues early, a 2% deduction bonus on tax payable is given in the case of medium-sized companies between N25m and N100m and 1% deduction on payable tax is given for large companies from N100m and above.
The finance law also extends the scope of taxable businesses in Nigeria to include any digital media agency that transmits, emits or receives signals, sounds, images or data of any kind in Nigeria, including ecommerce companies, app store, online adverts, cloud computing services online payment platforms and so on, as long as the company has significant economic presence in Nigeria and profit can be attributable to such platforms.
Also taxable in Nigeria under the new finance law would be outsourcing of foreign technical, management, consultancy or professional services to a person or company resident in Nigeria where the company has significant economic presence in Nigeria and profit can be attributable to such platforms.
Under the new law, the following categories of dividends are exempt from tax:
Dividends which are paid out of the retained earnings of a company, provided that the dividends are paid out of profits that have been subjected to tax under the relevant laws.
Dividends that are paid out of profits that are exempted from income tax by the Act or any relevant Act.
Profits or income of a company that are regarded as franked invesment income under the Act.
Distributions made by a Real Estate Investment Company to its shareholders from rental income and dividend income received from such shareholders.
Ease of Doing Business
The law also made substantial changes to the mode of doing business in Nigeria. Under the finance law:
Nigerian banks are to request for Tax Identification Number (TIN) before opening bank accounts for individuals, while existing account holders (accounts opened before September 30, 2019) must provide their TIN to continue operating their accounts.
Email correspondences are now recognised for purposes of communicating with Nigerian tax authorities.
Also, stamp duty on bank transfer made in Nigeria will now apply only on amount starting from N10,000, and above. However, transfers between the same owner’s accounts in the same bank are to be exempted from stamp duty.
Other notable introductions and amendments include:
That the remittance of VAT will now to be on cash basis, that is, the difference between output VAT collected and input VAT paid in the preceding month.
The meaning of supply and definition of goods and services has been expanded to cover intangible items other than land, among others.
Introduction of thin capitalisation of 30% of Earnings before interest, tax, depreciation and amortization (EBITDA)for interest deductibility. Any excess deduction can be carried forward for 5 years.
Deemed tax presence for non-residents with respect to imported technical and management services now taxable at a final WHT rate of 10%.
Insurance companies can now carry forward tax losses indefinitely, deduct reserve for unexpired risks on time apportionment bases while special minimum tax for insurance has been abolished.
Dividend distributed from petroleum profits now to attract 10% withholding tax.
Compensation for loss of employment below N10m to be exempted from Capital Gains Tax.
VAT registration threshold of N25 million turnover in a calendar year to be introduced
Any expense incurred to earn exempt income now specifically disallowed as a deduction against other taxable income
Specific requirement for VAT deregistration for discontinuing operations
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Moving across Africa has never been easier than now according to the 2019 Africa Visa Openness Index published by the African Union Commission in conjunction with the African Development Bank. This is some good news for African startups looking to expand across African countries as well as migrants within Africa.
“Our work on the Africa Visa Openness Index continues to monitor how Africa is doing on free movement of people. Progress is being made but much still needs to be done. To integrate Africa, we should bring down the walls. The free movement of people, and especially labour mobility, are crucial for promoting investments,” African Development Bank President Akinwumi A. Adesina said.
Here Is All You Need To Know
For the first time, African travellers have liberal access to over half the continent, the 2019 Africa Visa Openness Index published by the African Union Commission and African Developmen tBank, reveals.
The report was launched on Monday on the sidelines of the AfricaInvestmentForum, which opened in Johannesburg, SouthAfrica.
This fourth edition of the Index shows that 47 countries improved or maintained their visa openness scores in 2019.
African visitors no longer need a visa to travel to a quarter of other African countries, whereas visa-free travel was only possible to a fifth of the continent in 2016.
Currently, 21 African countries also offer eVisas to make travel more accessible, up from up from 16 in 2018, 13 in 2017, and 9 in 2016).
The 2019 top performers on visa openness rank among the top countries for foreign direct investment in Africa, and benefit from strong levels of growth, including in tourism.
According to the report, Seychelles and Benin remain the top-performing countries, offering visa-free access to over 50 Africans countries while Ghana and Ethiopia moved up a couple of places to enter the top 20 list.
From the report, the under-listed are the top 20 visa open countries in Africa:
Seychelles — visa free (53)
Benin — visa free (53)
Senegal — visa free (22), visa on arrival (31)
Rwanda — visa free (17), visa on arrival (36), visa required (1)
Ghana — visa free (18), visa on arrival (34), visa required (1)
Uganda — visa free (18), visa on arrival (34), visa required (1)
Guinea Bissau — visa free (14), visa on arrival (39)
Cabo Verde — visa free (16), visa on arrival (36), visa required (1)
Togo — visa free (14), visa on arrival (38), visa required (1)
Mauritania — visa free (9), visa on arrival (44)
Mozambique — visa free (9), visa on arrival (44)
Mauritius visa free — (27), visa on arrival (21), visa required (5)
Kenya — visa free (18), visa on arrival (32), visa required (3)
Comoros — visa free (0), visa on arrival (53)
Madagascar — visa free (0), visa on arrival (53)
Somalia — visa free (0), visa on arrival (53)
Djibouti — visa free (0), visa on arrival (52), visa required (1)
Ethiopia — visa free (2), visa on arrival (49), visa required (2)
Tanzania — visa free (16), visa on arrival (25), visa required (12)
Gambia — visa free (28), visa on arrival (0), visa required (2
The Need For Others To Loosen Up
For the Chairperson of the African Union Commission, Moussa Faki Mahama, the role of integration for the development of the continent and the fulfilment of its people’s aspiration to well-being cannot be overemphasized.
‘‘I congratulate those member states that have taken measures to ease the procedures for the entry of African nationals into their territories,’’ he said, ‘‘and urge those that have not yet done so to join this growing momentum.”
To that effect, the report recommends that African countries need to make more progress on visa regimes, including introducing visas-on-arrival.
By breaking down borders, Africa will be able to capitalize on gains from regional integration initiatives such as the African Continental Free Trade Area, the Single African Air Transport Market, and the Protocol on the Free Movement of Persons, it says.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
As part of efforts aimed at adopting the use of information communications technology (ICT) to create cutting edge innovative measures aimed at making teaching more impactful especially in Africa, The Mastercard Foundation Centre for Innovative Teaching and Learning in ICT has issued a Request for Proposals (RFP) inviting growth-stage, educational technology (EdTech) innovators to apply for an opportunity to grow their ventures while contributing to improving the quality of education in Africa. According to MasterCard Foundation, this is a one in a million opportunity for tech-preneurs in Africa to test their mettle.
Joseph Nsengimana, Regional Director, Mastercard Foundation Centre for Innovative Teaching and Learning in ICT
This is the first RFP to be offered by the Centre for Innovative Teaching and Learning in ICT located in Kigali, Rwanda. The Centre works with governments, EdTech developers, and other stakeholders to identify and eliminate the barriers facing young people pursuing secondary education in Africa. Selected EdTech companies will be supported for a minimum of 12 months and benefit from a comprehensive package that includes: customized mentorship, financial support, and the opportunity to test, validate and scale their business.
At a recent ministerial roundtable hosted by the Mastercard Foundation in Botswana, education ministers, African Union representatives, academics, young people, and EdTech entrepreneurs met to discuss how EdTech can improve outcomes for teachers and students. During these consultations, two priority areas emerged – professional development and enriched learning content. Innovators are invited to submit proposals that will either: enhance and increase accessibility and affordability of professional development for in-service teachers, which also minimizes their out-of-classroom time; or create and deliver enriched learning content that improves quality, relevance, and accessibility to both in-school and out-of-school secondary school learners.
“Our aim is to create an active connection between those who need the solutions and those who create them,” said Joseph Nsengimana, Regional Director, Mastercard Foundation Centre for Innovative Teaching and Learning in ICT. “Solutions often do not consider the on-the-ground limitations from both a training perspective and the technical environment. We’re talking about co-creation every step of the way.”
Working with EdTech entrepreneurs and governments, the Centre for Innovative Teaching and Learning in ICT will support entrepreneurs and scale up their innovations. Eligible organizations must meet the following criteria: a registered company that is now post-product with the potential to scale (typically in operations for two years or longer); company is majority African-led and/or owned; a for-profit or non-for-profit operating model is in place; the company is already operating in, or interested in moving into, the education market in Africa; and the company’s product specifically addresses the professional development of teachers; and/or the need for enriched and accessible learning content for learners.
The Centre was established as part of the Mastercard Foundation’s Young Africa Works Strategy to enable 30 million young people to secure dignified and fulfilling work by 2030. Technology has the power to strengthen and improve how education is delivered across the continent, however, education technology entrepreneurs and implementers often struggle to grow and scale their solutions.
Access to quality education is often difficult, especially for young people living in rural and remote communities. While great strides have been made in access to primary education, only 43 percent of youth in Sub-Saharan Africa enroll in secondary education. Educational technology can be a digital bridge to those hardest to reach. For the vast majority of youth, secondary school is their springboard to employment or to entrepreneurship. In order to find work that provides a decent living, it is crucial that they are equipped with strong foundational, technical, and soft skills.
In addition to accessibility, secondary education systems in Africa suffer from a lack of qualified teachers, due in part to conflict, difficult working conditions, poor remuneration, and lack of support. Professional development will improve the quality of teaching among existing teachers, and it may revitalize the profession by providing teachers an opportunity to grow. The deadline for submissions is November 21, 2019.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
Barring any last minute changes, South Africa is set to introduce a new law that will require state agencies and paratastals to sub-contract to Small, Medium, Micro-Enterprises Enterprises (SMMEs) a minimum of 30% of the value of every contract for contracts that are above R30 million ( $2 mn). At the second annual South Africa Investment Conference, Cyril Ramaphosa, South Africa’s President said that this new piece of legislation would be known as the Public Procurement Bill.
“Under the soon-to-be-finalised Public Procurement Bill, every organ of state that receives a tender must sub-contract a minimum of 30% of the value of the contract to SMMEs that are at least 51% black-owned,” Ramaphosa said.
Ramaphosa said that this public procurement is being used to promote local production, and that SMMEs will benefit from designated products when they participate in public procurement systems.
A New Tax Regime For SMMEs Too
He added that the tax regime for SMMEs is also being simplified.
“An example of this is the requirement for annual rather than biannual tax returns. Grants received by SMMEs are also tax-exempt,” he said.
“Enhancements have also been made to the venture capital company tax regime to encourage investment in small businesses and junior mining companies.”
Comments
With this proposed legislation, South African startups should be gearing up for some of the biggest deals ever on the continent. In simple terms, for every government contract awarded to any organs of the South African government, startups would get about 30% of the whole contract sum, provided that the total value of the contract is up to $2mn. This would no doubt boost the South African startup ecosystem, and encourage more startups to spring up.
Startups in South Africa are therefore advised to keep track of the proposed legislation and watch when it becomes law. This is also an opportunity for them to position their businesses, get the necessary business documents ahead of the opportunities to be presented by the proposed legislation.
Apart from South Africa, Nigeria recently issued new regulations — Guidelines for Nigerian Content Development in Information and Communications Technology as amended — that require all indigenous or Nigerian Companies who have secured IT projects or contracts with any Nigerian Federal Public Institution or Government owned companies either fully or partly, of which the gross value of the project is Five Hundred Million Naira (N500,000, 000, 00)or above to engage on the project, a Nigerian startup or incubation team for the purpose of R&D on the project, as well as engage Nigerian graduates with IT background as interns on the project.
The Guidelines apply to all Nigerian Federal Ministries, Departments and Agencies, Federal Government Owned Companies(either fully or partially owned) Federal Institutions and Public Corporation, Private Sector Institutions, Business Enterprises and Individuals carrying out business within the Information and Communications Technology sector in Nigeria.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Only two African economies rank in the top 50 on the ease of doing business, according to a report released by the World Bank. Mauritius ranks 13th, ahead of countries like Australia, Germany, Canada or China, while Rwanda ranks 38th, ahead of the Netherlands, Belgium or Hungary.
Top Ten African Countries
In terms of performance, about ten African countries are ranked in the first 100 in the world.
S/N
AFRICAN COUNTRIES
RANKING IN THE WORLD
SCORE (%)
1
Mauritius
13
81.5
2
Rwanda
38
76.5
3
Morocco
53
73.4
4
Kenya
56
73.2
5
Tunisia
78
68.7
6
South Africa
84
67.0
7
Zambia
85
66.9
8
Botswana
87
66.2
9
Togo
97
62.3
10
Seychelles
100
61.7
The Doing Business 2020 report also notes that effectiveness of trading across borders also varies significantly from economy to economy.
Economies that predominantly trade through seaports incur average export border compliance costs as high as $2,223 per shipment in the Democratic Republic of Congo and $1,633 in Gabon compared to only $354 in Benin and $303 in Mauritius, the report notes.
More than half of the economies in the top-20 cohort are from the OECD high-income group; however, the top-20 list also includes four economies from East Asia and the Pacific, two from Europe and Central Asia, as well as one from the Middle East and North Africa and one from Sub-Saharan Africa. Conversely, most economies (12) in the bottom 20 are from the Sub-Saharan Africa region.
Economies that score highest on the ease of doing business share several common features, including the widespread use of electronic systems. All of the 20 top-ranking economies have online business incorporation processes, have electronic tax filing platforms, and allow online procedures related to property transfers.
The Doing Business 2020 data also suggest that a considerable disparity persists between low- and high-income economies on the ease of starting a business. An entrepreneur in a low-income economy typically spends about 50.0% of income per capita to launch a company, compared to just 4.2% for an entrepreneur in a high-income economy
Togo and Nigeria Ranked The Top Ten Improvers In The World
The Doing Business report also acknowledges the 10 economies that improved the most on the ease of doing business after implementing regulatory reforms.
In Doing Business 2020, the 10 top improvers are Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India, and Nigeria (table O.2). These economies implemented a total of 59 regulatory reforms in 2018/19 — accounting for one-fifth of all the reforms recorded worldwide. Their efforts focused primarily on the areas of starting a business, dealing with construction permits, and trading across borders.
The motivation for reform in Nigeria, Tajikistan, and Togo was in part the developmental achievements of their neighbors. Rwanda’s progress over the past 10 years inspired authorities in Togo, leading several Togolese delegations to visit Kigali to learn about successful reforms. Togo’s president set a goal to be number one in West Africa in Doing Business 2020. To achieve this target, Togo made significant reform efforts in the areas of starting a business, registering property, and getting credit…
Nigeria has embarked on a comprehensive reform journey following the example of Kenya, the report notes.
Sub-Saharan Africa Remains The Weakest On The Ease Of Doing Business Index
The report notes that sub-Saharan Africa remains one of the weak-performing regions on the ease of doing business with an average score of 51.8, well below the OECD high-income economy average of 78.4 and the global average of 63.0. Compared to the previous year, Sub-Saharan African economies raised their average ease of doing business score by just 1 percentage point in Doing Business 2020, whereas economies in the Middle East and North Africa region raised their average score by 1.9.
Somalia ranks the worst country in the world as well as in Africa to do business in, followed by Eritrea, Libya, South Sudan, Central African Republic, Congo Democratic Republic (DRC), Chad, others.
Global Performance
Worldwide, 115 economies made it easier to do business, according to the report. New Zealand however remains the number one country in the world in terms of ease of doing business, followed by Singapore, Hong Kong, Denmark, Korea Republic, United States, Georgia, United Kingdom, Norway and Sweden.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
As the global economy shows signs of uncertainty on many fronts policy makers have been urged to focus on growth. This is coming amid subdued growth even as the pace of the investment and trade softens.
The World Bank Group, in cooperation with the International Monetary Fund, can help emerging and low-income countries bolster potential growth, increase their resilience to shocks, boost domestic revenues, and continue building policy buffers. The two organizations have an important role to play in addressing the increase in debt vulnerabilities, and they can help countries meet a range of challenges to the international financial system, including tackling corruption.
World Bank Group President David R. Malpass
These were key messages from the Development Committee, a ministerial-level forum of the World Bank Group and the International Monetary Fund, in a communique issued at the close of the institutions’ Annual Meetings in Washington.
The committee, which represents 189 member countries, noted that the Bank Group is uniquely placed to address global development challenges, and they encouraged it to help implement country platforms that will make better use of development resources and mobilize private sector solutions. They also urged continued efforts to protect the most vulnerable, spur job creation, and strengthen public sector efficiency.
World Bank Group President David R. Malpass similarly stressed the urgency of the organization’s mission: the twin goals to reduce poverty and boost shared prosperity. But with 700 million people still living in extreme poverty around the world and the increasing risks posed by climate change and fragility, today’s global economy is making this mission even harder. At the meetings’ opening press conference, Malpass called for “fresh thinking to ignite growth” while expressing optimism that “well-designed reforms can deliver meaningful gains.” He emphasized that this is especially true for emerging markets and developing countries: they can “unleash growth that’s broadly shared across all segments of society.”
Both the committee and Malpass underscored the leading role played by IDA, the Bank Group’s fund for the poorest countries, in reducing extreme poverty, a challenge that is becoming steadily more concentrated in Africa. They noted IDA’s strong implementation of its current three-year program, and they urged continued strong support from donor countries in the replenishment of IDA’s funding for the next cycle, an effort that is well underway. In his plenary speech to the Board of Governors during the meetings, Malpass highlighted IDA’s growing focus on situations of fragility, conflict, and violence—where the poorest people are also increasingly concentrated. In addition, both he and the committee noted IDA’s joint work with IFC and MIGA to scale up private sector development, including in fragile situations.
The Bank Group’s work supports better development outcomes across a wide range of sectors. Malpass mentioned a number of these: “We’re investing to help countries gain access to electricity and clean water, to ensure the full inclusion of girls and women, to address climate change and protect the environment, to improve health and nutrition, and to bolster infrastructure.” He also stressed the rule of law, transparency, and peace and security, along with more effective debt management. But he observed that effective country programs must fit the distinct needs of each economy: “Development cannot be imposed from outside—country leadership and ownership matter.”
The meetings also marked a further transition in leadership, with Anshula Kant recently arrived as Managing Director and Chief Financial Officer for the Bank Group and with Axel van Trotsenburg assuming a new role as Managing Director of Operations at the World Bank. In welcoming them, Malpass also congratulated Kristalina Georgieva on her appointment as Managing Director of the IMF, expressed his appreciation for IFC CEO Philippe Le Houérou becoming co-chair of the current IDA replenishment, and thanked Keiko Honda for her years of service as MIGA CEO.
In a statement after the Development Committee meeting, Malpass said, “We at the World Bank Group are staying focused on our mission. We’re helping countries build strong programs, tailored to the unique circumstances of their economies.” While acknowledging the risks posed by the global economy and the daunting issues that face individual countries, he expressed confidence that progress can be made: “We cannot let today’s challenges be a roadblock to better development outcomes.”
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
The startup ecosystem in Eswatini still seems far off.
With roughly about 1.4 million people, Eswatini (formerly Swaziland) is nearly 70 times lesser in size than South Africa. However, comparison of countries by size may sometimes be misleading. For instance, even though Eswatini is about 24 times bigger in size than Singapore (a South East Asian country), Singapore’s economy (in GDP terms) is by far larger than Eswatini’s (about 74 times). This is even as both countries don’t have key export commodities such as oil.
Comparing both countries’ startup ecosystems further leaves less than desired. The most recent Startup Genome’s 2019 Global Startup Ecosystem Report rates Singapore as the #14 global startup ecosystem in the world and identifies Local Connectedness as one of its strongest traits. Apart from ranking 4th in the world, highlights from the report include that Singapore’s startup ecosystem has an estimated value of $25 billion, far exceeding the global average of $5 billion. The ecosystem ranks #5 on the Global Startup Ecosystem’s Fintech sub-sector. Early-stage funding per startup in Singapore is $202,000. Output Growth Index of startups in Singapore is 8 out of 10, indicating meaningful growth in total startup creation, calculated in an annualized growth rate.
Eswatini facts in basics
Part of the reasons why Singapore’s startup ecosystem has succeeded is because the Singaporean government supports young startups with its Startup Tax Exemption Scheme. The scheme exempts 75% of a company’s first $73,000 in income. Additionally, Singapore raised tax deductions for IP registration fees from 100% to 200% and qualifying expenses incurred on Research &Development from 150% to 250% in 2018. Thus, Singapore startups are able to put off paying taxes until they are larger and more established.
Below we examine why the startup ecosystem in Eswatini is yet to come of age.
Poor Ease of Doing Business
The latest World Bank’s Ease of Doing Business report ranks Eswatini as number 117 out of 190 countries in terms of ease of doing business .
Founders desiring to register a business as a Private Limited Liability Company in the country must pass through each of the following procedures: Preregistration (for example, name verification or reservation, notarization); Registration in the economy’s largest business city; Postregistration (for example, social security registration, company seal); Obtaining approval from spouse to start a business or to leave the home to register the company; Obtaining any gender specific document for company registration and operation or national identification card.
Each of these procedures starts on a separate day (2 procedures cannot start on the same day). Approximately, it takes about 12 days to obtain a trading license in Eswatini. However, a company might need more than one trading license if it does more than one activity. Each activity has a different license fee. For instance, if the company produces and sells its goods to the public.
No Noticeable Legislation Incentivising Startups
Eswatini has no legislated law granting incentives to its startup ecosystem or newly formed businesses. Although companies may be issued with a Development Approval Order (of up to a 10-year period) enabling them to pay only 10% as corporate tax instead of the standard flat rate of 27.5% applicable to all corporate entities, only Eswatini’s Minister of Finance is authorised by law to exercise such powers. The grant of a development approval order is also only applicable to approved new investment, business or development enterprises in manufacturing, mining, international services and tourism and which will not unfairly compete with existing Swazi companies. Swaziland and foreign investors are eligible to apply for this incentive but the application must be made by a company incorporated in Swaziland.
By concentrating the incentive only in the manufacturing, mining, international services and tourism sectors, and by placing the stringent requirement of Ministerial approval, the scheme may have deprived startups still struggling with raising initial starting capital from the opportunity of being granted such order.
Again, Eswatini’s National Policy on the Development of SMEs defines small enterprises as having assets of E50,000 to E2m (US$6500- 260,000), 4 -10 employees, and sales of up to E3 million (US$395,000). Medium enterprises have assets valued at E2–5m (US$260,000–650,000), up to 50 employees, and sales of up to E8 million (US$1,040,000). (E = symbol of Swaziland’s currency Lilangeni (SZL).
The purpose of this classification is not to provide support in terms of seed capital but to give exaggerated focus on the startup ecosystem — more or less pretending that a lot is being done for startups.
At policy level, the SME Unit in Eswatini’s Ministry of Commerce, Industry and Trade is responsible for researching and proposing changes to existing policy or developing new policy related to SMEs in such areas as finance and training.
Eswatini’s Small Enterprise Development Company (SEDCO) also provides business development services such as training on business management and registration of start-up ventures. SEDCO operates nine small industry estates and rents workshops to small business owners.
The SME Development Unit / Domestic Investment Department in Swaziland’s Investment Promotion Authority also provides extensive support to SMEs as well as operating a linkages programme to help establish business relationship between SMEs and larger enterprises.
However, no matter the extent of such policies, nothing could be more powerful as spread tax incentives, which small businesses or startups can access no matter how remotely located they are, as is the case with Singapore’s Startup Tax Exemption Scheme or South Africa’s Section 12J. Most of the times, only a handful of businesses may be selected for such trainings or linkages programmes.
The direct implication of the absence of these incentives is lack of appetite for equity investments by venture capital or private equity firms in Eswatini ’s startup ecosystem.
One of the enablers of economic growth in modern times is the degree of adoption of technological innovations by locals of a geographical territory. For instance today, the eight most valuable companies in the world are all tech companies. As at 2007, only one tech business, Microsoft, was among the 10 biggest companies in the world. Increasingly, globalisation has meant that many of these brands have significantly captured larger chunk of the global economy.
A 2014 statistic indicated that South Africa’s ICT fuelled by technological revolution contributed 2.7% to South Africa’s overall GDP, a statistic which is larger than agriculture, but slightly shy of tourism’s contribution of 3.1%. In other words, for every R100 that the South African economy produced in 2014, R2.70 was due to activities related to ICT. In Nigeria, Africa’s largest economy, the Information and Communications Technology’s (ICT) contribution to the Gross Domestic Product (GDP) stands at 13.8% as at September, 2019, a figure which may more than double Nigeria’s Oil and Gas contribution of 8.8% in two years.
Having noted the significance of technology in the growth of a country’s economy and by extension its startup ecosystem, the rate of internet penetration in Swaziland is still very low. As at 2018, only about 446,051 people in the country, representing a meagre 27.8 % of the entire Swaziland’s population have access to the internet. Compared to the East African country of Mauritius, these statistics are abysmally poor. Even though Eswatini is about 9 times larger than Mauritius in size (and even has more people than Mauritius), there are about 803,896 internet users as at Dec/2018 in Mauritius, representing about 63.2% of the Mauritian population. Unarguably, this is why the Mauritian ICT industry made a GDP contribution of 5.6% in 2017 for Mauritius. The implication of this is that so many activities are going on in the sector, and invariably the Mauritian startup ecosystem.
A major factor that explains this low rate of technology adoption in Mauritius is the poverty gap in the country. The socially and economically marginalised — particularly those at the intersections of class, gender, race or ethnicity — are unable to harness the Internet to enhance their social and economic well-being. Although the internet sector in Swaziland has since been open to competition with four licensed Internet Service Providers (ISPs), prices have however remained high and market penetration relatively low. Much of this is attributable to the country’s landlocked nature. As a result of this, the country depends on neighbouring countries for international fibre bandwidth. This meant that access pricing was high for many years, though prices have fallen more recently in line with greater bandwidth availability resulting from several new submarine fibre optic cable systems that have reached the region in recent years. Invariably, the startup ecosystem in Eswatini is also affected by lack of abundance of this.
Low Number of Tech Hubs And Incubators
Unlike other African countries with appreciably large presence of tech hubs, incubators and accelerators, Eswatini boasts only of a few.
In Southern Africa, for instance, where Eswatini is regionally located, Zimbabwe and Zambia recorded remarkable growth respectively doubling and tripling their number of active tech hubs in eighteen months in 2018 (13 vs 6 in Zimbabwe; 6 vs 2 in Zambia). However, there is only about one hub in Swaziland, out of over 420 hubs present in Africa. The Mbabane Hub is made up of young people in their own right, working together to promote technological innovations around the Mbabane city region— the capital and largest city in Eswatini.
Although the Swaziland government has, in 2012, initiated the Royal Science and Technology Park (RSTP), a parastatal under the Swaziland Investment Promotion Authority (SIPA), very much still remains to be done. The Biotechnology Park which falls under The Royal Science and Technology Park (RSTP) is situated at Nokwane and is a “one stop facility” that creates an enabling environment to investors wishing to settle within the Royal Science and Technology Park. RSTP hopes to foster the conception of inventions and facilitate their patenting and to help knit various elements of the Research & Development (R&D) cluster together. By 2022, RSTP hopes to have trained Swazis with new, innovative skills, providing them with the environment to experiment on new technologies. RSTP also hopes to inculcate a culture of entrepreneurship among Swazi graduates and to facilitate specially promoted research in response to national priorities and develop strategies for the development of human resources in Swaziland.
The importance of tech hubs, incubators or accelerators in the development of Eswatini ‘s startup ecosystem, for instance, can never be over-emphasized. Tech hubs can create an environment specifically targeted at helping young technology companies thrive by encouraging experimentation, not demonizing failure, and helping firms network with other like-minded individuals and enterprises. They can also make it easier for firms to meet investors in order to get their project funded.
Bottom Line
Eswatini still has a long way to go in terms of its startup ecosystem growth. However, it has a bright future on the flip-side. The country has a median age of 20.5 years, although with a life expectancy of just 31.88 years, the lowest documented life expectancy in the world and less than half the world average (largely because of large prevalence of several health issues, including HIV/AIDS and tuberculosis). With increasing accessibility to the country’s economy by foreign investors, most of whom are from South Africa, there may still be some hope on the horizon.
According to Bloomberg, Tunisia is the most innovative country in Africa, occupying Africa’s first place for the quality of its entrepreneurial environment (Global Entrepreneurship Index) and having the best mobile internet connection on the continent (Speedtest Global Index) .
The country’s ICT sector which represents 7.2% of its GDP has created over 100,000 jobs (with over 7,500 jobs created per year). It also has over 1,200 established ICT companies. Its universities produce around 10,000 engineers per year for a population of 11.6 million. France with a population of 67 million, trains about 32,000 engineers a year.
Tunisia is also the first country to set up a framework to facilitate the launch and development of a Startup Act.
Leading Africa’s Innovation?
According to Karim Koundi partner at Deloitte, Central Africa—and TMT Industry Leader Africa Francophone Advisory Services–Tunisia represents the best of the continent’s technological hub for many reasons.
“Based on my own experience in the region, in other words, Francophone Africa,’’ he says, ‘‘I have noticed that Tunisia has many assets to play the role of an important hub for Africa’s startup ecosystem. First, Tunisia has the human human resources. Tunisia has a pool of technological and digital skills. Second, its geographical position not only allows it to be a hub, but also is a gateway to other continents for Africans. Third, Tunisia being a small country, has a market which is relatively small. The implication of this is that Tunisians are open to all other markets. This is a major asset.’’
The consequence of these factors is that if the Tunisian authorities commit the necessary resources for some considerable period of years Tunisia would perform wonders.
“In terms of weakness,” Karim Koundi continues, “there is a lot to be done in terms of mobility and transport of products, services and people within the continent. Logistically, to move from Tunisia to the rest of the continent, you have to go through other continents or other countries, with flights of 24 hours … “
Koundi further notes that Tunisia’s national banking network does not support the country’s pan-African ambitions.
“The Tunisian banking network must be more present on the continent,’’ he says.
How Tunisian Startups Are Already Disrupting Industries
More and more Tunisian startups are innovating and exporting local technological know-how to other continents such as Europe.
For instance, startup Enova Robotics is pioneering the manufacture and export of mobile robots in Africa and the MENA region .
“I am originally a teacher — researcher of training,’’ says Anis Sahbeni, CEO and founder of Enova Robotics. ‘‘I taught at the Sorbonne, France since 2004. In 2014, I decided to change my cap and go back to Tunisia to create the first start-up in Africa and the Mena region, which manufactures its own brand of robot .’’
Enova Robotics’ robots are entirely made in Tunisia, from design to manufacturing, through Artificial Intelligence, with an integration rate, according to Sahbeni, that exceeds 70%.
Based in the area dedicated to the Tunisian Tech Innovation City in Sousse, the company, which has a subsidiary in Paris, is also specialized in the security sector.
“Our goal is to go to the international market,’’ says Sahbeni. ‘‘We started with Europe. We work for Airbus, Michelin, Securitas … The goal is to gradually penetrate the security industry through this innovation. This is an ambition fostered by an ecosystem conducive to innovation.’’
Sahbeni says the Tunisian tech ecosystem is buzzing and encouraging more and more startups to take up innovation and the opportunities offered by globalisation.
‘‘Through the Startup Act in particular, which lifts a series of barriers, particularly for export, and facilitates relations with the Tunisian government ,’’ he further notes, ‘‘the Tunisian ecosystem has become almost competitive with the European startup ecosystem.
Sahbeni however concedes that there are still improvements to be made.
“In Austria, for example, there are 250,000 startups, with an average employment rate of 2.5 per start-up. So 500,000 Austrian people work with startups. Today, it is in this sense that we have to go: innovation from Africa to the United States and elsewhere in the world, “he says.
According to him, Africa as a market has more young people than any other continents, an advantage the continent could harness.
“We initially targeted the European market, while waiting for America,’’ he says. ‘‘This is because the European market has the most mature market to absorb this type of technology. But Africa, with its growth, is a target market. By 2025, no later than 2030, Enova will be present on the African market. “
Video game, animation, 3D, virtual reality
Anis Sahbeni is not the only one who is leading this disruption. Since the creation of Tunisia’s Startup Act, Tunisia is experiencing a 30% increase in startup creations. More and more of these startups are directly oriented towards the African market.
Many young Tunisian entrepreneurs have increasingly shown their appetite for entrepreneurship in the area of Artificial Intelligence.
“I think Tunisian expertise is multiple. We have this chance, for a small country, to have good universities and technological institutes, which cover the territory well and have a multisectoral approach, computer, mechatronics, robotics,’’ notes Dounia Ben Mohamed, a writer with Le Point, a magazine focused on the Francophone startup ecosystem. ‘‘But it is also clear that currently great efforts are made around the AI. The Tunisian Government has realized the importance of IA & Industry 4.0, and made it a priority. The AI industry can count on a high-performance startup ecosystem and its diaspora. Tunisia currently ranks 2nd in Africa in the Government AI Readiness Index (2019), which assesses the ability of governments to reap the benefits of AI.’’
‘‘There is a totally unknown sector that has emerged around the School 3D Netindo. It is an ecosystem linked to the creative digital cultural industry, that is to say the video game, the animation, the 3D , VR, special effects, which allows Tunisia to be with South Africa, Kenya and Nigeria in pole positions on this industry of the future. Tunisian expertise is beginning to be recognized in sub-Saharan Africa and is sought after,”he says
As the Tunisian technology hub continues to grow, both in terms of public and private initiatives, several smart city projects are also emerging. Notable among them are the Tunisian Smart City initiative and the association, Bizerte 2050, which was created in 2009 and operates for the development of the Bizerte region of Tunisia through innovative, inclusive and futuristic concepts. Benefiting from a partnership with the International Telecommunication Union, Bizerte Smart City is among the top four smart and sustainable cities in the world, alongside Dubai, Pully (Switzerland) and Singapore. The African Union has also included it in its 2063 agenda for the transformation of Africa.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
According to data curated by Maxime Bayen, GSMA Ecosystem Accelerator’s Insights Director, just in the last 7 months, January to July 2019, African startups have succeeded in raising close to $225 million in funding. While South Africa had 33.3 per cent share of the startups invested into in Africa during this period, Nigeria’s shares represented about 24%. Maxime Bayen pulled together a total of 44 start-ups from nine African countries for his enquiries.
The list was mainly dominated by startups from South Africa, Nigeria, and Kenya. While South Africa saw a record number of 15 startups on the list, 10 startups were from Nigeria while 8 were from Kenya. Uganda got three, Ghana and Egypt got two, while Mauritius, Zimbabwe and Zambia one each.
According to data curated by Maxime Bayen
Here Is Why The Above Facts Are Interesting:
Although 2019 is not yet over, it does appear that Nigeria has displaced and is now leading others, including Kenya (Africa’s top startup funding destination in 2018) as the top ecosystem with the highest amount of funding this year. However, should 2019 end with Nigeria’s total fundraising amount still below $250 million (including Kobo360’s $20m recent funding from Goldman Sachs), Nigeria comparably would trail Kenya’s performance in 2018. Kenya in 2018 raised a record $348 million in startup funding, the highest ever amount raised by any African startup ecosystem in years. The current year figure would also mean that 2018 was the best year for African startups in terms of the total funding raised.
The above facts are also interesting because even though Nigerian startups secured the most funding, more South African Startups secured funding above $1 million compared to other startup ecosystems, with over 30% of the startups that raised funding above the $1 million threshold in Africa found in South Africa.
Below, we consider why more startups in South Africa are raising funds compared to other startup ecosystems.
A Large Presence of Local Investors And Equity Funds
South Africa unlike, other African startup ecosystems, has a very large presence of local investors such as venture capital funds, angel investors and other private equity funds who are increasing their stakes in local startups.
Indeed, while other African startup maintain little or no presence of sigificant early stage investors, South Africa has more of these ventures. Top South African companies in 2016, for instance, launched the R1.4-billion SA SME Fund, a VC fund to co-invest alongside various investors (not solely VC investors). SA SME Fund CEO Ketso Gordhan further said the fund would invest over R1-billion or 75% of its R1.4-billion funds in black-owned small and medium-sized enterprises, including tech startups.
Just recently, South Africa’s SME Fund and the government’s Technology Innovation Agency (TIA) also announced a public-private partnership to co-invest R350 million across three venture capital funds. A Memorandum of Understanding (MOU) was signed between TIA and SME Fund at the Innovation Summit in Cape Town on Friday 13 September, 2019. The partnership sees over R350 (over $23 million) invested in three venture capital funds. These fund managers will invest in a portfolio of early stage businesses and provide capital, as well as other support, to the entrepreneurs, to help them commercialise technologies and grow their businesses. The South Africa’s SME Fund’s mandate to the three fund managers includes a requirement that they invest at least 50 percent of the fund into businesses owned by black entrepreneurs.
Source: the latest Southern African Venture Capital and Private Equity Association’s (Savca) Venture Capital Industry Survey
Notable active VCs in South Africa include AngelHub Ventures which today provides pool funding, expertise and networks to foster startup growth. The firm has supported startups such as GoMetro, Snapplify and AmaLocker. 4Di Capital through its Early-Stage Technology Fund 1 is aimed at startup investment opportunities with big growth potential at the seed and early stages in the mobile, enterprise software and web sectors. 45i Capital apart from running Grindstone Accelerator, has invested in Sensor Networks and Aerobotics. Knife Capital’s recent achievements include the exit of radar startup iKubu to Garmin in 2015. In 2017 Knife Capital invested in its first international deal, increasing its investment in 2018 in healthtech 5nines Technologies.Business Partners in 2012 launched a R400-million VC fund. Armed with that, it made investment in 19 South African startups. Business Partners funds startups in the clean energy, agri-processing, biotech and ICT sectors up to R25-million. Kalon Venture Partners has invested in companies such as SnapnSave, i-Pay and The Sun Exchange. See this article for more information. Edge Growth has a pool of over R900-million of early stage venture capital and has invested in more than 45 deals since launching its first fund in 2010. Its investment include funds for startups Sweepsouth, Mobenzi, Pioneer Academies and Everlytic. Invenfin is an early-stage venture capital fund that looks at ventures across all industries. Some notable portfolio members include ArcAqua, Ad Dynamo and Bos Brands.
The table below shows that more South African investors invested in local startups than any other African local investors doing same for their local startups between January and July, 2019.
Additionally, South Africa Receives More Share of All Private Equity Investments in Sub-Saharan Africa
In addition to the numerous local investors, South Africa is also receiving a wave of investment from international investors and private equity firms. According to Asoko Insight , South Africa is the main target of investment on the continent with 39% of the total offices set up by these investment firms. Kenya comes second with 14% and Nigeria is third with 13%.
The Increasing Role Of Crowdfunding
2019 has quite been significant for South African startups, with Intergreatme and Beerhouse raising substantial sums from Uprise.Africa, a crowdfunding platform in record-breaking deals. Crowdfunding refers to raising money from the public (who collectively form the “crowd”) primarily through online forums and social media. At a time when most African countries are yet to open their doors up to crwofunding, South Africa is increasing the chances of startups raising capital through this means. Enabled by the friendly legal framework on crowdfunding in South Africa, Africa’s first equity crowdfunding, Uprise.Africa, and South African alternative exchange ZAR X recently entered into an agreement that will see the mini stock exchange list any up-and-coming entities, which have already successfully raised capital via crowdfunding, and freely trade their shares on the open market. Not only could the arrangement be the funding gap filler that fledgling South African entrepreneurs desperately seek, but it could bring the local capital market to the people. The partnership also solves the fundamental flaw of all other pre-IPO models, namely that once a company has issued the shares they remain fairly illiquid, with investors having their funds tied up until that company looks at going public. Tabassum Qadir, co-founder, and CEO of Uprise.Africa says they plan to conclude at least three deals a month.
“We are simplifying venture capital through this mutually beneficial partnership for both entrepreneurs and investors,” Qadir says.
Reducing The Risk Exposure of South African Startup Investors Through Legislation
One significant role government has played in enabling more inves in South African startups is the introducing in 2009 Section 12J tax incentive, which gives tax relief to investors for investing in qualified Venture Capital Companies (VCCs). The objective of section 12J is to create and maintain employment and to grow the economy and ultimately the tax base. The incentive allows investors who make investments in approved VCCs — that then invest in qualifying small companies — a tax deduction. Section 12J was introduced with a “sunset clause” that takes effect on 30 June 2021. It is not clear whether the incentive would be extended.
By operation, Section 12J, enables venture capital firms to upon investment in an approved venture capital company (VCC), claim an income tax deduction in respect of the expenditure actually incurred to subscribe for VCC shares. For example, if an investor subscribes for shares in an approved VCC for R100,000, that taxpayer will be entitled to an income tax deduction of R100,000 against taxable income.
Historical VC Investments in South Africa (2009–2018) — Source: the latest Southern African Venture Capital and Private Equity Association’s (Savca) Venture Capital Industry Survey
Historical VC Investments in South Africa (2009–2018) — Source: the latest Southern African Venture Capital and Private Equity Association’s (Savca) Venture Capital Industry SurveyStatistics reveal that the value of venture capital investments grew by 33% to R1.160 billion in 2017. The popularity of these investments is clear, and understandable given the high tax burden on individuals without it. In fact, in 2018, about 41% of all deals by value were in startup capital.
Other notable South African startup ecosystem boosters include a large presence of incubators and other private equity firms.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
