MTN Group has begun to work on separating its fiber and fintech units. This movement is part of plans to unlock value and raise funds to boost its development. The operator is looking for partners and strategic investors for the two subsidiaries.
Ralph Mupita, CEO MTN
The company has 85,000 kilometers (52,817 miles) of fiber across the continent, while fintech products such as mobile payment services are growing rapidly. The strategy represents the next phase of an ongoing plan to sell assets and repay debt to allow MTN to invest in its expansion.
The South African-based company seeks to take advantage of the millions of Africans who connect to the Internet for the first time each year. Many do this via smartphones, and there is rapid population growth in major markets on the continent such as Nigeria. MTN’s fintech business could contribute 20% of the group’s revenue over the next three to four years, up from 8% currently.
“We recognize that there is a significant demand for data in Africa that is not going to stop. Nothing prevents us from calling on other parties to help us finance the infrastructure we need. This work is already underway, ”said CEO Ralph Mupita.
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
Becoming Africa’s newest unicorn probably calls for more responsibilities which evidently captures the expansionary drive of the payments processing company Flutterwave into North African territory. Flutterwave which recently raised $170m in new funding will according to company sources achieve its objectives. To this end, the company will extend its payments network to Egypt, Morocco and Tunisia by the middle of the second quarter.
Flutterwave’s CEO Olugbenga Agboola
Aside from the North African countries, Flutterwave also plans to expand into francophone Africa as “our network needs to be everywhere” on the continent. With the new funding, Flutterwave aims to make it easier for Africans to build global businesses that can make and accept payments worldwide. Flutterwave will also use the money, raised from investors to accelerate customer acquisition and develop new products.
The need to venture into North Africa is informed by the fact that digital payments market in North Africa and the Middle East is set to grow at a compound annual rate of 13.3% until 2026, driven by mobile phone and Internet penetration, which is crucial for the region to have an underlying real-time infrastructure in place to enable these payments.
Among new products is the Flutterwave Mobile service, which allows small merchants to convert a mobile phone into a point of sale and this service goes live this month in Kenya, South Africa, Nigeria and Rwanda.
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
Nigeria’s leading bank in tech innovations, Guaranty Trust Bank (GT Bank) is moving quickly with its restructuring plans. In March, the bank told investors it would restructure into a holding company which would allow it to offer more financial services beyond pure banking. During its H1 2020 earnings call with analysts, GT Bank’s CEO, SegunAgbaje disclosed that the holding company structure would be completed by Q1 2021.
Group Managing Director of GTBank, Segun Agbaje
“[T]he operational model for the Holco is set,” Agbaje said on the call. “You will have the centre, which is the controlling or holding company and then a couple of business units. Operationally, in terms of Holdco, we are going to do a one for one exchange, which means that the shares of GTBank would move up to the Holdco,” he added.Under the new holding company, GT Bank will operationally be split into four businesses. Guaranty Trust Bank Nigeria will serve the Nigerian market as a business.
It will operate Guaranty Trust Bank East Africa which will house the bank’s operations in Kenya, Rwanda, Uganda and Tanzania.Guaranty Trust Bank West Africa will oversee the bank’s businesses in Gambia, Sierra Leone, Ghana, Cote D’Ivoire and Liberia.The fourth business is GT Bank UK, the bank’s international office which was established in 2008.
“I really am excited about Holdco,” Agbaje said on the call. Hinting at the recent growth of digital payments in Nigeria, he added: “I think everything that has happened with the pandemic has proved that we are on the right path.”
“I think you can see that we’re gearing up the business for another high growth phase, not only are we taking the banking business and operationally splitting it into [four], where we can look at Nigeria very differently from East Africa and from West Africa and people can drill down.”The restructuring comes at a time when the bank is due to appoint a new CEO. Current CEO Agbaje has been at the helm of affairs since 2011 following the death of the bank’s co-founder and then CEO, TayoAderinokun. But according to Nigeria’s banking regulation, a CEO can only serve a maximum of 10 years.
By creating a holding structure, Agbaje might just be elongating his reign over the bank. He could become CEO of the restructured company while the bank is operated by a different chief executive.While GT Bank’s holdings structure operations will be split into these four geographies, Agbaje explains that other non-banking business units would emerge. “The business unit we are looking at commencing with would be Asset Management, a Pension Fund Administrator (PFA) and a payment company,” he told analysts. “Hopefully this week, we would put in our application for final approval for the payment company.”
The choice of a PFA is interesting. Agbaje considers it a strategic position. A recent pension industry regulation will allow customers to switch fund administrators the same way they do with other financial assets. Once that kicks in fully, “we can only go to gain market share from where we want to start,” Agbaje told analysts.Agbaje hinted that the bank will also offer asset management services “which will basically complement our personal banking business for people who are looking for a high yield.”However, payments are really what are driving the bank’s decision to restructure.
GT Bank has a growing e-business operation. In its recent H1 2020 presentation, the bank recorded impressive growth in mobile banking, USSD payments and internet banking.USSD payment volume grew to 356.4 million for the first six months of 2020 but suffered a decline in transaction value perhaps due to the pandemic. While GT Bank added 600,000 new USSD customers, USSD transaction revenue took a hit following the reduction in transfer fees to ₦10 for transactions below ₦5,000. According to the bank, around 50% of all USSD transactions are below ₦5,000. Fees and commissions revenue fell 32.2% as a result.
Mobile banking also rode to 95 million transactions worth ₦5.7 trillion, while internet banking grew 14% to ₦1.2 trillion during the same period.GT Bank has bigger ambitions in the payments business and its interest has been growing for the last three years.The bank has been the most aggressive traditional financial institution competing against fintechs in Nigeria with different digital products.“There is not one thing called payments”, Agbaje said in a March 2020 presentation, “there are different parts of it.”
It operates GTPay, a payments gateway similar to Paystack; GTCollections, a payments aggregator; QuickCredit, a digital lending platform; and Habari, GTBank’s e-commerce superapp. The bank is also an issuer, issuing payments cards and operating international money transfer services.Under the new holding company structure, many of these business units could be bundled under a standalone payments business entity.And GTBank has made serious efforts to promote these services by slashing interest rates on loans, deepening uptake of its USSD payments offering and intensifying engagement with small businesses.
“[Payments] is a space we’re coming into,” Agbajesaid earlier in the year, “so we will have to look at the likes of Paystack as bigger than us on the day we start, as knowing more than us, but I promise you we will bridge that gap very quickly.”Earlier in the year, Agbaje told analysts that “today, a good way to gauge what you control of the payment space are NIP payments.”
NIBSS Instant Payments (NIP) is a real-time interbank payment scheme. The online-based system to facilitate instant transfers within the country between member financial institutions in Nigeria including banks and mobile money operators. In the month of August alone, NIP transaction volume was nearly 200 million, while total transaction value was a little shy of ₦15 trillion ($38.9 billion). On the recent call with analysts, Agbaje explained that GT Bank is “actually number one in both NIP inflow and outflow at the moment [and] we have been for a few weeks. The bank is now responsible for over 18% of outflows and almost 17% of inflows.
“When we take that business, we think the payments business is something that is going to do really well.”Earlier in the year, Agbaje summed up GTBank’s payments ambitions: “GTBank is going to win [the payment space] and we’re going to win very easily.” GT Bank’s restructuring is designed to achieve this. In March, Agbaje explained to analysts that the bank could follow a few routes. One option was to “hive off” its current payments business as a standalone, or use acquisitions to develop a separate business. The long term plan is to keep the payments business as a stand-alone business, then possibly prepare the business for a stock market listing.
“[T]he people that will win the payment space won’t operate within the traditional banking framework,” Agbaje believes. “They will operate outside of the traditional banking framework, kind of like what you saw with Worldpay.” UK-based WorldPay traces its roots to 1997 when it was founded in partnership with National Westminster Bank. It later became a part of the Royal Bank of Scotland Group following a takeover of National Westminster Bank. WorldPay took on a life of its own, Agbaje explained and “has become this mammoth company in 2019 that was acquired for $43 billion. So, in that case, you would see that it really wasn’t a fintech per se.”
GT Bank will follow the same route, the bank’s CEO hinted in March. “[GT Bank’s fintech] will definitely be a separate business unit,” Agbaje said. “We will then watch and see whether we want to list it somewhere else. But I think if you are going to leverage the current advantages we have as an organisation it will start as a separate business unit.” GT Bank said its payments arm will have an Africa-focus, hinting that it will expand the business unit to other countries in West and East Africa.
A few things are propelling GT Bank’s payments and fintech ambitions. One is the shot at greater revenue. “About 30% of banking revenue comes from the payment space,” he told the crowd at the Lagos Social Media Week. It is estimated that the [Nigerian] payments market [paywall] could grow between $20 billion and $40 billion in the next few years. But fintechs are eating into this revenue. A consulting firm, Frost & Sullivan predicts that Nigerian fintech revenues will grow from $153.1 million in 2017 to $543.3 million by 2022. “What this means is that 30% of banking income is easily at risk,” he explained. As these fintechs eat up banking revenue, their valuations will increase and it will be very difficult to acquire these companies. Agbaje already considers many of fintechs too expensive, discouraging him from both partnerships and acquisitions.“We’re not going to rush into any partnership[s],” he said, “because we’re also not going to pay any valuations that are overly rich. We can on our own build this business.”
“But if we can’t go on our own… we’re definitely not going into any valuations of like 20 or 30 times earnings, no,” he added. Another reason propelling GT Bank’s fintechambitions is the scale at which rival fintechs are growing in the market. While there’s a risk that banks will lose a significant portion of their revenues, the scale at which some fintechs are growing. “That is what made OPay very scary,” Agbaje said. “Anybody who has the guts to pilot at scale, and has the money, and has the will, and has the drive is someone you really have to watch. And they have grown market share.” Those models are the reason why I’m very encouraged that Guaranty Trust Bank going into the payment space will do very well, because we will pilot at scale and we will be very aggressive, he added.
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
It looks like investor Deciens Capital has found a new home in Chipper Cash, the Africa-focused fintech startup that allows you to send and receive any amount of money across Africa for free. Barely six months after pouring over $6 million into the startup, the venture capital firm has followed it on with a co-investment of $13.8 million in a Series A funding round. This is notwithstanding the fact that Deciens Capital was also part of Chipper Cash’s $2.4 seed round in 2019.
Chipper Cash Co-founder Ham Serunjogi
“We’ve been huge beneficiaries of the generosity and openness of this country (USA) and its entrepreneurial spirit. But growing up in Africa, we’re able to navigate [the U.S.] without the traumas and baggage our African American friends have gone through living in America,” said co-founder Ham Serunjogi, who has also announced the launch of the Chipper Fund for Black Lives targeted at giving 5 to 10 grants of $5,000 to $10,000 to people or causes who are furthering social justice reforms.
The recent investment had been confirmed by Deciens Capital founder Dan Kimmerling. Founded in 2012, Deciens Capital invests mostly in US-based fintech startups. The venture capital company claims to have invested in over forty early stage fintech companies since inception. Its most recent investment was on Apr 27, 2020, when Starcity raised $30M.
“Chipper Cash illustrates how the three axes of affordability, accessibility and appropriateness can help startups understand how to generate traction and uptake with low-income customers, and thereby drive business growth. The use of tech alone is not enough: Startups must carefully consider how to make a tech-enabled product that works for low-income people, given their existing devices, needs and comfort levels,” noted Catalyst Fund, one of the startup’s early investors.
Year-on-year, fintech startups in Africa have always collected the lion’s share of funding
Founded in 2018 by Ugandan Ham Serunjogi and Ghanaian Maijid Moujaled, (two college students brought together by their academic adventures at Grinnell College, Iowa, USA) Chipper Cash provides free, interoperable payments in and between Ghana, Kenya, Uganda, Tanzania, South Africa, Rwanda, and Nigeria.
It accomplishes this by allowing customers to link their mobile money accounts (regardless of provider) to Chipper and make P2P transfers via its simple smartphone application.
Deciens ‘ Capital investment in Chipper Cash is a game changer in the face of the pandemic
After launching in October 2018, Chipper has averaged 40% month-on-month growth and already serves hundreds of thousands of users, attesting to its powerful value proposition and customer-focused design.
“We’re now at over one and a half million users and doing over a $100 million dollars a month in volume,” Serunjogi told TechCrunch, an online tech magazine.
Parallel to its P2P app, the startup also runs Chipper Checkout: a merchant-focused, fee-based mobile payment product that generates the revenue to support Chipper Cash’s free mobile-money business.
On how the startup will compete in Africa’s crowded fintech ecosystem, Serunjogi pointed to Chipper Cash’s gratis-payment structure, among other factors.
“Money doesn’t buy product market fit. It doesn’t buy ultimate success in this space,” he said.
“By offering our product for free, we’re not in a pricing war or competing on a dollar-to-dollar basis. We’re in a pure utility war on who can provide the most value to our users. We’re quite comfortable with our position, and our long-term value proposition will speak for itself over time,” Serunjogi added.
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 Pan African Bank, Ecobank Transnational International Group has announced that it will offer $10,000 for winners of its upcoming Ecobank Fintech Challenge. The Challenge which opened in February for applications to African fintechs, will award $10 000 to a fintech for a winning solution that can assist the bank, while the first runner-up will get $7000 and the second runner-up $5000 in cash prizes. The challenge aims to help support fintechs that are ready to scale and provides them with support and access to Ecobank’s 33 African markets so they can grow to become pan-African fintech success stories.
The Ecobank Fintech Challenge offers fintechs the opportunity to integrate with the bank’s offerings and also also offers fintechs the opportunity to potentially integrate with Ecobank’s existing digital offerings. Applications for the Challenge closes on on 12 April 2020 as interested fintechs should submit details of their product as well as a demo to the challenge. These products must address one or more of a specific set of pain points, namely: Customer experience: Ecobank is looking for products that offer solutions and innovations in the following areas: digital customer onboarding, those that improve customer experience at branches, those that improve customer experience online, digitisation of the customer journey.
To win the Challenge, the Bank is looking for innovative solutions that help improve lending to SMEs. It is also looking for ecosystem aggregation which gives the Bank the opportunity to work with innovators offering solutions on SME/Merchants onboarding on payment integration, niche merchant aggregation and those solutions that provide easy access to non-smart phone users. Equally high on the Bank’s radar are digital solutions that help improve performance of sales force as well as solutions that enable agents to offer more services, and fintechs to help solve problems around offline mobile-to-mobile payments (dead zones).
In addition, the bank is willing to consider any other solution that fintechs believe will help revolutionise the banking sector in Africa. Finalists will be selected to participate in the Ecobank Fintech Innovation Fair, while all finalists will be inducted into the Ecobank Fintech Fellowship, which will provide fellows an opportunity to explore deals, integration and commercial partnership with the Ecobank Group.
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
There are indications that Africa’s fast growing Fintech ecosystem which surged up to 60% in the last two years as the continent’s Fintech firms grew from about 300 to about 500 in the last two years but with this boom also comes the challenges chief among which is the increase in cyberattacks. Analysts say that with about $132.8 million raised in 2018 by Fintech firms, Africa presents an opportunity for growth in the sector especially given the high mobile phone penetration levels and the boom in mobile financial services and payment technologies.
Bethwel Opil, Enterprise Sales Manager at Kaspersky Africa
The growth in mobile technology is responsible for the high growth in Fintech in countries such as South Africa, Nigeria and Kenya that accounts for 65.2% of Africa’s Fintech startups. Speaking on this development, Bethwel Opil, Enterprise Sales Manager at Kaspersky Africa said that such Fintechs have had a significant impact on the financial services landscape of these countries, where locally, these solutions are reaching more Kenyans than ever before. He added that the tech revolution that took place in Kenya has brought about practical Fintech experiences making it one of the most financially inclusive countries in Africa and where mobile money transactions contribute a significant percentage to the country’s GDP.
However, the downside to this development is the fact that with more local businesses and consumers taking advantage of the ability to use digital methods to move money around, criminally minded people are also having more targets to focus on thus the emerging Fintech space is also becoming an increasing target for cybercriminals.
Opil noted that young startups are always more exposed than traditional businesses, and their undeveloped infrastructure, especially at startup stage, make them an easier target than traditional banks. He pointed out that there are a growing number of businesses that are using or offering cryptocurrency and mobile money as payment methods and cybercriminals are embracing this trend, using sophisticated techniques to access such funds.
Startups should bear in mind that that operating over the internet makes Fintechs vulnerable to criminals even though mobile payment methods offer a convenience that is hard to debate. For example cases of SIM swap fraud is reported as being used to not only steal credentials and capture one-time passwords (OTPs) sent via an SMS, it can also be adopted to cause heavy financial damages customers by resetting the accounts and or allowing fraudsters to access currency accounts not only in banks, but also in Fintechs and credit unions. Challenges such as this abound because most Fintech companies do not have proper defences in place to protect their services and their users against a data breach and because the market is unregulated, it is hard to prevent. Another ugly development is that cybercriminals are presently demanding ransoms in cryptocurrency given the anonymity of the market and the fact that there is little chance of being tracked. One ready example is the kidnapping case in Abuja where the kidnappers requested that the victim’s family pay the ransom with cryptocurrency, even though the Nigerian Police eventually traced the payment to the owner of the account leading to the arrest of the criminals. To avert such, the need for more and adequate security education, awareness and ensuring that it is seen as a priority is critical as the Fintech market grows cannot be overemphasized.
That is why Kaspersky Africa is warning that there is no substitute for vigilance – if something looks suspicious in any way, do not make the payment or investment. Consumers who are using mobile cryptocurrency as an investment or payment method should also ensure that they verify the wallet’s address. “Don’t just follow links, double check everything before sending the transaction and make sure you use a high-quality security solution to safeguard the devices you use” Opil added.
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.
Egypt ’s Central Bank is set to launch a fund to support fintech startups early next year with a capital of $50–100m. Also, the Egyptian government plans to set up seven technological parks this year in various universities at an investment of EGP 1 billion ($60.8 million), in its drive to foster digital technology infrastructure.
Here Is All You Need To Know
According to Egypt’s government, the parks will be financed through Egypt’s Ministry of Communications and Information Technology’s resources in parallel with the beginning of the new academic year, Daily News Egypt reported.
The ministry is ready to contribute to the fintech fund, which the Central Bank of Egypt (CBE) plans to launch next year, if the latter requests it.
Central Bank of Egypt aims to launch a fund to support fintech startups early next year with a capital of $50–100mln, the report said.
Egypt’s ICT sector recorded 16 percent growth in fiscal year 2018/19 and the sector contributes 3.2 percent of the country’s GDP, Daily News Egypt reported citing the minister.
Egypt aims to increase investments in its ICT sector and the ministry intends to increase the ICT contribution in the GDP to reach 8 percent, the report said.
Egypt is also developing a comprehensive legislation system and framework to regulate the ICT sector, through issuing the e-commerce bill and a personal data protection law, Talaat said.
For almost 10 years, Egypt has made a dramatic leap in a number of fast-expanding startups and an amazing set of supporting institutions and communities.
In 2018, Egypt was ranked the fastest growing startup ecosystem in the Middle East and North Africa and the second largest after UAE, according to a report by start-up platform MAGNiTT.
The Egyptian government has also successfully established many incubators, providing a stepping stone for local entrepreneurs. Bedaya, TIEC — Technology Innovation and Entrepreneurship Center, and Fekretak Sherketak are the top incubators founded by the government, offering funding for new innovative ideas.
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.
When Egyptian financial technology (fintech) company Fawry went public on 8 August, it was a fantastic moment for the tech ecosystem, not just for Egypt, but the Arab world, and Sub-Saharan Africa as a whole.
Preferring IPO to Private Placement
The technology startup sector has, over the past few years focused too much on fundraising with an aim to exit via acquisitions to companies abroad. This has become the ultimate sign of success for startups, but while it has been the dominant way investors make money and entrepreneurs and their employees realise financial value, it leaves the regional ecosystem wanting.
When I was raising funding for Aramex back in 1996, we were trying to do a private placement which did not get much appeal in the region. People questioned whether Aramex could survive in the face of formidable competition from the giants of the industry even at a mere valuation of $30 million, so we decided to take the company public.
“Great idea, but where do we do that?” I told my partner Bill Kingson. Certainly not on any of the regional exchanges! Why? Because of all sorts of restrictions, from foreign investor restrictions, to small illiquid exchanges, to a restricted process of fund raising and book building, and interference by the regulator in company valuations rather than the market/investors.
“Oh well, let us then go to Nasdaq!”
We listed on Nasdaq in New York and stayed listed on it for five years, then we took the company private in 2002 and listed it again on the Dubai Financial Market (DFM) in 2005. Eleven years later, Aramex continues to be a public company in Dubai, 37 years after its founding.
Why IPO, And Not Acquisition?
While acquisitions can provide a boost for the ecosystem and can bring global investors to the region, initial public offerings (IPO) allow for a deepening of the ecosystem and gives more options to regional startups.
So why is it that companies that could IPO in the region do not even have it in their thinking to go public and why would a company like Jumia, which has its corporate office in Dubai lists in New York rather than on one of the Middle East regional exchanges?
Laying Foundation For Many More Startup IPO
There are several challenges currently in place and the following will need to change if we are to see more companies going public:
Foreign ownership laws: a lot of companies have registered themselves outside of the region to allow for foreign ownership, like the Cayman Islands or the British Virgin Islands. Why is that? The writing is on the wall, a lot of these investors are here, but they invest in entities that are offshore that allow for anyone to be an investor.
Track record of profitability: most of these exchanges require three years’ of profitability before they allow a company to IPO. This is not a restriction visible in most developed markets, Uber went public despite stating it may never make a profit. Investors should be given a choice of whether they invest or not, rather than have the regulator decide what will be a good investment.
Engage these scale-ups: engage the hundreds of companies that are scaling up in the region, talk to their investors, their founders and see what the regional exchanges need to do to get them to list in the region. Changing these laws and regulations will not hurt anyone, they have been tried and tested in the most developed exchanges in the world. Learn from them and make it happen here.
This will be a win-win for everyone. Someone needs to take the first step. Watch Fawry and learn from their experience.
Listing more companies creates deeper liquidity for our exchanges, which they all need. It is also the best way to democratise and to trickle down the benefits of companies like Aramex and Fawry, making liquidity available on the public market — where most of the region’s investors are based.
The bigger the exchange, the more funds there are, the greater the possibility to get investors and give their listed companies their fair value.
How Startups That Went Through The IPO Route Have Fared
Fawry managed to do very well in Egypt, it listed on the Egyptian Exchange at a share price of EGP6.46. After the first day of trading, its share price soared by 31 per cent to EGP8.48, valuing the company at $366 million. It seems regional exchanges can and will give you the valuation that you want.
IPOs give companies the ability to stay independent, keep the brand that they have worked so hard to build, generate liquidity and exits for their investors, create a liquidity option for their founders and employees while giving the general investor public a chance to participate in the success of these companies. It also encourages and widens the base for regional and even global institutional investors to invest in the region and generate healthy foreign direct investments (FDI).
This is exactly what happened with Aramex since it went public on the DFM. Employees enjoyed their stock options, founders were able to find their exits, regional investors had huge appetite for the share, and global investors waited in line to gain access to the share. The company stayed independent, continues to thrive, and retained its talented people and created a great platform to access funding from various financial institutions in the region.
Having the region’s tech and non-tech scale-ups IPO, means the stock exchanges become less dependent on traditional businesses like real estate, banks and insurance companies and can attain the diversity that reflects the new businesses of the 21st century, generating new wealth for a new generation that is currently building the businesses of the future.
Fadi Ghandouris the chairman of Wamda and founder of Aramex, one of the leading logistics and transportation companies in the Middle East and South Asia.
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.
Expect investors who invest in Africa’s fintech sector to cash out big. Investment deals in Africa’s fintech sector shot to a record $357 million in 2018. This is partly because more people are using mobile money services in Sub-Saharan Africa (SSA) than in any other sub-regions in the world. In fact, over the last 12 to 18 months, Sub-Saharan Africa (SSA) has now emerged as one of the fastest-growing financial technology (Fintech) hubs in the world in terms of investments, albeit from a low base.
Here Is All You Need To Know
In 2018 alone, investment in African fintechs nearly quadrupled to $357 million, with startups in Kenya, Nigeria, and South Africa accounting for the largest share. This trend continued into 2019, with a number of high-profile deals.
For example, three Nigerian fintech start-ups — Kudi, OneFi and TeamApt, each raised around $5 million in funding during the first half of the year.
GSMA said huge opportunities await Fintech’s investors, with emerging markets including Nigeria, Kenya, and South Africa holding huge potential for fintech innovations.
The Numbers
GSMA further added that 395.7 million registered mobile money accounts now exist in the region and that nearly nine in 10 registered mobile money accounts are in East and West Africa.
According to the body, which is in charge of over 800 telecoms companies globally, over the past year, several underserved markets in the region have taken steps to accelerate mobile money adoption and, by extension, financial inclusion among citizens.
The body noted that in Nigeria, regulatory reforms introduced in October 2018 allow mobile operators to obtain licenses to operate payment service banks (PSBs), while in Ethiopia, an ambitious financial inclusion strategy has been attracting investment into mobile money services.
Indeed, reforms in Nigeria have seen MTN getting Super Agent license on Tuesday from the Central Bank of Nigeria, with other telecoms to follow suit.
Integration of Mobile Money Platforms With Broader Financial Ecosystem Will Change The Game
GSMA noted that Angola’s national bank plans to submit new laws governing payment systems, including mobile payments, to parliament for approval in 2019.
The telecoms body said these developments notwithstanding, future growth of mobile money services in the region will be largely driven by the interoperability of mobile money services.
Account-to-account (A2A) interoperability gives users the ability to transfer between customer accounts held with different mobile money providers and other financial system players.
It also disclosed that Tanzania led the way in 2014, but several countries across the region, including Kenya, Rwanda, Nigeria, and Ghana, have now launched interoperability projects and use cases.
According to GSMA, mobile money providers’ integration with banks is one particular use case that has significantly increased volumes moving between mobile money and banking systems.
The body, while charging Nigeria and other countries, informed that a next step in the interoperability journey will be the implementation of innovative solutions to integrate mobile money platforms with the broader financial ecosystem.
“A number of options exist around central switching infrastructure for the industry to enable nascent use cases to scale, including merchant payments and efficient connections to domestic and international financial system players. This is already happening at sub-regional levels.
“For example, the eight countries 11 of the West African Economic Monetary Union (WAEMU) are building an interoperable system that will connect 110 million people to more than 125 banks, dozens of e-money issuers, and more than 600 microfinance institutions.
“However, much of the existing bank-focused infrastructure is not optimal for mobile money. In an effort to solve this, MTN and Orange, with the support of the GSMA, launched a joint venture to enable interoperable payments across Africa.
“Known as Mowali (‘mobile wallet interoperability’), the service is open to any mobile money provider in Africa, as well as banks, money transfer operators and other financial services providers.
“With its pan- African footprint allowing for economies of scale and a cost-recovery commercial model, Mowali has the potential to drive down the price of services offered to lower-income customers.
“Additionally, Mowali could shape the future of the mobile money ecosystem in the region by creating a common mobile money acceptance brand with the potential to connect fintechs, banks, merchants and other ecosystem players to nearly 400 million mobile money accounts across Africa,” GSMA stated.
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.
Fintech is where the money is. Africa’s fintech companies have raised $320 million in funding since January 2015 and the ecosystem has surged 60% in the last two years. Africell understands these statistics and is willing to use its wide reach to give it a shot. With $100 million funding from the OPIC, the US government’s private investment fund, the African telecom company is more than ready to continue the disruption game.
Here Is The Deal
The Uganda-headquartered Africell’s new funding is more than $100 million and part of this would be used by the company to expand access to telecommunications in Africa.
The countries Africell is targeting are Uganda, DRC, Gambia and Sierra Leone.
Apart from this $100 million funding, Africell has set aside $300 million to spend on a new market like Angola within the first year of commencing business if they secured a license.
Africell would bid to become the fourth operator in Angola, which was expected to reissue a tender in the next two months after the original tender for the license was annulled in April.
A larger part of the $100 million would be spent on fintech.
The unbanked population is what Africell is targeting here.
Global fintech funding rose to $111.8 billion in 2018, up 120 percent from $50.8B in 2017 and that is a huge opportunity Africell is hoping to tap into.
To make this happen, Africell is looking at expanding its fintech services, such as mobile payments, micro-insurance, and micro-finance.
Mobile money payments, pioneered in Kenya, have expanded rapidly in other African nations where many people do not have bank accounts.
The 18-year-old company has 15 million subscribers across its four African operations.
The Game Is In Competing Profitably And Not Just Expanding
“We are looking only at markets where we can make a difference,” said Africell founder and chief executive Ziad Dalloul indicating this included Angola and Zimbabwe.
He said Angola was attractive because the country’s state-owned Angola Telecom had a large market share that could be vulnerable to a more aggressive private operator like Africell.
“Day one, we can just change the whole thing…drop market prices, expand into rural areas, provide faster, better service on internet. These are the things we know how to do. So that’s why we are keeping an eye on Angola,” he said.
And Africell Is Turning Its Eyes On Fintech For Reasons More Business Than Charitable
“No space has quite the potential impact of the fintech space when it comes to impact — and profits — in Africa, with startups operating such platforms able to significantly address the major issue of financial exclusion on the continent and thus promote development in all sorts of other areas,” saysDisrupt Africa co-founder Tom Jackson.
Nigeria led the investments in 2018 with 58 startups raising $94,9 million, followed by South Africa with 40 businesses that raised $59,9 million, and Kenya was third.
Fintech investment was still the most popular, bringing in 39.7% of total funds “South Africa, Nigeria and Kenya remain the main three markets, with 141, 101 and 78 active ventures respectively, accounting for 65.2% of Africa’s fintech startups,” Jackson says.
US fintech investment for 2018 more than doubled to $52.5B, from $24B in 2017, across a record 1,061 deals.
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.
