By Greg Nott and Tristan Marot
Africa is a unique continent. From its diverse cultures and languages, to its extremes in wealth and development – but one consistent variable across the region is opportunity. Since the start of the century, what has been clear is that the next couple of decades are Africa’s for the taking, and take it we shall. The wide breadth of development taking place on the continent is staggering. From massive infrastructure projects such as the Grand Ethiopian Renaissance Dam, Grand Inga Dam or the Maputo–Katembe Bridge to the massive economic growth seen in countries such as Rwanda, Ethiopia and Uganda. Africa’s combined average annual GDP has consistently outpaced the world average and according to the World Economic Forum, 6 of the top 10 fastest growing global economies are in Africa.
As the continent develops, so too do the people of Africa. Until the onset of COVID-19, the number of people below the poverty line was decreasing for the first time since the metric was initially measured. When considered with Africa’s high birth rate, poverty has been steadily decreasing as a percentage of the population for years. Africa has also seen an explosion in technology usage – notably in telecommunications. Africa is second only to Asia in sheer number of internet users, with Kenya boasting some 87.2% of its population being connected to the internet, and Nigeria, which has the largest population of any African country, having 61.2% of its population connected to the internet. The pace of development on the continent, combined with increasing technology usage (especially internet connectivity) and increasing personal wealth on the continent has made Africa ripe for a Fintech revolution.
Last week, Chipper Cash – a FinTech start-up which specialises in peer-to-peer payments with a presence in 7 countries on the continent – raised $30 Million in its Series-B funding round. Earlier this week, JUMO – a South African FinTech start-up – confirmed that it had dispersed over $2.5 Billion in credit across the continent. OPay, a Nigerian fintech start-up, came 79th on a list of Most Well Funded FinTechs in the World – having raised approximately $170 Million. In its report on FinTech in sub-Saharan Africa, the IMF stated
“FinTech is emerging as a technological enabler in the region, improving financial inclusion and serving as a catalyst for innovation in other sectors, such as agriculture and infrastructure.”
This revolution is likely to continue and expand even further as the African Continental Free Trade Agreement (AfCFTA) is implemented by state parties across the continent. AfCFTA aims to create the largest free trade area in the world and will enable Fintech companies which are based in a state party to access with little restriction, a market of continental size. This will be of benefit to already established financial centres on the continent, such as South Africa and up-and-coming financial centres such as Rwanda, but will also help the populations of countries with less mature or stable financial sectors as they will – once AfCFTA comes into full force – have access to these products despite being in another state.
Industries which can scale quickly and cheaply, such as Fintech, stand to benefit the most from AfCFTA as they can utilise the widened market without much need for capex to do so. With the appropriate assistance in basing out of an advantageous jurisdiction and advice on the nuances in regulations which will remain post AfCFTA, Africa truly is for the taking by our Fintechs. We do however need to be careful to ensure it is African Fintechs which secure this opportunity.
Chipper Cash, the start-up referred to earlier, while founded by two African born entrepreneurs, was founded in San Francisco while the founders were studying in the US. This is a story of many of Africa’s entrepreneurs who, in trying to provide the solutions to Africa’s problems, need to look beyond the continent for the expertise, training and more often than not, the capital, to do so. These are the current realities of not just Fintech on the continent but for the entire start-up ecosystem. AfCFTA provides the platform upon which start-ups will have a market large enough for them to scale quickly – but focus needs to be placed upon ensuring that the tools to do this are provided to local businesses in a way which doesn’t export the benefits out of Africa.
- Greg Nott has been Caster Semenya’s lawyer and friend for over a decade. He is a Board Member of the NEPAD Business Foundation and the Chairman of Southern Africa-Canada Chamber of Commerce (SACANCHAM). Greg is a Partner and Director at international law firm, Norton Rose Fulbright and the Head of the Africa Practice.