👨🏿🚀TechCabal Daily – Nigeria’s inflation is rising…and shining
In partnership with Share this newsletter: Lire en Français اقرأ هذا باللغة العربية Good morning Here’s your weekly reminder to move us to your main or primary inbox. Just drag and drop from Promotions, or right-click on our email and add us to Main. This way, you won’t miss our mails and we’ll be like MTN—everywhere you go! In today’s edition Twitter ignores laid-off Africa team SA ride-hailing drivers threaten shutdown Nigeria’s inflation breaks the ceiling Telkom plans to sell its towers The World Wide Web3 Event: The Moonshot Conference Opportunities Layoffs Twitter ignores laid-off African team Some members of Twitter team in Africa Seven months after being laid off from Twitter, the big tech’s African ex-team is yet to receive any severance from the company. ICYMI: In November/December 2022, Elon Musk’s Twitter takeover led to the firing of more than half of Twitter’s 8,000-strong workforce, including all members of its nascent African team. The team, headquartered in Ghana, had announced the launch of a new office a week prior to their layoffs. While teams across other continents received—in emails informing them of their layoffs—emails to the Twitter Africa team included no details on severance packages. All requests to the Twitter headquarters were also not responded to. At the time, CNN reported that the team was considering legal action against Twitter for violating Ghanaian labour laws. Seven months, no severance: Now, seven months later, BBC has confirmed that the team is yet to receive any severance. While lawyers representing the team were in contact with Twitter up until May 2023, they now report that Twitter has stopped responding, just right when discussions were almost concluded. The lawyers are now considering other options that could help the ex-Twitter Africa team get justice. Twitter’s dim picture: Across Europe and America, the same story is hitting several ex-employees at Twitter. Last week, in the US, the company was hit with a lawsuit that alleges it owes $500 million in severance payments to laid-off employees in the US. In more news about its money problems, the company was also hit with an eviction notice from its headquarters due to failure to pay rent. Last week, CTO Elon Musk revealed that the company had lost half of its advertising revenue since the takeover and is in “heavy debt”. Secure payments with Monnify Monnify has simplified how businesses accept payments to enable growth. We are trusted by Piggyvest, Buypower, Wakanow, Fairmoney, Cowrywise, and over 10,000 Nigerian businesses. Get your Monnify account today here. Mobility Ride-hailing drivers in South Africa threaten shutdown Image source: YungNolly Yesterday, ride-hailing drivers in South Africa threatened to shut down operations. What’s wrong? The ride-hailing drivers are demanding actions on safety issues like hijacking, illegal vehicle impoundment, and harassment from taxi drivers. They are also advocating for industry regulations and a decrease in companies’ “excessively high” commissions. Drivers do not have a say: Thato Ramaila, the Soweto United E-hailing Association Chairperson, alleges that ride-hailing companies enforce a “ridiculous” 30% commission on drivers’ earnings without negotiating with them. However, Vhatuka Mbelengwa, the Private Public Transport Association spokesperson, believes that while there might be a service reduction, a complete shutdown of ride-hailing apps is unlikely. Mbelengwa also underscores the probability of possible disruptions and advises South Africans who plan to use the apps to exercise caution. Zoom out: This isn’t the first time ride-hailing drivers have gone on strike in South Africa. In 2020, Uber and Bolt temporarily stopped operations due to high commission rates, which resulted in lower income and safety concerns for drivers. The drivers also went on several strikes between 2021 and 2022 to protest several issues including drivers’ safety after one young Bolt driver was murdered in Pretoria. Economy Nigeria’s inflation breaks its own ceiling It seems Nigeria’s inflation rate is staging its own “rise and shine” show. The Consumer Price Index (CPI) and Inflation Report for June 2023 reveals that the country’s headline inflation rate has soared to 22.79% year-on-year. This is a significant jump from the 18.60% recorded in June 2022. On a month-on-month basis, the figures rose to 2.13% from 1.94% in May 2023. Image source: Zikoko Memes Food takes the cake of inflation: In June 2023, food inflation reached a staggering 11.81%. Housing, water, electricity, and fuel are trailing behind it with a 3.81% increase, while clothing and footwear made a modest rise of 1.74%. Transport joined the party with a 1.48% surge, among other factors that added to the mix. Differing inflation among states: Lagos state stands out with the highest rate at 25.75%. Following closely behind are Ondo at 25.40% and Kogi at 25.23%. On the other hand, Borno exhibits a comparatively slower rate of 20.44%, while Zamfara and Ekiti record rates of 20.93% and 21.06% respectively. Zoom out: The inflation figures are breaking a 7-year record but experts think it could have been worse. Global Chief Economist, Renaissance Capital, Charles Robertson, notes that the inflation data is good news that inflation is only 22.8% YoY, despite the official FX rate devaluation from roughly NGN460/$ to closer to NGN800/$. GrowthCon 1.0: Learn how to unlock 10X Growth Connect with growth leaders, operators, and enablers to explore proven tactics for driving sustained business growth in Africa at GrowthCon 1.0. Experience curated masterclasses, case studies, a growth hackathon and more. Get your tickets here. Telecoms Telkom plans to sell its tower portfolio Image source: Telkom South Africa’s biggest Internet Service Provider (ISP), Telkom, has plans to sell its Swiftnet tower. Swiftnet, which owns more than 4,000 towers, houses the masts and towers portfolio and is expected to be sold within the next two months. Plans on investment: According to CEO Serame Taukobong, part of the money from the Swiftnet sale will contribute to the company’s “negative free cash flow” and allocate additional investment in capital expenditures (capex) for their fibre business. Taukobong also stated that Telkom’s tower portfolio has two solid bidders. Additionally, in February, Bloomberg reported that New York-listed IHS Holding was considering making
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Nigeria’s agent banking association will move ahead with price hike as fintechs consider legal action
Despite pushback from the CBN, fintech, and customers, PoS operators will implement a price hike this week. Will the business model survive the price increase? Every morning, Mrs Adetunji sells food at a shop in front of her house in the Agege area of Lagos. To drive traffic to her shop, she doubles as a PoS agent, allowing her neighbours, who live far away from bank ATMs, to withdraw money. She is one of the 1.5 million Nigerian agents that allow customers to access cash quickly. In a country where informal trade accounts for a significant part of GDP, cash is king. In the first quarter of 2023, a cash scarcity ended 31 months of growth in the private sector. Despite the importance of cash, there are not enough ATMs to meet Nigeria’s demand, and point-of-sale (PoS) agents step in to fill the gap. While there are less than 2,000 physical bank branches in Lagos, one of Nigeria’s busiest cities, there are over 320,000 banking agents. PoS agents are to Lagos what yellow taxis are to New York. There are 17 automated teller machines, 147 point-of-sale devices, and four bank branches for every 100,000 Nigerians, according to a 2022 Mckinsey report. Last month, the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) announced that they would increase the charges for withdrawing cash. Before the imminent increase, the charge for withdrawals below ₦5,000 was ₦100, but with the increase, it would double. The charges rise to ₦800 for ₦18,000 to ₦20,000. The increase also exceeds the official Central Bank of Nigeria’s recommended charge for PoS transactions (1%). Image Source: TechCabal Criticism from all parts Fintechs like Moniepoint, OPay, and PalmPay are some of the dominant players driving the agency banking business. On a call with TechCabal, Edidiong Uwemakpan, the global marketing head for Moniepoint, told TechCabal that the company was not consulted before the announcement. A Facebook post from the official OPay account said “any agent found overcharging will be blacklisted and may face legal consequences.” PalmPay told TechCabal that it was not informed of the decision made by AMMBAN. The fintechs all agree that the price increase contradicts the unique selling points of PoS operators—the ease of withdrawals and the cheap charges. Leveraging their ubiquity and large customer base, these fintechs are able to offer cheap charges on transactions to attract more customers and agents. But a hike in the price might change all that. Martin, a student based in Lagos, told TechCabal that he would rather spend time in lengthy ATM queues than pay the extra charges. His position is understandable, given Nigeria’s persistent inflation. While the removal of fuel subsidies has doubled the price of fuel, food prices are also at a 7-year high. Last week, the Federal Competition and Consumer Protection Commission (FCCPC) barred PoS operators in Nigeria from increasing the PoS charges and threatened a sanction. If those sanctions go ahead, it may impact Nigeria’s financial inclusion drive. The agency banking model has been the most successful stab at banking the unbanked. In Taraba, there are only 20 bank branches but over 15,000 PoS agents. Anyone living in Taraba is more likely to bank with a fintech than a commercial bank. Image Source: The NigerianFinancial ServicesMarket by Intelpoint While Martin can afford to use an ATM in Lagos instead of paying the new charges, Nigerians in other states do not have the same luxury. Moji, a 72-year-old woman who lives in Akure, told TechCabal that she would still use her PoS agent because it takes her 2 hours and a ₦300 transport fare to withdraw money from the nearest bank. “I do not have a choice,” she said. This is not the first time that PoS agents have increased their prices. In Q1 2023, as Nigerians felt the pinch of the cash scarcity, PoS agents increased the price because the demand for Naira was greater than the supply, and they had to resort to unconventional ways to get cash, such as buying cash from fuel stations. Not all PoS agents are in support Unlike the last temporary price hike, this week’s price action is not driven by cash scarcity, and some PoS operators do not think the new rates are sensible. Most of the PoS agents that TechCabal spoke to rely on the charges as a secondary source of income, which is why they do not support the increase. Mrs Adetunji told TechCabal that she does not want to increase the charges for withdrawing money because she thinks it’s wrong to increase the price. “How would I explain to my neighbours that I want to increase the charges?” Image Source: The NigerianFinancial ServicesMarket by Intelpoint “I heard on the news that the association has increased the charges due to the current economic realities. But since I don’t belong to any associations, I still charge the normal withdrawal fees—₦100 for ₦5,000 and ₦200 for ₦10,000,” Shola Hafeez, a PoS operator in Ikorodu, a city in Lagos, told TechCabal. Mariam*, a PoS operator in Yaba, told TechCabal that while she has heard about the increase in the news, she does not know when it will take effect. She added that she does not take the increase seriously because she cannot force customers to patronise her and she does not rely on the PoS device for her income. When asked how the union will enforce the new prices, the national publicity secretary of the association, Elegbede Segun, told TechCabal that the implementation has kicked off. “The directive is that each state chapter should come up with its own pricing list that will reflect its realities. Since the implementation just started, we will be getting an update from the state chapters later today,” he told TechCabal. The law of demand and supply Agents are not employees of the fintechs that own the devices they use to transact, and as such, the fintechs have limited control over them. PalmPay told TechCabal that, while it does not support the
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Unraveling the pulse of Africa’s tech ecosystem: Q2 2023 trends
TechCabal Insights presents trends and events in African tech during the second quarter of the year: Sectoral funding, expansions, acquisitions, regulations, and more. In our analysis of trends and events in Q2 2023, we provide a glimpse into the major moves and the occasional rocky road in the African tech ecosystem. Let’s dig deep into the data, as we explore the highs and lows, the triumphs and challenges that defined the ecosystem during the recently-concluded quarter. Funding: A rollercoaster ride Image source: Ayomide Agbaje/TechCabal Insights Notably, venture funding reached $621.8 million in May from 34 announced deals—a 42% year-on-year increase from May 2022. This was driven by two mega deals: M-Kopa securing $255 million in a debt-and-equity financing round and SunKing’s $130 million securitisation deal. This was unlike the momentum in April and June which had deals amounting to $129.8 million from 23 announced deals and $126.2 million from 25 announced deals respectively. While the figures show a general slowdown in funding for African startups, the quarter still witnessed an impressive feat. A total of $877.8 million was raised across 220 startups, representing a 6.9% increase from Q1 2023. Although these numbers fall short of the $1.2 billion raised in the corresponding quarter of the previous year (Q2 2022) at a 23.63% decline. Image source: Ayomide Agbaje/TechCabal Insights Sectoral breakdown: Energy (cleantech) surpasses Fintech Startups operating in the energy, fintech, and logistics sectors emerged as the frontrunners in Q2 2023. Unlike previous quarters, fintech startups didn’t receive the largest share of VC funding. Energy-focused startups replaced them, raising $486.9 million, which accounted for 53% of the total funding in the quarter. Contrary to expectations, the funding landscape for African fintech in the previous quarter did not live up to the anticipated levels of success. For example, the number of fintech startups securing funding in June 2023 was quite limited, resulting in a subpar performance in terms of capital investment from venture capitalists, angel investors, and accelerators. It is noteworthy that, thus far, no African fintech startups have managed to secure mega-equity deals (exceeding $100 million) solely through debt funding and grants. Nigeria takes the lead In the race for venture funding, Nigeria sprinted ahead in Q2 2023, leaving other Africa’s Big 4 countries Kenya, South Africa, and Egypt on the trail. Nigerian startups secured $462.4 million, while Kenya followed with $149.3 million. South Africa and Egypt received $214 million and $6.1 million respectively, experiencing a decline from their previous quarter’s highs. Notably, Kenya’s rise this quarter can be attributed to the mega deals that local startups in the country closed, which played a significant role in toppling Egypt from its previous position. These figures further highlight the dynamic nature of the startup landscape in Africa, with each quarter bringing new opportunities and challenges for both startups and investors. Expansions: Broadening horizons Expansion is the name of the game as African startups seek to deepen their market presence to drive both operational and revenue growth. This previous quarter, TechCabal Insights tracked four noteworthy expansion moves, a similar figure to Q1 2023’s but a sharp drop from the eight tracked in Q2 2022. Nigerian auto-financing startup, Autochek, took a major leap forward by acquiring a majority stake in Egyptian startup, AutoTager, effectively expanding its footprint across nine African countries. Also, Ghanaian agri-tech startup Farmerline spread its wings into Francophone Africa, launching its operations in Ivory Coast. Ecosystem turbulence: Major moves and rocky events Fintech fraud and cybersecurity concerns In June, two South African companies witnessed cyberattacks. The first incident involved hackers gaining unauthorized access to MultiChoice’s streaming platform, Showmax, allegedly exposing more than 27,000 usernames and passwords. Meanwhile, Heritage Bank in Nigeria reported an insider hack worth ₦49 billion ($83 million) in customer funds. Also, Globus Bank, another Nigerian bank, disclosed a hack in 2022, in which hackers exploited a USSD glitch to withdraw over ₦1.75 billion ($2.9 million) from customer accounts. In Kenya, cybercriminals targeted Naivas, the country’s leading online retailer, with a ransomware attack, threatening to leak sensitive data. These incidents underscore the ongoing need for companies in the ecosystem to enhance their cybersecurity measures and address the ever-present risks of fraud. Shutdowns: Copia Global and Lazerpay bid farewell As Q2 2023 unfolded, the global trend of shutdowns also continued to make its mark in Africa’s tech ecosystem. Nigerian crypto startup, Lazerpay, announced its closure after struggling to secure the necessary funding. Meanwhile, Copia Global, a Kenyan e-commerce company, made the tough decision to shut down its Ugandan operations. These developments highlight the harsh realities of the tech business landscape, where even promising ventures on the continent face the pressures of sustainability. Layoffs: Shaking the African tech ecosystem In the ever-evolving African tech ecosystem, layoffs have become an unfortunate reality. What began with Swvl in May 2022 has continued to sweep across the continent, leaving a mark on some prominent startups. June witnessed a wave of layoffs as five African startups collectively laid off over 238 employees. Twiga, a Kenyan agritech company, made a “cost-cutting” move by laying off 211 employees, including its entire sales team. Nigeria’s fintech Eyowo, amidst a pivot to a D2C model, also had to let go of 13 employees. Similarly, Smile Identity, a KYC startup that raised $20 million in February 2023, had to reduce its workforce by 8 employees due to challenging macroeconomic conditions. Fintech giant Chipper Cash executed its third round of layoffs, though the exact number remains undisclosed. Also, sources revealed that Mara, a Web3 startup that raised $23 million in 2022, had to make the difficult decision to lay off six employees in May. Digital currencies by African countries During the last quarter, Zimbabwe embarked on a new chapter by launching its digital currency. However, the International Monetary Fund (IMF) raised concerns, cautioning that the gold-backed currency might not solve the country’s fiat currency devaluation problems and could deplete its gold reserves. Despite the criticism, the Reserve Bank of Zimbabwe (RSV) sold an impressive 14 billion Zimbabwean dollars’ worth of
Read MoreAfrican countries are making digital service tax for foreign companies a norm as Uganda joins the race
Uganda’s new law imposes a 5% income tax on non-resident companies offering digital services. Services covered include online advertising, data services, and online marketplaces. Major tech corporations like Meta and Netflix will be affected, joining Kenya and Nigeria in implementing similar taxes. Toward the end of March 2023, Uganda’s minister for finance, planning, and economic development presented the income tax (amendment) bill 2023 and the convention on mutual administrative assistance in tax matters (implementation) bill before parliament. The tax amendment bills cover key aspects such as income tax and VAT, among others, such as excise duty and lotteries and gaming. A section of the amendments proposed taxing non-residential companies that provide digital services to Ugandans. President Yoweri Museveni has signed the bills making them law, which means they will become effective soon. However, what do the new laws say and imply for foreign tech corporations operating in the country? Taxing foreign digital service providers The new law introduces an income tax of 5% on all non-resident individuals who earn income by providing digital services to customers within Uganda. The law specifies that a non-resident person is deemed to derive income from rendering services to a customer in Uganda if the digital service is delivered via the Internet, an electronic network, or an online platform. Within the scope of this legislation, “digital services” covers a range of services, including online advertising services, data services, and services facilitated through online marketplaces or intermediation platforms, such as accommodation, vehicle hire, and other transport-oriented platforms. Moreover, digital content services are also included, covering access to and downloading digital content, online gaming services, cloud computing services, and data warehousing. The bill encompasses other services provided through social media platforms or internet search engines. It allows for the potential inclusion of other digital services, subject to the minister of finance’s prescription through a statutory instrument issued under the income tax act cap 340. Which key companies will be affected? The new law has introduced a digital service tax (DST) on foreigners who offer online services like Meta, Netflix, Google, and others such as e-cab companies such as Bolt and Uber. However, how this proposed amendment will be implemented has not been discussed. Besides, it is unclear whether it will be implemented through withholding tax or requiring non-residents to file income tax returns. No exemptions have been mentioned for the final withholding tax of 15% on non-residents earning income under a Ugandan-source services contract when the DST is in effect. This implies that the effective tax rate reaches 20% if both measures are applied. The conflict may be addressed in a future amendment, but that has not been done for now. DST in Kenya and Nigeria Uganda now joins Kenya, which introduced DST under the Finance Bill 2020. The law saw the introduction of a digital tax at 1.5% of the gross transaction value. As a result, the tax was payable by individuals whose income from services and products was sourced within the state through the digital marketplace. The digital service tax was payable when transferring payment to service providers. It doubled to 3% in mid-2022. In 2022, Nigeria introduced a 6% digital services tax. At the same time, non-resident providers of digital services were required to collect VAT on their offerings. Like the Kenya and Uganda case, these digital services cover apps, high-frequency trading, electronic data storage, and online advertising. Foreign companies like Netflix and Meta, offering digital services, had to remit 6% of their annual turnover from their Nigerian business to the Federal Inland Revenue Service (FIRS) as per the regulation. Nigeria also separately introduced VAT on foreign digital services in January 2022.
Read MoreDriven by rising food prices, Nigeria’s June inflation hits 7-year high
Nigeria’s headline inflation increased to 22.79% in June, driven by a rise in the prices of food. According to the National Bureau of Statistics Consumer Price Index (CPI) and Inflation Report for June 2023, Nigeria’s headline inflation rate has increased to 22.79%, year-on-year from 18.60% recorded in June 2022. On a month-on-month basis, the figures rose 2.13% from 1.94% in May 2023 figures. Nigeria’s inflation rate continues its uptrend despite several monetary measures by the central bank to tame the rising rates. On a divisional level, inflation was majorly driven by food at 11.81%, followed by, housing, water, electricity and fuel (3.81%), clothing and footwear (1.74%), and transport (1.48%), amongst others. Food inflation was up by 25.25% on a year-on-year basis in June 2023; higher than the rate recorded in June 2022 (20.60%). Food inflation was driven by increases in the prices of oil and fat, bread and cereals, fish, potatoes, yam and fruits. States are not left out On a year-on-year basis, Lagos had the highest inflation rate (25.75%), followed by Ondo (25.40%), and Kogi (25.23%), while Borno (20.44%), Zamfara (20.93%) and Ekiti (21.06%) recorded the slowest rise in headline inflation. Global Chief Economist, Renaissance Capital, Charles Robertson, notes that the inflation data is good news, owing to the fact that the population is reeling from President Tinubu’s economic policies of the foreign exchange devaluation, and fuel subsidy removal. “Relatively good news from Nigeria’s inflation figure – with a rise to only 22.8% YoY, despite the official FX rate devaluation from roughly NGN460/$ to closer to NGN800/$. There could be more to come in July of course,” he tweeted.
Read MoreDespite public outcry, Kenya has received billions from recently introduced digital service tax
Kenya added digital economy taxes and collected $1.9B VAT revenue via electronic tax invoicing alone. The state also integrated betting firms into its tax collection systems, which has, so far, paid off. Kenya has been patching up tax leaks for a couple of months now. These changes have seen the Kenya Revenue Authority (KRA) meet and surpass targets after it recorded a 6.7% jump in the 2022/2023 financial year. KRA’s managed collection increased from KES 1.58 trillion ($23.2 billion) in the 2018/2019 financial year to KES 2.166 trillion ($32.2 billion) in the just concluded financial year ending in June 2023. These numbers imply that KRA added KES 586.259 billion ($8.9 billion) to its collection in the last half a decade. “Despite an economic slowdown occasioned by an unfavourable global fiscal environment, KRA recorded a revenue collection of KES 2.166 trillion for July 2022 – June 2023 compared to KES 2.031 trillion in the last financial year. The collection for the financial year 2022/2023 was, therefore, higher than what was collected in 2021/2022 by KES 135 billion,” said KRA in a statement. Digital revenue drivers Over the last few years, Kenya added new tax avenues, including taxing the digital economy amid complaints from locals. The state recently approved taxing crypto exchanges and social media influencers. However, the recent tax areas, which went live at the start of July 2023, will only be reported at the end of the 2023/2024 financial year. The previous government introduced a digital service tax (DST) alongside VAT on digital market supply. The legislation aimed to impose a 1.5% tax on the total value of digital services. Starting in January 2021, individuals earning income by offering services or products through online platforms were required to pay this tax. Furthermore, the law specified that both Kenyan residents and non-residents with permanent establishments in the country could utilise the tax amount as a deduction against their income liability for that particular year. And just last year, Kenya doubled DST to 3%. To this end, KRA collected KES 5.328 billion ($37.5 million) from the tax heads, translating to a growth of 207.9% compared to the previous financial year. KRA notified the public and all taxpayers registered for VAT about the transition from old electronic tax registers to the tax invoice management system (TIMs). According to the KRA, VAT-registered taxpayers had to obtain the new electronic registers before mid-2022. This shift aimed at enabling them to generate and electronically transmit tax invoices in accordance with the VAT (Electronic Tax Invoice) Regulations of 2022. The introduction of eTIMS also sought to reduce compliance costs by lowering hardware expenses and enhancing the accuracy of real-time invoice transmission, thus improving declaration and reconciliation between returns and payments. Notable features of eTIMS include cross-platform access (computers and mobile phones), a user-friendly and adaptable design, and a convenient solution for taxpayers to fulfil their compliance needs. Based on the development, with 95,732 VAT-registered taxpayers now using eTIMS, remittances have increased to KES 272.365 billion ($1.9 billion). The revenue performance outlook is expected to improve even more as eTIMS is widely adopted. eTIMS is set to simplify filing tax returns by providing pre-populated VAT returns. KRA has also reaped heavily from integrating its systems into betting companies’ systems. This integration has granted KRA up-to-date access to all the companies operating within the gaming and betting industry. As a result, the KRA collected KES 15.190 billion ($107 million) in excise duty and withholding tax after onboarding 28 taxpayers from the sector. Plans to tap more into the digital economy KRA plans to implement a technology platform to generate revenue by transforming it into a digitised revenue administration. This will be achieved by integrating with e-Citizen, other government agencies, and private entities for payroll taxes. It will also be achieved by simplifying the customs payment process through inclusion in M-Service and implementing a risk management system through AI.
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Next Wave: Nigeria’s wrecking ball
Cet article est aussi disponible en français <!– In partnership with –> <!— –> First published 16 July 2023 For now Nigeria’s reform of its foreign exchange regime is looking more like if you tied a wrecking ball to a boomerang—for a section of Nigerian fintechs. But even the banks should not celebrate yet. A lot of problems Africa’s technology is set up to solve are structural problems that have their root in bad policies and failed governance. Take Nigeria for example. In the last 8 years, the government has banned, increased import duties or denied foreign exchange for the import of a number of items including staple food products like rice, maize and poultry. Full list here. The idea was that, by banning items, the country could save valuable forex and spur local supply to meet demand. But the opposite happened. Local supply failed to come near anywhere close to matching demand, and as a result demand for imported food went up. The result of this (plus poor monetary policy) was a significant gap between official exchange rates and what was more freely obtainable in the parallel market. By the end of 2022, spreads between the official exchange rate of the naira and the dollar were as high as 61%. Naira-USD spreads have narrowed dramatically following FX policy reforms and the removal of Nigeria’s unorthodox central bank governor, Godwin Emefiele. | Chart: Ayomide Agbaje — TechCabal Insights. That is more than 50% of pure profit if you could somehow get $ at official rates and resell in the parallel market. Nigeria has a fairly large number of people who need $ for everyday things like purchasing items on Amazon, paying for subscriptions or running a business with dependencies on international vendors/products. But banks no longer allowed international payments from Naira cards to go through, so importers of food and users of digital services had to source for $ from anywhere they could. As I said, a lot of problems being solved in Africa are structural problems with roots deeply resident in government policy. In the last three years, cross-border payment products have really been dollar-local currency arbitrage products. They solved an important problem and benefited from netting a smaller percentage of the arbitrage opportunity from meeting that need. And Nigeria made up the bulk or at least a significant propoertion of that market. Before moving forward, let us establish one truth, or something as near the truth as possible. All currency problems are policy and government problems. Therefore all cross-border payment problems are government problems. The degree to which they are business-solvable problems is tied to the attention and approach of the government. If you are in many African countries and run a business that is too exposed to swings in government policy, you are either close to the managers of government problems, or very brave. In my opinion, we had a lot of very brave businesses. In any case, governments change and there is not too much you can do to hedge against changing government policies if your business depends on bad policies to thrive. In this case, when things get better, your business suffers from it. Partner Message GrowthCon 1.0: Learn how to unlock 10X Growth Connect with growth leaders, operators, and enablers to explore proven tactics for driving sustained business growth in Africa at GrowthCon 1.0. Experience curated masterclasses, case studies, a growth hackathon and more. . Get your tickets now A few weeks after Nigeria switched from its tenuous fixed exchange rate policy to a managed rate, Bloomberg and other media reported the upward surge in the country’s stock exchange. Last week, Bloomberg reporter, Emele Onu, clarified that a lot of that upward momentum came from bank stocks. An index of bank shares gained 23% last month, the most since 2018. Clearly, the banks were “balling”. To rub it in, last week, banks in Nigeria have launched a slew of products targeting remittances. Access Bank, Nigeria’s largest bank by assets (2022), launched a product with remittance fintech, Remitly to capture remittance inflow. ALAT, the digital banking arm of Wema Bank will now allow naira cardholders to spend up to $500 without needing a dollar bank account. It was $0 previously. Guaranty Trust Bank has done the same, and United Bank for Africa (UBA) will allow customers will FX accounts to borrow in naira against the FX in their dollar or British pound accounts. Partner Content: With NearPays the future of payment is contactless It has been an onslaught of products capitalising on the FX policy reform and threatening the market of cross-border/dollar virtual card fintechs. It exposed the vulnerability of building a currency-policy-dependent payment product in Africa that is only designed to capture arbitrage opportunities. But not use the short term painkiller as a foothold to explore deeper user engagement models beyond the occasional need for a USD virtual payment option. @wquist – Slow Ventures In underwriting/spread based businesses, be very aware if you are building products to spot an arbitrage or to create one. Both can be great ways to make money but there is very little long term equity value in the former. — fintechjunkie (@fintechjunkie) July 13, 2023 And it showed that the banks are learning how to quickly turn on a dime (at least in launching new products that also capitalize on policy swings). Banks are better positioned to do these types of product launches, because they have deposits, serious cashflow, legacy positioning and their stock (thus available capital) is up! But banks cannot celebrate yet… They still carry a corporate and non-digital-first baggage with them. UBA will only give the FX-backed loan I mentioned earlier, if you walk into the bank and fill a form. And GT Bank’s new app launch was disastrous as it locked customers away from making any transactions for hours, until the problem was resolved. Interestingly these remittance products have been launched just as remittance inflow is tightening. Nigerians at home received $952 million in the
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👨🏿🚀TechCabal Daily – The naira card’s return
In partnership with Share this newsletter: Lire en Français اقرأ هذا باللغة العربية Good morning Twitter’s new update is fighting spam bots. Starting last Friday, only users you follow will be able to send you messages that land in your primary inbox. Messages from verified users you don’t follow, meanwhile, will be in your Message Request folder. This is the new default. You can, however, change the settings to receive messages from anyone. In today’s edition Naira cards are making a comeback Uganda to tax foreign digital companies Access Bank acquires StanChart TC Insights: Big data for Africa The World Wide Web3 Event: The Moonshot Conference Job openings Economy Naira cards are making a comeback Image source: Tenor Great news for Nigerians: you’ll soon be able to make international payments with your naira cards. And yes, that includes Netflix, Apple, Amazon, and all the other online stores that aren’t naira-denominated. Last week, commercial bank Wema Bank became the first bank to increase its dollar limit for all users of its ALAT card—its naira debit card—from $20 to $500. Backstory: Since 2020, Nigerian banks have slowly reduced spending limits on naira debit cards due to what the Central Bank of Nigeria (CBN) described as a dollar shortage. Banks like Zenith cut spending limits from $500 to $200. At the time, the oil-exporting country was experiencing a steep fall in oil prices. It had also paused selling forex to retail currency traders after the ban on international travel due to the pandemic. By July 2022, the dollar scarcity worsened and banks cut down spending limits drastically—from $200 to $20. Some like StanChart cancelled international spends using naira cards, and anyone who had to pay in dollars had to open dollar accounts. And now? Nigeria is moving in a different direction with its newest government. Since he assumed office, President Bola Tinubu has taken steps to increase the inflow of forex into the country. Earlier in June, the CBN floated the naira, bringing official and black market rates for forex closer together. Last week, the apex bank also approved naira payouts for diaspora remittances. All this means that forex can flow a lot easier in the country. Zoom out: While only Wema has announced the increase in international spending limits, it’s expected that several other commercial banks will follow suit in coming weeks. Secure payments with Monnify Monnify has simplified how businesses accept payments to enable growth. We are trusted by Piggyvest, Buypower, Wakanow, Fairmoney, Cowrywise, and over 10,000 Nigerian businesses. Get your Monnify account today here. Legislation Uganda to impose 5% tax on foreign digital companies Image source: YungNolly Kenya might be relaxing its laws to accommodate foreign companies, but its neighbour Uganda isn’t having any of it. Last week, the Ugandan government amended its Income Tax Act to include a new law that imposes a 5% tax on income earned by foreign companies operating in the country. A new change: This comes weeks after President Yoweri Museveni initially refused to assent to the Income Tax Amendment Bill 2023, stating that it needed to include taxes on non-resident digital companies in the country. In response to the Parliament, the president stated that, “The measure was meant to cater for taxation of digital economies such as; Twitter, Amazon, Netflix etc, the clause related to non-residents and non-residents in Uganda says it doesn’t relate to residents in Uganda as it was mistakenly stated in the minority report. It should be reinstated.” The Parliament then reprocessed the bill to include a 5% tax on foreign companies, and on Tuesday, July 11, the president assented to the bill. According to the Ugandan minister for finance Henry Musasizi, the country is not looking at the digital services. “We are looking at the income derived by the provider of these services. For Uber, the money goes to California; the man derives income, but pays no taxes. Now we are saying, can we have a mechanism of having the taxes?” he said. Zoom out: Uganda joins countries like Nigeria which, in 2021, instituted a 6% tax on foreign digital companies, as well as Zimbabwe, Tunisia, Tanzania and Sierra Leone which all have 5%, 3%, 2% and 1.5% taxes respectively on foreign companies. M&As Access Bank to acquire StanChart assets Another Nigerian commercial bank is making big moves. On Friday, British multinational bank Standard Chartered (StanChart) revealed that it had completed negotiations to have all its sub-Saharan African assets acquired by Access Bank. Image source: Zikoko Memes Where and where? The deal, which is set for competition in 2024, will see the sale of StanChart’s subsidiaries in Angola, Cameroon, Gambia, and Sierra Leone, with the exception of StanChart’s Nigerian subsidy. Access Bank will also acquire Standard Chartered’s consumer, private, and business banking business in Tanzania. “Access Bank will provide a full range of banking services and continuity for key stakeholders including employees and clients of Standard Chartered’s businesses across the five aforementioned countries,” Standard Chartered said in a statement. Divesting in Africa: This new deal comes as part of StanChart’s plan to decolonise divest in Africa and the Middle East. In 2022, the bank left seven countries—including Angola, Lebanon and Zimbabwe—across both regions in what it described as a move to focus on faster-growing markets in countries like Saudi Arabia and Egypt. This new move follows the same direction with its CEO for Africa and the Middle East Sunil Kaushal saying, “This strategic decision allows us to redirect resources within the AME region to other areas with significant growth potential.” Access Bank, on the other hand, is already Nigeria’s biggest bank by asset, and this deal will see its value skyrocket as it takes a more prominent position in the African banking scene It’s not a done deal yet, though. Regulators across the five countries will have to okay the acquisition before StanChart can wash its hands off. GrowthCon 1.0: Learn how to unlock 10X Growth Connect with growth leaders, operators, and enablers to explore proven tactics for driving
Read MorePharmarun wins $10,000 at Pitch2Win 2023. Here is what we know about the startup.
At the third edition of Pitch2Win, an event that connects startups to investors, health-tech startup Pharmarun won $10,000 in equity-free investment. Here is all you need to know about the startup and its co-founders, who have also been friends for 20 years. In less than five minutes, Teniola Adedeji convinced Kola Owodunni, Yuzuru Honda, Eloho Omame, Hiro Mashita, and Kola Aina, the five judges of Pitch2Win 2023, that her health tech startup PharmaRun was most deserving of the prized $10,000 equity-free funding. PharmaRun delivers medication on-demand to the doorsteps of customers. It competed for this funding with 14 early-stage startups that pitched AI, blockchain, fintech, e-commerce, and logistics solutions at Pitch2Win, an annual event that aims to connect startups to potential investors. This is not the first time Pharmarun has received external investment. In 2021, the same year it officially launched, the startup received an angel investment from Fedha Capital. But over a phone call, her best friend of 20 years and co-founder, Funmilola Aderemi, told me that Teniola had registered “Pharmarun” as a business name since 2015. By that time, Teniola had rounded up an investment banking internship at Bank of America Merrill Lynch and was working as a pharmacist at the National Food and Drug Commission (NAFDAC). Amused at the recollection of what now looks like a self-fulfilling prophecy, Teniola responded, “I just thought the name was really cool. I wanted to own a pharmacy of my own and call it that someday.” Pharmarun started out as a labour of love. “Too often, I heard people talking about how only pharmacies situated on the island [a more bourgeois part of Lagos and miles away from the mainland] had a medication that they needed,” recalls Teniola. Working at a pharmacy herself, she witnessed the frustration of customers when her workplace ran out of stock for a particular drug. Teniola took it upon herself to assist customers in finding the medication elsewhere, even extending her help to family and friends. As word spread, people started reaching out to her on WhatsApp, asking her to locate specific drugs and deliver them. The demand for her assistance increased significantly during the COVID-19 pandemic when movement restrictions made it even more challenging for individuals to access pharmacies. “That was when I realised that this could grow into a business,” Teniola reflects. She sought the assistance of her friend, Funmilola, who at the time was a senior product designer at a logistics company, MAX. Late-night calls became a regular occurrence as they collaborated on designing various aspects of the web platform where customers could order. Teniola disclosed that they had been concerned that no one would trust them enough to make payments on the website until they had their first paying customer. She had previously operated primarily through WhatsApp and relied on word-of-mouth referrals. To instil confidence in potential clients, the website was designed to include features such as “Speak to a pharmacist”, to assure users that real people were behind the platform. Pharmarun’s customer base has expanded to include individuals, hospitals that need to send refills of prescriptions to their patients, as well as insurance companies seeking to ensure timely refills for their policyholders. The business’s needs grew with time, so Teniola began to search for a co-founder to lead Pharmarun with her full-time. Even though Funmilola was spending plenty of time helping her with the product, Teniola was hesitant to ask her to leave her promising senior product designer position at logistics startup MAX. But she eventually did, and her best friend said yes to becoming her co-founder. Flashing back to that moment, Funmilola said, “It felt natural and almost like a promotion from a consultancy position to a co-founder position. Moreover, I enjoyed working on the product with Teniola, and like her, I was also passionate about the problem.” Teniola, with seven years of experience as a pharmacist and pharmacy operations manager, is the CEO of the startup, while Funmilola, due to her years of experience in product design, is the Chief Product Officer. Going the extra mile Both co-founders believe that Pharmarun needs to be more than a drug store. “If people know where to find a drug but do not have any money to buy it, they still lack access to medication,” Teniola mused on a call with me. Pharmarun also finances medication for its customers through embedded buy-now-pay-later (BPNL) services. “Through partnerships with some BNPL companies, customers who are out of cash to pay can still access medication.” Because the BNPL services are embedded at the checkout, they are not run on the balance sheet of Pharmarun, so the startup doesn’t need to work on recovering the loan from customers. Pharmarun’s operational model may evoke comparisons to Jumia, as users can simply place an order and have medications delivered to their doorsteps. However, unlike Jumia’s platform, users do not have to choose from an array of pharmacies like Medplus. When customers search for a specific drug on the Pharmarun platform, it assists them in finding the best price from any pharmacy that has the desired quantity of medication. “This is why we are onboarding as many legitimate pharmacies as we can,” Teniola said. Currently, Pharmarun collaborates with over 80 pharmacies across the country, with a significant presence in cities such as Lagos, Abuja, Port Harcourt, Ibadan, and Uyo. It is working on partnering with more pharmacies. Nevertheless, the process of onboarding these pharmacies has not been without challenges. Adedeji highlighted the stringent onboarding process to ensure compliance with industry standards, ensuring user protection. Additionally, many of these pharmacies are not tech-savvy, necessitating training on the web platform used to fulfil orders. Overcoming these obstacles is crucial as Pharmarun actively works to expand its network of partner pharmacies. During her pitch, Teniola mentioned the need for significant funding, estimating up to $500,000, to facilitate the onboarding of more pharmacies. Staffing also posed a significant hurdle as the customer base grew. Teniola acknowledged the difficulty of finding individuals with
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House of reps oppose CBN’s social media KYC requirement
Lire en français Read this email in French. Editor’s Note Week 29, 2023 Read time: 5 minutes Hello This week’s news roundup takes us on a journey across Nigeria, Kenya, Equatorial Guinea, and Egypt. Enjoy! Oh, before we dive in, can you to spare 3 minutes and fill out this survey? Your feedback means the world to us. Pamela Tetteh Editor, TechCabal. Editor’s Picks CBN’s social media KYC rule to take a pause Nigeria’s House of Representatives has asked the Central Bank of Nigeria (CBN) to press the pause button on their plans to make social media handles a mandatory ID for know-your-customer (KYC) operations. Read more. Lawyers caught using ChaGPT again South African lawyers, in the midst of arguing a case at the regional court in Johannesburg, got caught red-handed for presenting fake precedents concocted from ChatGPT. This is not the first time such a thing has happened. Learn more. A swahili-speaking Bard After some delays due to data privacy concerns, Google has announced the global debut of its multilibual AI chatbot, Bard. Swahili is the first African language the multilingual chatbot can speak. Learn more. Airtel launches 5G in Kenya Airtel took the baton and became the second telecom company to launch 5G in Kenya. They followed in the footsteps of Safaricom, which launched their 5G back in October 2022. It’s a race to lightning-fast connectivity, and Kenya is zooming ahead at full speed. Learn more. NFCCPC and Google to weed out abusive loan apps In a bid to protect lenders, Nigeria’s Federal Competition and Consumer Protection Commission (NFCCPC)and Google app store are respectively working to weed out pesky loan apps. Learn more. Entering Tech Interested in getting tech career resources and insights?. Then sign up for Entering Tech to get started! Egypt to launch satellite this year Egypt’s space dreams are taking off! The Egyptian Space Agency is setting its sights on launching the NExSat-1 satellite before the year’s end. Learn more. Flutterwave to the rescue Flutterwave has launched Tuition, a payment product enabling African users to pay school fees locally and abroad using local currencies. They’ve also partnered with IATA to enable airlines to receive payments in local currencies. Learn more. Safaricom to launch new VC funds Safaricom is planning to set up two new venture capital subsidiaries which will be tasked with identifying and investing in tech startups in Kenya. Will they replace its $1 million fund, Spark Venture Fund? Learn more. Kenya pauses new Finance Act Kenya’s Finance Act is causing quite a stir! Justice Mugure Thande has ordered a temporary stop to the implementation of the country’s freshly approved Finance Act 2023 Learn more. Equatorial Guinea’s e-visa Equatorial Guinea has partnered with VFS Global to launch a new e-visa service that aims to attract more tourists and business travellers to the country. Learn more. Who brought the money this week? Nuru, a solar company in the Democratic Republic of Congo (DRC), raised $40 million in equity funding. MYDAWA, a Kenyan online pharmacy, received $20 million in an undisclosed round from Alta Semper Capital, a private equity firm. Zuvy, a fintech company, secured $4.5 million in debt and equity funding from TLG Capital. Egyptian fintech company Masroofi raised $1.5 million in an undisclosed round from undisclosed investors. Kenya-based B2B company Revivo raised $ 635 K in pre-seed funding from Raba Partnership, Village Global, Musha Ventures, Satgana, and strategic business angels. What else to read this weekend? Is Africa’s financial ecosystem equipped to fight rising cyber fraud? GTBank’s new app debuts to dissatisfaction as customers report technical glitches Nigeria’s eNaira: High on blockchain, low on adoption Ride-hailing drivers in Nigeria are suffering after government triples fuel prices Written by: Ngozi Chukwu Edited by: Pamela Tetteh 18, Nnobi Street, Surulere, Lagos, Nigeria Unsubscribe from TC Weekender
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