The ‘Big Four’ fallacy: Rethinking African markets
This article was contributed to TechCabal by Dotun Olowoporoku. Here’s a thought experiment: What if your fundamental assumptions about investing in African startups were wrong? What if the Big Four markets—Nigeria, Egypt, Kenya, and South Africa—aren’t actually where the greatest opportunities lie? Most VCs investing in Africa are making a classic mistake: pattern matching. They see success stories of startups like Paystack, Flutterwave, and Moniepoint in Nigeria, and think, “Aha! Nigeria is where it’s at.” But this is lazy thinking. Similar logic underlies the signal-seeking investment theses for headline markets such as Kenya, Egypt, and South Africa. It’s the equivalent of deciding in 1995 that the only place to invest in tech was Silicon Valley. The truth is, Africa isn’t one market. It’s not even four markets. It’s a complex tapestry of interconnected economies, each with its own unique challenges and opportunities. While the Big Four are undoubtedly important and proven markets, by focusing solely on them, we’re potentially missing out on the next big things. The pattern matching trap Pattern matching is a useful heuristic and cognitive shortcut that investors often use to make quick decisions. It involves recognising familiar patterns and applying previous experiences to new situations. In the context of African investments, this can lead to both positive and negative outcomes. On the positive side, pattern matching can help investors quickly identify promising startups that share characteristics with previous successes. It can streamline due diligence processes and help allocate resources efficiently. For example, recognising similarities between the opportunities presented by a new fintech idea and Paystack might lead to a good investment decision. However, the same thought pattern can potentially lead to a concentration of capital in a handful of markets, founder types, and verticals while leaving vast swathes of the continent untapped. This narrow focus creates a self-fulfilling prophecy: more investment in certain markets leads to more success stories, which in turn attracts even more investment, creating a feedback loop that further marginalises other regions. This isn’t just bad for the overlooked markets—it’s potentially detrimental for investors too. We’re competing for the same deals in the same overcrowded markets, driving up valuations and potentially missing out on hidden gems elsewhere. The intense competition in these markets can lead to inflated customer acquisition costs, team compensation, and reduced returns on investment. Moreover, pattern matching can lead to missed opportunities. By focusing solely on what has worked before, we might overlook innovative solutions that don’t fit the established patterns. This is particularly risky in a diverse continent like Africa, where unique local challenges often require novel approaches. But here’s the thing: the best opportunities often lie where others aren’t looking. And in Africa, that means looking beyond the Big Four. It requires a willingness to challenge assumptions, dig deeper into unfamiliar markets, and recognise that the next big success might come from an unexpected place or in an unexpected form. To truly capitalise on Africa’s potential, investors need to balance pattern recognition with openness to new ideas and markets. This might involve developing new frameworks for evaluating opportunities, building networks in underserved regions, or collaborating with local partners who have a deep understanding of these markets. Lakes and Oceans: A new mental model for African markets Instead of thinking in terms of countries, we need to start thinking in terms of what I call “Lakes” and “Oceans.” This isn’t just a cute metaphor—it’s a fundamental shift in how we should approach African markets. Ocean markets are the behemoths. Nigeria, Egypt, Kenya, South Africa—these are your Atlantics and Pacifics. They’re vast, with huge populations and GDPs to match. On paper, they look irresistible. But here’s the catch: they’re also shark-infested waters. Everyone’s fighting for a piece of the action, from local players to multinational corporations. The competition is fierce, and the regulatory environment can be as unpredictable as a rogue wave. Lake markets, on the other hand, are your Victorias and Tanganyikas. Countries like Senegal, Côte d’Ivoire, Morocco, or Cameroon. They’re smaller, sure, but don’t let that fool you. These markets are deep, and they’re connected. A startup that can navigate one of these lakes well can often easily slip into neighbouring waters. The real magic of Lake markets is in their interconnectedness. Many share common currencies (like the West African CFA franc), have similar regulatory environments, or are part of regional economic communities. This means that once you’ve cracked one market, expanding to others can be relatively smooth sailing. Here’s where it gets really interesting: Lake markets often have room for only one or two dominant players. If you can back the right horse early, you might just end up owning the whole lake. And if that player can then navigate from lake to lake? You’re looking at potentially geo-diverse dominance. Take the example of Wave. They didn’t just dip their toes in Senegal’s waters. They dove headfirst, became the big fish in that pond, and then swam over to Côte d’Ivoire. Before anyone knew it, they were valued at $1.7 billion. That’s not just impressive; it’s a blueprint for how to approach these markets. The Ocean strategy is about fighting for market share in crowded waters. The Lake strategy is about becoming the big fish in a small pond, and then expanding your territory pond by pond. It’s not about making a splash; it’s about creating ripples that turn into waves (pun unintended!). Charting a new course This shift has profoundly influenced our approach at Ventures Platform. We’ve begun to view African markets through a new lens, looking beyond the obvious choices. Our strategy now involves exploring calculated risks in less familiar territories, seeking out hidden opportunities that others might overlook. For founders, this paradigm shift opens up a world of opportunities. By focusing on dominating a Lake market and then strategically expanding across interconnected regions, you have the potential to build something truly transformative. The next African unicorn might not emerge from Lagos or Nairobi, but from Dakar or Abidjan. The future of African tech
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👨🏿🚀TechCabal Daily – The long haul
In partnership with Lire en Français اقرأ هذا باللغة العربية TGIF It’s been a long week, but we’d like to end it on a light note. We spent half of yesterday grovelling to our Events team and we’re back with a special offer for you. For the next couple of days, we’re offering TC Daily readers 25% off tickets to Moonshot 2024. All you have to do is enter the coupon code “MSTCD” for local tickets, and “MSTCD1” for international tickets. The long road to a Kenyan fintech expansion GT Bank close to finalising Finacle move Nigeria to generate $100 billion annually from creative economy Nigeria to generate $100 billion annually from creative economy The World Wide Web3 Jobs Expansions The long road to a Kenyan fintech expansion Image source: Tenor Acquiring a fintech operating licence in Kenya is a long and complicated process. It can take up to two years to get an operating licence, mainly because the Central Bank of Kenya (CBK) has strict rules. Fintechs must prove they meet capital requirements, consumer protection, and anti-money laundering requirements. As Kenya’s fintech space grows, the CBK has become even more cautious, adding more time to the approval process. Only a few fintechs like Flutterwave have managed to extend their services to Kenya. They do this by partnering with local banks or mobile operators like Safaricom’s M-PESA or Airtel Money to enter the market. Others, like Nigerian fintech Rise, choose the M&A option. The reality is that fintech is still fairly new in Africa, and regulators are cautious due to past money laundering issues. This often complicates the process. However, licence passporting could ease this by allowing fintechs to operate across multiple countries with a single licence. Here’s Kenn Abuya reporting for TechCabal; “Imagine you have a driver’s licence issued in Kenya. With ‘licence passporting’, you could drive your car in other countries in Eastern or Southern Africa without applying for a separate driving licence from each country. No African country has adopted licence passporting.” Passporting could be a good plan. For this to work, central banks need to come together, at least regionally, to agree on rigorous standards to vet fintechs. Even a continent-wide passporting through the African Union is also a possibility; but first, the issue of money-laundering rife in fintech still poses a problem. The order of achieving this looks somewhat like this: fintechs coming together to stop money laundering and fraud, then this makes a stronger case for the passporting idea that has been floated in the space. In the meantime, fintechs looking to enter Kenya need to be prepared for a long, careful process to get fully licenced and operational. Read Moniepoint’s 2024 Informal Economy Report Did you know that 57.7% of the business owners in Nigeria’s informal economy are under 34 years old? Click here to find out more about the demographics of Nigeria’s informal economy. Banking GT Bank close to finalising Finacle CBA migration Image source: GT Bank On September 9, Sterling Bank, a Nigerian tier-2 commercial bank formally announced its core banking application (CBA) migration to SeaBaaS, a locally-developed platform—a couple of days after we first reported. Yesterday, we again reported that another bank, GTBank, a tier-1 bank, is finalising a migration from Basis/Banks to Finacle, a CBA platform provided by India’s Infosys. While Sterling Bank went local, GT Bank is moving from the UK to India. Both moves are also not defined by the same reason; Sterling Bank likely chose a local custom-built platform to reduce costs and cut dollar spend. GTBank, on the other hand, opted for Finacle because of its retail banking and non-banking demands. While Finacle, according to a price comparison by Capterra—an independent software rating platform—is cheaper than Basis at base level, the former is tailored for large commercial banks that require extensive functionality, scalability, and customisations, which often drives up the cost. Usually, Nigerian banks validate their core banking options by running small trials (Proof of Concept) to test the software, checking the vendor’s reputation, and getting feedback from other banks that use the system. Local service providers have an opportunity here. They provide cheaper solutions and have timezone availability for post-migration support that may not be available in foreign companies. While it is necessary to improve the reliability of their systems, another area they could look at is offering cloud-based CBA solutions that reduce the cost of hardware infrastructure and offer scalability. However, it’s not a zero-sum case. While big Indian software providers are winning the pockets of big retail banks in Nigeria, local providers like Qore are finding business with smaller cooperatives, microfinance and digital banks, like HopePSB and Ekondo Microfinance Bank. Fincra secures International Money Transfer Operator (IMTO) licence in Nigeria Since its inception, Fincra has provided businesses with local payment options. However, with the IMTO licence, Fincra can now manage funds transfers from abroad to Nigerian recipients more efficiently. Read more here. Economy Nigeria to generate $100 billion annually from creative economy GIF Source: Zikoko Memes $100 billion. That’s the amount Nigeria intends to generate from its creative economy yearly. If you’ve followed the Nigerian movie industry closely—where films regularly hit ₦1 billion ($604,000) in box office revenue—and the Afrobeats to the world movement, you’d agree that these numbers are achievable. However, the current contribution of Nigeria’s creative economy is a far cry from those figures. At $5 billion, the sector contributes just 1.2% to the country’s GDP. Despite the abundant talent and cultural richness, challenges such as inadequate infrastructure, funding constraints, and certain policy gaps have hindered increased contribution by the creative economy to the GDP. Hannatu Musa Musawa, Nigeria’s Minister of Art, Culture and the Creative Economy is rolling up her sleeves to address those gaps. Yesterday, the Minster released an 8-point plan aimed at transforming the country’s creative economy and creating 2 million jobs. The Ministry will focus on areas like film production, music, fashion, and digital content creation. Key elements of the plan include improving access to funding
Read MoreNASDAQ-listed Lesaka will finalise $85 million Adumo acquisition in October
NASDAQ-listed South African fintech Lesaka Technologies will finalise its $85 million acquisition of fintech startup Adumo in October 2024 after receiving approval from shareholders and South Africa’s Competition Commission. First announced in May, the deal will expand Lesaka’s consumer and SME merchant financing services into Botswana, Kenya, Namibia, South Africa and Zambia. “This acquisition allows us to offer payment processing, integrated payments and reconciliation solutions to SME merchants in South Africa, Namibia and Botswana,” the company said on an earnings call on Thursday. “It also allows us to enter a new market vertical, being the hospitality sector.” Through the acquisition, Lesaka claims it will reach 1.7 million customers and 119,000 merchants in the Southern African region. The company currently has 1.5 million customers. Lesaka, with a market capitalisation of $315 million, owns payment provider EasyPay, and Kazang, a card-acquiring POS device company. In February, the company acquired point-of-sale provider Touchsides for an undisclosed amount. Adumo’s acquisition will enable Lesaka to grab a greater market share in the southern African region after expanding into new markets. Competitors like YOCO are only based in South Africa. Lesaka will make more acquisitions in the coming months. “Our run rate of acquisitions is not expected to decelerate and we anticipate we will be making add-on acquisitions fairly frequently,” Group chair Ali Mazanderani said on the earnings call. “We have several potential targets which fit clearly into our stated strategy.”
Read MoreSlow licencing process is a headache for fintechs expanding to Kenya
For fintech startups expanding to Kenya, nothing is more difficult than getting an operating licence. A payment service provider (PSP) licence may take up to two years due to approval delays, forcing startups to use workarounds such as partnerships with telcos, banks and mobile money providers. “We don’t enable services that we can’t do without a licence, but what we do in Kenya is connect licenced parties,” Rachael Balsham, East and Southern Africa MD at fintech Onafriq told TechCabal at last week’s Africa Fintech Summit in Nairobi. “Safaricom’s M-PESA is licenced to run mobile money services, and we connect them to other licenced parties.” Onafriq allows businesses to send and receive money across 40 African countries but is only licenced in 12, excluding Kenya. While some fintechs secured PSP licences in other markets, the slow pace of licencing in Kenya is a major roadblock for fintechs looking to set shop in the East African country. While the Central Bank of Kenya (CBK) has talked up legal reforms to fast track fintech licencing, high market entry barriers and evolving regulations have derailed progress, which has allowed traditional players like commercial banks and telcos to remain dominant. “We are in the process of updating and amending the Payments Act, basically coming up with a new act. We hope to be able to finish that soon and also the regulations and that would guide our way forward in terms of payments service providers space,” Kamau Thugge, CBK governor, told TechCabal in June. “The CBK currently doesn’t have the capacity for thorough due diligence before issuing licences to hundreds of fintechs that have set up shop in Kenya,” said a fintech co-founder who asked not to be named. The CBK did not immediately respond to a request for comments. This problem could be fixed through licence passporting for established fintechs, according to Balsham. “Licence passporting” is a regulatory mechanism that works as a passport for fintech companies. It allows them work in different countries within a region without needing separate licences for each. Imagine you have a driver’s licence issued in Kenya. With “licence passporting”, you could drive your car in other countries in Eastern or Southern Africa without applying for a separate driving licence from each country. No African country has adopted licence passporting. “If adopted, it could make it easier for them to offer their services across borders, which can lead to lower prices, better products, and more choices for customers,” one banking lawyer told TechCabal.
Read MoreGTBank finalising change to new core banking platform
Guaranty Trust Bank (GTBank), the first Nigerian bank to post ₦905.57 billion in half-year profits, is finalising its core banking platform change to Finacle, a software built by Infosys. The bank previously used Basis, a banking software also used by Providus and SunTrust. The decision to change to Finacle was finalised in September 2023 after some of the bank’s top management and tech team visited India to broker a direct partnership, side-stepping third-party vendors. One person familiar with the matter said that change was necessary because GTBank’s previous banking software had problems, which led to occasional service disruptions. GTBank picked Finacle because it plans to integrate its banking and non-banking subsidiaries on a unified platform, said one person with direct knowledge of the matter. “Rather than having different solutions that cater to different subsidiaries, the bank chose Finacle because it has modules for GT subsidiaries like wealth management and pensions. It was a good deal,” the same person said. GTCO’s move to Finacle, which is used by at least 10 banks, including three of Nigeria’s biggest commercial banks, highlights the growing influence of Infosys. The absence of a local banking software provider and Finacle’s global leadership position in core banking software, attributed to its extensive solution offerings, versatility, and strong performance in core platform functionality, have solidified Finacle’s position in the market. One person with knowledge of the matter said CEO Segun Agbaje made the final decision. In July 2024, Agbaje shared that the bank would change its core banking software to Finacle during a presentation to flag off its ₦400 billion capital raise. “The technology needs to be better, the technology needs to be more robust. We have Finacle which is a good software that will land us where we need to go,” he said at the time. The ongoing migration, which began in the fourth quarter of 2023, is designed to avoid disruptions to GTBank’s large retail customer base, one person with direct knowledge of the process claimed. GTBank did not immediately respond to a request for comment. A change in a bank’s core banking application can cause service disruptions in the short-term. On Saturday, TechCabal reported that customers of Sterling Bank, a tier-2 Nigerian bank, could not access the bank’s app because of a migration to a new custom-built core banking application. “Changing the core banking software is like doing a heart transplant,” one industry insider said. GTCO’s transition to Finacle reflects a broader trend among Nigerian banks, driven by evolving technology requirements and the growth of digital banking. The true measure of this trend’s success will be its impact on customer service and the seamlessness of the migration process.
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👨🏿🚀TechCabal Daily – Moove’s new move
In partnership with Lire en Français اقرأ هذا باللغة العربية Good morning We’re officially three weeks away from the conference that will host the most audacious thinkers and doers in African tech. Moonshot 2024 is where you can connect with industry pioneers, explore emerging trends, and discover untapped business opportunities in one of the world’s most dynamic markets. We’re hosting 4,000 guests and 75 speakers across 2 days and 9 content tracks. You can be a part of it too. Get 1 or 2 tickets to front-row seats to celebrate innovation on the continent. Moove expands into the US JKIA workers begin strike action Kenya plans tax cuts Ghana’s inflation quells to a 29-month low The World Wide Web3 Opportunities Expansions Moove expands into the US Moove co-founders Ladi Delano and Jide Odunsi “A small fish going into a big pond.” That’s how my colleague described Moove’s latest expansion into the US. The Uber-backed Nigerian startup offers financing for ride-hailing, logistics and delivery companies, deducting a percentage of the drivers’ weekly earnings to pay for the vehicles in instalments. That model hit a snag in Nigeria—one of the six countries where Moove is currently present—as drivers struggled with repayments due to high living costs and inflation. But the US is every bit different from Nigeria. With a relatively stable economy, large market size (330 million people) and reliable credit scoring systems, Moove has a chance of scoring better margins than other countries where it operated. The US has a market size that dwarfs the market size of other countries where Moove operates. The fintech’s move into the US is likely an all-electric vehicle one, mirroring its move to UAE where it operated an all-EV fleet.Although the US has seen a surge in EV adoption, with many affordable EVs, there is still an opportunity for Moove to thrive in the country’s $94.9 billion EV market. The company will be competing with other vehicle financing startups like Lendbuzz, Car Capital Technologies, and others. Moove’s move (pun unintended) into the US is its first expansion since it announced a $100 million fundraise in March. The firm hinted at an expansion into six new markets after its fundraise. Read Moniepoint’s 2024 Informal Economy Report Did you know that 57.7% of the business owners in Nigeria’s informal economy are under 34 years old? Click here to find out more about the demographics of Nigeria’s informal economy. Companies JKIA workers fear job loss as they begin strike People walk at the Jomo Kenyatta International Airport on September 10, 2024. Image source: Reuters/Thomas Mukoya. Do company leases lead to takeovers? Kenyan aviation workers think so. Early on Wednesday, workers went on a strike over the country’s proposed deal with Indian conglomerate Adani Group to manage and run one of its most important assets: the Jomo Kenyatta International Airport (JKIA). Only one phrase was chanted in unison, “Adani must go.” JKIA, one of Kenya’s most-booked airports, accounted for two-thirds of all Kenyan flights in 2023. When workers went on strike, thousands of passengers were unable to travel. These workers fear that they could lose their jobs if the airport is leased to Adani. What happened to JKIA? In 2013, JKIA suffered a fire outbreak it still hasn’t recovered from. Though the government has put in money to renovate the airport, its runway and passenger terminal still remain in poor condition. Kenya is facing a debt crunch, and there’s little incentive to put in more money on any renovation plans, and this is where Adani’s point of interest comes in. Adani proposed the deal in two parts: first, it will pay for repairs to fix the airport’s terminal and runway for $1.85 billion. Then, it will run the airport independently for 30 years and keep 18% of the annual returns. While both the government and Adani preferred to keep details of the deal under wraps, news broke out that Adani, after 30 years, will keep an equity stake in the airport. Adani, known for its acquisition expansion strategy, clearly has a long-term interest in JKIA. But turning over JKIA assets to a foreign private company looks risky. The poser here is: can Kenya instead explore other public-private partnerships where Adani can fund the project and recoup their investment from JKIA’s financial returns? Fincra secures International Money Transfer Operator (IMTO) licence in Nigeria Since its inception, Fincra has provided businesses with local payment options. However, with the IMTO licence, Fincra can now manage funds transfers from abroad to Nigerian recipients more efficiently. Read more here. Economy Kenya plans tax cuts for individuals and companies GIF Source: Tenor The irony of Kenya’s relationship with money and debt is in how it is willing to forgo expenses in renovating one of its most important airport assets, only to turn around to reduce its tax net. Finance minister John Mbadi plans to cut value-added tax (VAT) from 16% down to 14%, and companies will pay 5% less on corporate taxes. Kenya is facing a debt-sustainability crisis, and if anything, its focus should be on making sure it meets these obligations. If you’re not familiar with economics speak, it means that Kenya needs to raise more money. Tax cuts won’t necessarily help Kenya do that. Kenya’s tax base is already short on what it owes. How will the government plug budget deficits if it cuts revenue collections? But again, the move might also suggest that Kenya still struggles with tax compliance. As at 2021, the Kenya Revenue Authority (KRA) reported a compliance rate of 59%, less than its 65% target. Kenya is between a hard place and a rock: it needs to raise money, but then, it is not collecting nearly enough in proposed tax amounts. Minister Mbadi thinks cutting taxes in the medium term will increase compliance. There is only one winner here. Reduced taxes will unburden Kenyans and free up disposable income for them to spend. We could see higher consumer spending in the coming months if this is implemented. Since its bill was
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Uber-backed Moove takes its search for profitability to America
Moove, the Uber-backed Nigerian startup that finances vehicles for ride-hailing companies, is expanding operations to the U.S. Since August, the company has listed vacancies for roles in Los Angeles and California. This expansion supports the startup’s plan to achieve profitability in 2025. Those U.S. roles include a managing director and more recently a head of debt capital market who will be “critical in driving our fundraising efforts, engaging with key financial stakeholders, and structuring complex transactions,” according to a LinkedIn listing. The four-year-old startup, founded by Ladi Delano and Jide Odunsi, shared its expansion plans in March 2024 when it announced a$100 million raise from Uber, Future Africa, Dubai-based The Latest Ventures, AfricInvest, Palm Drive Capital, and Triatlum Advisors. Moove did not disclose the destination countries but said it will majorly finance electric vehicles upon entry. The company, which operates in six markets—Nigeria, South Africa, Ghana, the U.K., India and the UAE, plans to expand to six additional countries by 2025. Moove did not immediately respond to requests for comments. The U.S. expansion may play out like Moove’s 2023 move into the UAE where it operates a 100% EV fleet some of which accounted for the largest number of EV trips on the Uber UAE platform in the same year. It also operates EV fleets in the U.K. and is preparing to introduce more than 20,000 EVs on Uber in India, per a March report. If Uber’s partnership with Moove is borderless, as its participation in the startup’s $100 million raise suggests, the company’s zero-emission mandate may see a similar soft landing in the U.S. where electric vehicles are increasingly popular. The mobility fintech sells fleets of vehicles to drivers who need them for ride-hailing, logistics and deliveries. It deducts a percentage of the drivers’ income weekly enabling them to pay for the car in installments. This model has met roadblocks in Nigeria where drivers are increasingly finding it difficult to meet payment targets due to inflation and fuel price hikes. It is unlikely that the startup will face similar challenges in the U.S. with a relatively stable economy and reliable credit scoring systems. It is not yet clear if the company will adjust its business model to fit into these new markets or if the revenue-based financing it offers to ride-hailing, logistics, mass transit, and instant delivery platforms, will remain unchanged. Have you got your early-bird tickets to the Moonshot Conference? Click this link to grab ’em and check out our fast-growing list of speakers coming to the conference!
Read MoreChaos at Jomo Kenyatta Airport as workers strike to oppose Adani lease proposal
Several flights were canceled, and hundreds of travelers were left stranded at Jomo Kenyatta International Airport (JKIA) after aviation workers began a strike over a proposal to lease the airport to India’s Adani Group for 30 years. Those workers want the deal canceled over fears of mass layoffs. At 10:00 am on Wednesday, a spot check by TechCabal showed that no flight had landed or taken off at the country’s main airport. Data from Flightradar, a global flight tracking platform, recorded minimal activity at East Africa’s busiest transport hub. The disruption has affected both international and domestic flights. “Kenya Airways would like to alert you that due to the action by some JKIA staff, this has resulted in some delays and possible cancellations of some of our flights for both departing and arriving passengers,” Kenya Airways said in a notice to passengers. Kenya Airports Authority (KAA) did not immediately respond to a request for comment. On Monday, the government’s last-minute efforts to stop the Kenya Aviation Workers Union (KAWU) failed after the representatives accused state officials and airport management of ignoring their demands. “The government has failed to provide the documents we requested for the Adani deal. The strike will go on until the government stops the deal,” said Moss Ndiema, KAWU secretary general. A Kenyan high court suspended the 30-year build-operate-transfer concession until it rules. The privately-initiated project by Gautam Adani’s firm has been opposed over controversial clauses including stopping Kenya from building or expanding other competing airports for 30 years. While the government has defended the deal as the best option to expand JKIA amid a cut in development budgets, it maintains that a decision has not been made to proceed with the lease. On September 3, Kenya sent 16 officials to India for due diligence including inspecting the company’s financial records. At the same time, the Indian conglomerate sent representatives to Nairobi, signalling that the deal could be in advanced stages. “Secret, unknown, unexplained and clandestine movements and activities by Adani employees, agents or assigns around JKIA and related installations be halted and stopped forthwith,” KAWU said in a notice.
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👨🏿🚀TechCabal Daily – Ride-Hailing Woes and Banking Trends
In partnership with Lire en Français اقرأ هذا باللغة العربية Good morning If you want to dive into the future of African tech, then Moonshot 2024 is where you want to be. Connect with industry pioneers, explore emerging trends, and discover untapped business opportunities in one of the world’s most dynamic markets. Enjoy the vibrant energy of Lagos while staying seamlessly connected with prepaid eSIMs from Sochitel. Register now for two days of inspiration, networking, and innovation. Risevest completes Hisa acquisition Cost considerations are driving shrewd Nigerian banking business Are ride-hailing platforms broken? Drivers say yes Egypt’s inflation soars first time in five months The World Wide Web3 Opportunities M&As Risevest completes Hisa acquisition Eke Urum, CEO of Rise, and Eric Asuma, co-founder of Hisa While Nigeria’s Access Bank is easily the busiest M&A machine in the financial services space, fintech startup Risevest isn’t doing badly either. Two months after we first reported that it was in talks to buy the Kenyan fintech startup Hisa, the deal has officially closed. It’s Risevest’s second acquisition in a little under a year. Anatomy of the deal: Risevest and Hisa are fintech startups allowing a growing class of African retail investors access to global stocks and other investment options like real estate. An acquisition of Hisa, which has been approved by Kenya’s markets authority, allows Risevest to expand to Kenya without any hassle. Without this acquisition, getting a licence to operate a fintech in Kenya may have taken up to two years. How much did this deal cost? Risevest and Hisa prefer not to say, although one person with direct knowledge of the deal said it was a cash and stock deal. While a 2022 fund raise valued Hisa at $5 million, it’s doubtful that it would have sold for anywhere near that price. Watch out for Kenn’s article on why this deal made sense for Hisa. A nose for a deal? Risevest acquired Nigerian fintech Chaka in September 2023—it also declined to share the specifics of that deal. That deal made sense because it allowed Risevest to expand its slew of licences, said one person familiar with the deal. Chaka for instance, offered Nigerian stocks and was one of the first companies to receive a digital sub-broker licence from the Securities and Exchange Commission (SEC). Given that both companies’ investors were interested in making the 2023 deal happen, it is likely to have been a stock-only deal. Will we continue to see savvy dealmaking from Risevest as it adds more infinity stones spots more opportunities? Its CEO artfully sidestepped that question. However, he spoke to us on what the future holds for Hisa under new ownership. Read about it here. Read Moniepoint’s 2024 Informal Economy Report Did you know that 57.7% of the business owners in Nigeria’s informal economy are under 34 years old? Click here to find out more about the demographics of Nigeria’s informal economy. Banking How cost considerations are driving shrewd banking business in Nigeria Image Source: Wunmi Eunice/TechCabal. How do the rich stay rich? By shrewdly keeping an eye on costs and ruthlessly pruning anything that may become a drag on their finances later. That’s the story of Nigeria’s biggest commercial banks which reported a combined ₦9.51 trillion ($5.7 million) in profits in 2023. Some tier-1 banks briefly hit ₦1 trillion (($608 million) in market capitalisation despite Nigeria’s macroeconomic conditions. Nigeria’s big banks have perfected the art of eking out profits regardless of the economic conditions and USD-denominated costs are the current enemy of that goal. The decision to float the naira has significantly increased technology costs; think storage, software licencing and even hardware. While banks are notoriously conservative businesses, we’re seeing some flexibility in how they’re thinking about technology costs. On Monday, Sterling Bank formally announced its move to SeaBaaS, a new core banking application. One person suggested that cost consideration may have played a part in the decision to have its custom software. Beyond software, local cloud players are also finding joy pitching to companies. With more competitive pricing than AWS or Azure, big organisations are trying new entities. Huawei, the Chinese enterprise company that went from upstart to a dominant player in the telecoms market, is also seeing and taking opportunities in the Nigerian banking space. Here’s an excerpt from a TechCabal story about how Huawei sold some storage to United Bank for Africa (UBA), a tier-1 commercial bank; “They lure customers in with the option of a free-to-use one-year solution,” said one cloud engineer at another tier-1 bank, citing Huawei’s extended proof of concept that allowed banks to use specific solutions for free. “No one else will offer you a one-year proof of concept,” another cloud engineer said. Read about it here. Fincra secures International Money Transfer Operator (IMTO) licence in Nigeria Since its inception, Fincra has provided businesses with local payment options. However, with the IMTO licence, Fincra can now manage funds transfers from abroad to Nigerian recipients more efficiently. Read more here. Mobility Are Ride-Hailing Platforms Broken? Drivers Say Yes Image source: TechCabal Kenyan and Nigerian gig drivers can trade places given how similar their challenges are. Two weeks after gig drivers in Kenya defied the almighty algorithms of Uber and Bolt to fix their own prices—that was always going to be shortlived for reasons I’ll explain later—Nigerian drivers are lightly copying the playbook. One gig driver in Lagos shared that trips under ₦3,000 ($1.82) are not worth his time; drivers are now telling customers to pay extra or cancel the trips. On Monday, my colleagues in Abuja took four trips on Bolt and Uber for which they had to pay above the prescribed prices. Is the gig driving model broken? Or are macroeconomic conditions spotlighting problems in a fragile business model? These questions are crucial as the gig economy faces increasing tensions between drivers and ride-hailing companies. Drivers in Kenya and Nigeria are protesting low fares, rising costs, and the perceived unfairness of the platform algorithms. Bolt and Uber increased fare
Read MoreExclusive: Nigerian investment fintech Rise completes acquisition of Kenya’s Hisa
Rise, a Nigerian fintech that gives customers access to selected global investments, has acquired Hisa, a Kenyan investment startup. The acquisition, the second for Rise in under a year, was approved by Kenya’s Capital Markets Authority (CMA) and gives Rise the right to operate in Kenya. Post-acquisition, Hisa will retain its brand and operations, including its staff. “We like the Hisa name because it resonates well with Kenyans so we have no plans on changing it,” Rise CEO Eke Urum told TechCabal. “We are not planning to make a lot of changes; it is time to understand the company, the culture, the context, and the market that we are coming into.” While Rise declined to share transaction details, one person with knowledge of the transaction told TechCabal the deal involved a mix of stock and cash. Hisa CEO Eric Jackson will become chief technology officer (CTO), a position he previously held before Eric Asuma, Hisa’s co-founder and then CEO, stepped down. Asuma, the founder of the business publication Kenyan Wall Street, co-founded Hisa with Jackson in 2020 and will stay on as a strategy advisor. Leah Njoroge, a former investment analyst at Kenyan Wall Street and finance associate at Hisa, has been named head of operations. All seven Hisa employees will report to her. Njoroge will report directly to Urum, who will now oversee Hisa as part of his wider portfolio of acquired startups. “With these two changes, we have some clarity on how we are going to grow in the next few months,” Eke said. Hisa plans to hire additional leaders once it starts seeing operational improvements. “Then maybe there will be a conversation on bringing external leadership to bolster the team. Otherwise, everything remains the same.” Hisa investors, including Faida, a Kenyan investment bank, Ham Serunjogi, and Majid Moujaled, co-founders of Chipper Cash, were involved in the acquisition talks. Eke declined to comment on whether any of the investors left Hisa post-acquisition, although he confirmed that Faida is still an investor.
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