Navigating the evolving regulatory landscape of cross-border payments in Africa
This article was contributed by Robert Sargsian, Co-founder/CEO at Due, and Omotesele Esekhaigbe, Compliance and Risk Manager (MLRO) at Zone as part of the Emerging Trends in Cross-Border Payments: A Growth Guide for Stakeholders report authored by Aroghene Favour Ndulu and Paschal Okeke. The regulatory ecosystem in Africa has many challenges, especially for cross-border payments. While the continent is experiencing rapid growth in digital financial solutions, the regulatory environment remains challenging for businesses and payment service providers. One apparent barrier is that Africa’s regulatory environment is highly fragmented, with each country enforcing its unique compliance requirements. This fragmentation cuts across policies, licences, and anti-money laundering (AML) regulations. This lack of harmonisation complicates efforts to create unified cross-border payment solutions. For instance, what qualifies as compliant in one nation or state might fail to meet the standards of another, forcing payment providers to adapt their operations country by country, multiplying their compliance costs. Another barrier in Africa today is a lack of a clear regulatory framework for stablecoins/digital assets. Regulatory clarity creates a much more streamlined and transparent ecosystem. We see some progress in South Africa in that direction, where the regulator and banks are open to digital assets/stablecoins use cases. Capital controls and restrictive foreign exchange policies- Many African countries impose strict capital controls and FX regulations to manage currency volatility and protect local economies. However, these restrictions make it difficult to transfer funds across borders, particularly in hard currencies like the US dollar or Euro. This creates bottlenecks for businesses needing to make international payments or manage cross-border investments. For instance, Nigeria has historically imposed FX controls that limit foreign currency availability, affecting businesses’ ability to conduct international transactions smoothly. Influencing policymaking Stakeholders, including payment service providers, regulators, and regional organisations, can influence policies to streamline cross-border payments in four ways: Advocate for harmonised regulations: Stakeholders can collaborate with regional economic blocs, such as the Economic Community of West African States (ECOWAS) and the Common Market for Eastern and Southern Africa (COMESA), to advocate for standardised payment regulations. A pertinent example is the Single Euro Payments Area (SEPA) in Europe, which harmonised payment systems across 36 countries, enabling cross-border euro transactions to be as straightforward as domestic ones. Public-private partnerships for improved financial infrastructure: Public-private partnerships (PPPs) can help build real-time payment systems, such as Nigeria’s NIBSS Instant Payment (NIP) platform, which processes millions of transactions daily in seconds. These partnerships can also create policies that encourage cross-border trade and investment. For example, the collaboration between the World Bank and several African countries under the “Regional Payments Integration Initiative” aims to improve interoperability between national payment systems, making cross-border transactions faster and cheaper. Engage with central banks to ease currency controls: By collaborating with central banks, stakeholders can advocate for policies that ease restrictive currency exchange rules and improve liquidity. For example, the Monetary Authority of Singapore (MAS) has partnered with industry players to develop Project Ubin. This blockchain-based cross-border payment system simplifies multi-currency payments while ensuring compliance. Similar innovations could address currency barriers in emerging markets like Africa. Build great products: Building great products, people love and are ready to push their authorities for. For example, consider how Uber has used its user base to push politicians in San Francisco to drop the anti-ride-hailing regulations. Challenges of multiple regulatory frameworks Each jurisdiction’s different regulatory requirements demand substantial financial and human resources. This fragmentation increases operational complexity and escalates compliance costs. Non-compliance can lead to severe penalties. In July 2024, Nigeria fined Meta $220 million for violating its local data and consumer laws. Another challenge is delays. Securing multiple licenses for similar activities across different regions can be time-consuming and redundant. This duplication often delays market entry, hindering a company’s ability to capitalise on growth opportunities. In emerging markets like Africa, licensing processes are further complicated by bureaucratic inefficiencies and unclear timelines, making it challenging for businesses. Data privacy laws and cross-border payment solutions In Nigeria, there has already been a rising need for compliance professionals in Fintechs. We’re seeing tech companies hire established compliance hires from traditional banks. This move was inspired by the attempt of central banks to derisk digital transactions. Laws like the Nigeria Data Protection Act and emerging frameworks like Kenya’s Data Protection Act demand solid compliance mechanisms. Providers operating across multiple regions must develop adaptable systems that meet these requirements without compromising efficiency. Some jurisdictions now mandate that specific categories of data be stored within their borders. Nigeria’s data protection law emphasises data residency, while India has proposed similar requirements. These demands can increase operational costs as companies invest in localised data centres and infrastructure to comply. Efforts to harmonise privacy laws across regions could reduce the compliance burden on payment providers. The African Continental Free Trade Area (AfCFTA) includes discussions on aligning data protection policies to facilitate smoother digital trade. Such initiatives could spur innovation and encourage more players to provide cross-border payments. Managing FX risks in cross-border transactions Fast settlements: The biggest unlock for FX risk management is fast settlements. If you can settle fast, then the time exposure you take the FX for can be limited. Stablecoins allow for a much faster settlement, almost instant, which is going to push down the spreads a lot in all markets. Hedging strategies: Using instruments such as forward contracts, options, and swaps to hedge against currency fluctuations. These tools allow companies to lock in exchange rates, reducing their vulnerability to market volatility. Forward contracts can provide certainty in cash flow management by ensuring a fixed rate for future transactions. Real-time FX monitoring: Advanced technology, such as APls, can monitor currency movements in real-time, providing valuable insights into market trends. Online FX monitoring platforms can help businesses make timely and informed decisions, minimising the impact of unfavourable exchange rate shifts. Use derivatives: This is one strategy that is currently being underutilised. For instance perpetual, when taking FX exposure, you can simultaneously hedge it on a perps market. This is not practiced that often in
Read MoreKey telecom executives say Nigeria’s tariff hike insufficient to address challenges
After 11 years of negotiations, the Nigerian Communications Commission (NCC) approved a 50% tariff hike in telecom services like calls, SMS, and internet bundles. While the decision is a step forward in addressing the sector’s financial strains, industry players say it’s only a partial win—falling short of the 100% hike they had long lobbied for. The 50% hike will not solve the sector’s challenges, including underfunded infrastructure and rising operational costs. Under the new policy, operators can adjust prices within the established tariff bands of ₦6.40 to ₦50, as outlined in the NCC’s 2013 Cost Study. While Monday’s announcement did not state when the new rates would take effect, an MTN executive confirmed to TechCabal that the increase would be rolled out in a week. Subscribers who recharge before the new tariffs are implemented or have ongoing data plans will not experience immediate price hikes unless they make new purchases. While the adjustment helps bridge the gap between operational costs and revenues, it does not fully address the broader issues plaguing the sector. “Tariff adjustment is a step towards bridging the gap between operational costs and revenues, but it does not fully address our need for a 100% increase. However, we understand this is a move in the right direction,” said Tony Izuagbe Emoekpere, President of the Association of Telecommunications Operators of Nigeria (ATCON). “This adjustment will help operators invest in infrastructure, expand coverage, and improve service quality.” Gbenga Adebayo, President of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), said the tariff increase is just one part of a broader agenda to ensure the sector’s sustainability. “Increasing tariffs was only part of the solution. We are grateful for the progress made, but we are taking it one step at a time,” he said. Industry stakeholders like Adebayo and Emoekpere believe addressing problems like multiple taxation, the protection of telecom infrastructure, and uniformity in the right of way for infrastructure are critical to improving service quality. “The focus should not only be on tariffs,” said Adebayo. “We need a holistic approach to improve the ecosystem—starting with the protection of telecom infrastructure through proper enforcement of the Critical National Infrastructure gazette.” The tariff hike will help major operators like MTN and Airtel manage their expenses and service debts, as operational costs have surged by 120%. The additional revenue will also be directed toward capital investments to enhance service quality. NCC Executive Vice Chairman Aminu Maida has given operators a three-month window to recover losses, after which the regulator will now focus on service quality improvements. “We remain committed to supporting Nigeria’s digital transformation agenda and driving inclusive growth,” said Karl Toriola, MTN Nigeria CEO. “This tariff adjustment will help us maintain the critical investments required to deliver high-quality services to Nigerians.” Nigeria’s broader economic challenges, including multiple currency devaluations, inflation, and the removal of fuel subsidies, have exacerbated the telecom industry’s financial pressures. In the last two decades, Nigeria has experienced four currency devaluations and two economic recessions, all of which have significantly impacted telecom operators’ operational costs.. At the time of Nigeria’s telecom liberalization in 2001, the naira exchanged at ₦104 to the dollar. By 2003, it had risen to ₦135, prompting the NCC to approve a tariff hike. By 2013, when the naira stabilized at ₦155, tariffs were revised downward as the sector grew faster than headline inflation r. However, the current tariff structure has become increasingly unsustainable as the naira has fluctuated between ₦1,500 and ₦1,700 over the past year. Headline inflation has accelerated above 33% since October 2024, putting additional strain on telecom operators’ ability to meet rising costs. “What has happened over the years is compounded inflation and the devaluation of the naira, which has made production costs significantly higher than they used to be,” said a telecom CEO who asked not to be named for fear of suggesting bad faith around the negotiations. Many operators believe the long-term solution lies in fully deregulating the telecom sector, allowing prices to be determined by market forces rather than a centralized tariff system. Under the current regulatory framework, the Nigerian Communications Act of 2003 gives the NCC the authority to set price floors and ceilings for telecom services. For instance, the price floor for a one-minute call is ₦6.40, while the ceiling is ₦50. Operators can set their prices within this range but must seek NCC approval for any adjustments—a process that is often slow and restrictive. “The ideal solution would be to fully deregulate the telecom market and let tariffs be set by market forces,” said one senior telecom executive who asked not to be named so he could speak freely. “This would allow operators the flexibility to adjust prices in real-time to respond to economic conditions. However, such a move would require a comprehensive review of the Nigerian Communications Act.” Some have proposed an alternative solution: implementing a fixed approval timeline for any tariff hike. For example, operators would have 90 days to submit price changes, and if the NCC does not respond within that period, the proposed price changes would be considered approved.
Read MoreSeamlessHR informally explored PaidHR acquisition in 2024 as competition in HR-SaaS intensifies
After raising $9 million in a Series A extension round in late 2024, the Nigerian HR Software-as-a-service (SaaS) company SeamlessHR initiated informal discussions with competitor PaidHR about a possible acquisition, according to multiple sources familiar with the discussions. However, those early stage talks did not progress to a formal offer or agreement, the same people said. According to one person close to the discussions who requested anonymity due to the sensitive nature of the talks, SeamlessHR initiated those informal conversations in the fourth quarter of 2024 but was rebuffed. Typically, a formal acquisition offer involves sending an indication of interest (IOI), while informal talks often occur without paperwork. No formal IOI was ever presented in this case. Instead of focusing on acquisition opportunities, PaidHR has continued to focus on its aggressive growth trajectory. Since its 2020 launch, the company has rapidly expanded, offering key payroll and HR services to over 200 businesses, including major Nigerian firms such as Flutterwave, Oando, and Mavin Group. In 2023, it paid ₦11 billion ($77 million) in client salaries, a significant jump from ₦2.7 billion ($18.5 million) in 2022. The company has also invested heavily in cross-border payroll technology, which many view as a unique competitive advantage. The acquisition would have allowed SeamlessHR, founded in 2018, to consolidate its position in the fiercely competitive HR-tech space. A successful deal would have enabled SeamlessHR to absorb PaidHR’s customer base in a space where customer acquisition is expensive and switching costs are high. Both companies declined to comment on the matter. SeamlessHR confirmed, however, that no formal acquisition discussions took place. The Nigerian HR-tech sector has become increasingly fragmented, with companies like BizEdge, PaidHR, Motherboard, Bento Africa, NotchHR, and Ropay all vying for market share. This growing competition has made it more challenging for a clear market leader to emerge, but there have been notable developments in the space. PaidHR’s cross-border payroll system, which enables companies to pay employees in different countries using local currencies, has been a standout feature since its launch. Within 10 weeks of launch, it contributed 9% of PaidHR’s revenue, said a company executive who asked not to be named because they were not authorised to speak to the press. The cross-border capability is a key reason SeamlessHR reached out, the same person said. The feature would have complemented SeamlessHR’s product suite, including HR management, performance management, leave and payroll management, recruitment, and HR analytics. In addition, the broader HR-tech sector in Nigeria is increasingly seen as ripe for consolidation. With over 20 companies competing in a crowded market, industry experts believe the sector would benefit from reduced fragmentation. “The HR Payroll space will benefit from contraction,” said the CEO of one HR-SaaS startup who asked not to be named so he could speak freely. “The ecosystem is better served by a few larger companies that can deliver high-quality services, rather than many small ones that may struggle with scaling.” However, other industry stakeholders caution that sub-Saharan Africa’s HR-tech space may not yet be ready for consolidation. “Most players in the region are still in the early stages of product development,” said another HR-SaaS CEO, who also spoke anonymously. “For consolidation to succeed, companies need to have reached product maturity.” Deel’s acquisition of South Africa’s PaySpace was possible because the company had been in operation for over two decades, giving it the time to refine its product and establish a mature offering, the same person added.
Read MoreKenya’s startup bill mandates R&D investment, but ownership rule sparks concerns
Kenya’s Senate has passed the controversial 2022 Startup Bill, setting the stage for a transformative shift in the country’s burgeoning startup ecosystem. If President William Ruto signs the bill into law, it will mandate Kenyan startups to allocate at least 15% of their expenses to research and development (R&D) and maintain wholly Kenyan ownership to qualify for legal recognition and government support. The bill now awaits presidential assent. While the bill introduces a range of incentives—such as tax breaks, grants, incubation programmes, and credit guarantee schemes aimed at boosting innovation—it has sparked concerns, particularly around its requirement for wholly Kenyan ownership. Critics argue that the bill could stifle growth by excluding startups with foreign co-founders or foreign investors that do not meet the bill’s ownership criteria. Such startups, which have been a significant part of Kenya’s entrepreneurial rise, would be unable to access key benefits, limiting their growth potential. “An entity shall be eligible to be registered as a startup and for admission into an incubation programme if the entity is wholly owned by one or more citizens of Kenya and at least fifteen percent of the entity’s expenses can be attributed to research and development activities,” a section of the bill states. The bill’s critics warn that while the intent is positive, its rigid requirements could stymie the innovation it seeks to encourage. Many successful Kenyan startups have attracted significant foreign capital and have foreign founders or co-founders whose contributions and expertise have positioned Kenya as an African innovation hub. The bill’s local ownership mandate could exclude such startups, potentially undermining the country’s appeal as a magnet for international venture capital. Kenyan startups have attracted millions of dollars in VC funding over the last decade, highlighting the country’s growing appeal for investors. In 2024, the country’s startups raised $638 million (KES82.3 billion), according to a report by Africa the Big Deal.  The 15% R&D expenditure mandate has been received more warmly as it aims to spur deeper innovation within the Kenyan startup ecosystem, encouraging founders to secure patents, register software, and engage in critical research—all vital for staying competitive globally. As Kenya’s startup sector matures, this requirement will push companies to prioritize long-term innovation and intellectual property. If President Willliam Ruto signs the bill into law, the Registrar of Startups will oversee startup operations, including research activities and tracking the flow of venture funding. While this oversight could improve accountability, it also raises questions about the burden of compliance for startups already dealing with tight budgets and complex business challenges. Steve Okoth, a tax director at BDO East Africa, described the 15% R&D requirement as a move to “institutionalise” innovation among founders and enhance “competitiveness” in the startup ecosystem. He argues that it would strain startups as most operate on thin margins and cannot prioritise cash flow for survival over discretionary spending like R&D. “This approach may be overly prescriptive. Startups are diverse, and their ability to innovate often depends on their specific industry, stage of development, and business model. A blanket mandate could be counterproductive,” Okoth said. “A more flexible, incentive-driven approach that accounts for the realities of Kenya’s startup ecosystem would be more effective in fostering sustainable innovation and growth.”
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👨🏿‍🚀TechCabal Daily – MTN Nigeria’s share price jumps by10%
In partnership with Lire en Français اقرأ هذا باللغة العربية Good morning Here’s your reminder to add TC Daily to your Primary/Main folder so you don’t miss any important updates. MTN Nigeria’s share price jumps 10% after news of tariff hike Globacom’s Ahmad Farroukh resigned as CEO after one month Kenya wants crypto firms to establish physical offices Transgrid Enerco acquires Eko DisCo World Wide Web 3 Events Telecoms MTN Nigeria’s share price jumps by 10% after news of tariff hike GIF Source: Tenor Investors holding MTN Nigeria (MTNN) shares had reasons to smile yesterday after regulators approved the 50% tariff hike on Monday. The markets reacted positively to the news, pushing MTN Nigeria’s shares up almost 10%. MTNN shares traded at ₦256.30 ($0.16) at the close of market on Tuesday—its highest since March 2024. While MTN Nigeria traded higher, shares of Airtel Africa, another publicly listed telco that has previously voiced opinions on the tariff hike, remained unchanged. This is likely because Airtel Africa’s listing covers its entire African business portfolio. So, while the news in Nigeria is positive, it is a small cog of the 14 markets where the telco operates. Telcos like MTN Nigeria and Airtel have been bleeding billions of naira in FX losses owing to the currency devaluation in major markets. During its Q3 2024 results announcement on October 30, 2024, MTN Nigeria reported a nine-month ₦514.9 billion ($331 million) FX loss. Following this, its share price stayed unchanged. However, six days later, the price fell from ₦175 to ₦169, marking a 3.4% drop. This reflected investor concerns over the company’s ability to weather Nigeria’s tough economic conditions. With the tariff hike, MTN Nigeria is expected to turn a profit—or at least hedge its FX losses—by Q1 2025. Investors are confident that the expected revenue boost will stabilise the company’s finances, improve profitability, and drive growth in the coming months. Collect payments Fincra anytime anywhere Are you dealing with the complexities of collecting payments in NGN, GHS or KES? Fincra’s payment gateway makes it easy to accept payments via cards, bank transfers, virtual accounts and mobile money. Get started now. Telecoms Globacom’s Ahmad Farroukh resigned as CEO after one month Ahmad Farroukh Ahmad Farroukh, who assumed Globacom’s CEO role in October 2024, stepped down in November after just one month, marking one of the briefest leadership tenures the Nigerian telecoms sector has seen. Farroukh’s resignation is more than a headline—it’s a sign of the telco’s struggles. Here’s how Ayoola Oke, a former Special Adviser to the former Executive Vice-Chairman of NCC, Ernest Ndukwe, described the news. “A CEO leaving in one month is unprecedented in the industry. The NCC can investigate the reason for his exit. The commission can seek an explanation from the CEO, who is not obligated to respond, or from the company because this is about corporate governance, which the NCC Act covers.” While Globacom has stayed silent, insiders point to the company’s centralised management style as a key reason for Farroukh’s quick exit. Led by its Nigerian billionaire founder Mike Adenuga, Globacom has long relied on a top-down approach to decision-making. Before Farroukh, Adenuga led the telco as CEO from its founding in 2003. The steady decline of telco over the years brought the issues the company faced to the public’s attention. Its market share plummeted to 12% following regulatory penalties for improperly registered SIMs. It further lost 40 million subscribers after the Nigerian Communications Commission (NCC) reviewed its subscriber data. Add to that a reputation hit from a 2023 data breach that exposed millions of customers, and you have a company in crisis mode. Bringing in Farroukh was supposed to be a statement that the telco wanted to turn things around. However, the timing of Farroukh’s resignation raises tough questions. Can Globacom adapt to regulatory pressures and regain its edge in a fiercely competitive market? Or will its entrenched governance style make it harder to retain top talent and rebuild? With Farroukh’s exit, seeing Globacom’s next moves will be interesting—whether it hires a new CEO or Adenuga reclaims the reins. A company that once defined Nigeria’s telecom success now faces a stark choice: evolve or risk falling further behind. Cryptocurrency Kenya wants crypto firms to establish physical offices, have vetted CEOs Image source: TechCabal/Timi Odueso Kenya has updated its newly introduced Virtual Asset Service Providers Bill, 2025, as part of its efforts to regulate the crypto sector. The bill now requires crypto firms to establish physical offices in Kenya, seek licences, and have their executives vetted by regulators. Last week, Kenya also demanded that social media companies establish a physical presence in the country. These actions show that the government wants to strengthen its control over global businesses by ensuring they are directly accountable to local authorities, making it easier to enforce regulations and monitor their operations. However, the crypto bill raises some concerns. Many crypto firms operate remotely without physical offices. Opening physical offices in the country would require them to seek licences and other operating approvals from the regulator, which some crypto companies—especially foreign ones—may view as excessive, given their operations in other markets. Yet, if the market is important enough, they’ll set up offices. Foreign crypto companies like Luno, for example, claim to have a physical presence in Nigeria, but online records do not verify this—signaling that offshore companies have largely operated without the need for physical locations, relying instead on the ruse of remote collaboration. However, with Kenya pushing for this rule, it could set a precedent for how African governments engage with foreign businesses. Kenya has faced criticism over its slow implementation of a regulatory framework for crypto. That sluggishness led to Kotanipay, its homegrown crypto exchange, obtaining a crypto licence first in South Africa before its own country. However, Kenya is now making noticeable progress in stepping up efforts to bring the crypto sector under its watch. The country’s move to regulate crypto is part of a larger trend across Africa, where governments
Read MoreMTN share price jumps 9.87% on news of tariff hike approval
MTN Nigeria’s share price soared to ₦256 on Tuesday, marking a 9.87% increase after regulators approved a 50% hike in telecom tariffs. This surge reflects investor confidence in the profitability of the company after two years of sustained losses. Meanwhile, rival Airtel Africa’s stock remained stable, underscoring the limited impact of the Nigerian tariff adjustment on the company’s overall valuation since its listing covers its entire African business portfolio. Airtel Africa’s share price closed ₦2,159 on Tuesday. Tuesday’s price is MTN Nigeria’s highest since March 2024 when it traded at ₦267.80. On December 23, 2024, when TechCabal reported that the Nigerian Communication Commission (NCC) would approve a long-pending proposal for telecom tariff hikes in January 2025. MTN’s stock price jumped 9%. Since 2023, MTN Nigeria’s profits have plunged thanks to a naira devaluation and quickening inflation. The telco giant reported a loss after tax of ₦514.9 billion in the first nine months of 2024, a 59.2% decline compared to the previous year. MTN Nigeria has been focused on accelerating its earnings to recover from the losses, according to its Q3 2024 earnings report. The approved tariff hike will reduce the impact of the macroeconomic condition and support the company’s profitability. The road to recovery for MTN is still underway. One of those strategies to restore its balance sheet is raising fresh capital. On January 17, the telco announced that it raised an additional ₦42.20 billion through commercial paper issuance. “In the first nine months of 2024, we sustained the growth in our underlying operating performance – underpinned by our resilient business model and operational agility – despite challenging conditions,” Karl Toriola, MTN Nigeria CEO said in the Q3 2024 earnings report.
Read MoreEgyptian fintech MoneyHash raises $5.2 million Pre-Series A from Flourish Ventures
MoneyHash, an Egyptian fintech startup that provides APIs to help businesses in Africa and the Middle East manage their online payments on a single platform, has raised $5.2 million in a pre-Series A funding round. MoneyHash will use the funding to to deepen its presence in the Middle East and North Africa (MEA) region and expand into other markets. The funding round was led by Flourish Ventures and saw participation from Saudi’s Vision Ventures, Arab Bank’s Xelerate Fund, and Emurgo Kepple Ventures. Angel investor, Jason Gardner, the founder and former CEO of Marqeta, also invested in the round, alongside existing investors like COTU, RZM Investment, and Tom Preston-Werner. The new fundraise brings the total fund raise to about $12.7 million. The startup raised $4.5 million in seed investment in 2024 and a $3 million pre-seed in 2022. Launched in 2020 by Nader Abdelrazik and Mustafa Eid, MoneyHash set out to solve challenges in fragmented payments problems for merchants in the MENA region. Large merchants, especially those operating across borders, face the complex task of managing multiple payment methods and providers. MoneyHash simplifies this with a single platform that integrates various payment gateways—like Checkout, Stripe, Ayden, Amazon Pay, Tap and ValU—through a unified API, optimizing for success and minimizing fraud. MoneyHash initial started by providing companies with sandbox access to its API, enabling connections to local payment gateways like Fawry, Paymob, and PayTabs. “We’ve built MoneyHash specifically to help merchants overcome these complex challenges and turn payments from a liability into a strategic advantage,” said Nader Abdelrazik, co-founder and CEO of MoneyHash. MoneyHash claims one of its key selling point is its comprehensive integration network. “With over 300 pre-integrated APIs of payment service providers and methods across 100+ markets, we’re not just solving today’s challenges—we’re future-proofing payment operations for our merchants,” said Abdelrazik.
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Realising regional expansion for African startups
Next Wave: A founder’s personal assets as collateral for failure: Lessons from China’s startup ecosystem. Cet article est aussi disponible en français <!– In partnership with –> <!–TopBanner January 19, 2025 The Pan-African dream: Realising regional expansion for African startups Image | Pixbay African founders have often been criticised for their rapid pan-African expansion drives. Understandably, the African continent holds undeniable allure for entrepreneurs with a balance of lofty ambitions and business acumen to serve marginalised groups. With over 1.4 billion people and an estimated combined GDP of $3.1 trillion, the African continent presents boundless opportunities for indigenous startups. Drawing from recent successes and failures, a deeper look at local startups’ pan-African expansion reveals that a one-size-fits-all model might not always be the best for founders and VCs looking to expand across borders. From Nairobi to Lagos, Cape Town to Cairo, the vision of a single African market under the African Free Trade Area (AfCFTA) has promised to lift the trade barriers and logistical hurdles. However, the reality of pan-African expansion for startups is still far more complex. A Pan-African dream Building scale and maintaining a lower burn rate can coexist in a symbiotic relationship. Every founder aspires to scale their business, yet many—along with their investors—fail to evaluate the broader impact of every strategic decision. The consequences are often severe, leading to layoffs and shutdowns after ambitious attempts to scale. For tech startups in the logistics, fintech, and e-commerce sectors, expansions can create the network effect needed to grow and unlock new revenue streams. Success stories like M-Pesa’s, Jumia’s, and Flutterwave’s inspire founders to embrace the pan-African dream, presenting cross-border expansion as a benchmark. The catch is that these examples are exceptions, not norms. The diversity of African markets, including cultural differences, a fragmented regulatory landscape, and varying levels of infrastructure, makes expanding across the continent daunting. Too often, the pan-African dream collides with harsh realities like regulatory challenges or different consumption behaviours. However, the challenges startups face in expansion drives offer valuable lessons to founders. In 2021, Twiga Foods, a Kenyan B2B agricultural produce platform, reversed its plan to expand into Nigeria. The startup struggled to replicate its centralised distribution model. It paused its pan-African ambition to focus on deepening its footprint in Kenya. Despite M-Pesa, Jumia, and Flutterwave’s success in their respective home markets, some regional markets have been a hard nut to crack. For instance, M-Pesa struggled to gain traction in South Africa due to the high penetration of card payments and a significant proportion of the population already being banked. Flutterwave has faced delays in securing licensing in Kenya, hindered by the absence of clear regulatory frameworks. Similarly, Jumia had to shut down its operations in Tanzania due to restrictive local laws. In most cases, the barriers are due to outdated regulations, like in Kenya where payment systems and banking laws do not recognise fintechs outside the traditional mobile money and financial institutions. M-Pesa’s success in the early days was tied to its ability to reach millions of unbanked Kenyans, especially in rural areas without physical banks. It enabled people to receive and send payments, bypassing traditional banking systems. For its part, Jumia’s achievements can be attributed to good market timing and adaptability to challenges. Jumia launched in 2012 when Africa’s e-commerce was in its infancy, giving it brand recognition that has helped it build customer trust. The company’s localised approach in its expansion has helped it set shop in about 10 African countries. Bureaucratic inefficiency and corruption in key institutions like parliament slow reforms. It permits political patronage where powerful individuals and companies influence law changes. Many reforms have also been tied to external conditions from multilateral lenders like the World Bank and the International Monetary Fund (IMF). While some reform recommendations open up sectors—like the current push from the IMF to regulate crypto—others are unpopular and face resistance from industry players. African founders are exploring mergers and acquisitions to skirt challenges hampering expansion like delays in licensing. Acquiring an existing player in the target market is proving to be a shorter route to expanding across the continent. In 2024, Nigerian fintech Rise acquired Kenya’s Hisa, giving it access to the market without licensing delays from the regulators. Moniepoint’s acquisition of Kopokopo also achieved the same goal. Harmonisation of laws could ease startups’ expansion headaches across Africa. Regional trade blocs like EAC, ECOWAS and SADC should adopt a unified regulation approach. For instance, as EAC works on a monetary and customs union, they should adopt a single licensing regime for startups and companies. Movement across Africa is still more expensive than on other continents. Increased investments in roads, rail and air transport could cut travel costs for talent and goods. In addition, massive investment in digital infrastructure like fibre optic cables is required to increase connectivity and bring down internet costs. Next Wave continues after this ad. Join millions of Nigerians earning 20% interest on their savings with zero risk. Trusted by 35 million users and 1.2 million businesses, PalmPay empowers your money to do more. Start saving today! Why one-size-fits-all doesn’t work Even with six regional trade blocs, each country on the continent has its regulatory frameworks, consumer behaviour, and infrastructure challenges. These complexities are often underestimated by startups, leading to costly missteps. Take Sendy and Copia, for example. Both Kenyan startups expanded across borders prematurely, before consolidating their presence in their home market. Copia, a B2C e-commerce platform, ventured into Uganda in 2022 while still grappling with order fulfilment issues in Kenya TechCabal. Such rushed expansions can stretch resources thin and jeopardise long-term growth, which is why it’s important to master the home market before venturing into new territories. Consumer spending habits, for instance, are one behaviour that startups often overlook. Southern African consumers have a higher spending power and prefer formal retail stores and e-commerce platforms. In East and Central Africa, informal markets play a bigger role. A strategy that works in Kenya may fail in Uganda or Ghana, and
Read MoreGlobacom CEO Ahmad Farroukh resigns after one month amid governance challenges
Ahmad Farroukh, who was appointed CEO of Nigerian telecom giant Globacom in October 2024, resigned after just one month in the role, multiple sources close to the matter confirmed. While Globacom has not issued an official statement or communicated the resignation internally, several industry insiders suggest the decision was linked to significant challenges within the company’s organisational structure. A mid-level manager at Globacom, speaking on the condition of anonymity, speculated Farroukh’s departure was tied to problems with the organisational setup. A top-level executive at the Nigerian Communications Commission (NCC) who asked not to be named confirmed Farroukh’s exit but declined to share specifics. Globacom did not respond to multiple requests for comments. Farroukh’s abrupt resignation highlights significant internal challenges at the company, which has long been criticised for its centralised decision-making process. According to a former Globacom executive, the company’s founder, Mike Adenuga, is key to most decisions within the company. Adenuga has managed the telecom giant alongside his other business interests, including oil and gas, financial services, and real estate, with minimal structural separation between his other ventures and Globacom’s operations. This approach has historically worked for the company but may have presented obstacles for Farroukh, whose experience at more structured organizations like MTN and Airtel might have led him to expect a different level of operational autonomy. Farroukh’s departure also comes when Globacom is facing heightened regulatory scrutiny. In late 2024, the NCC’s sector audit revealed that over 40 million subscribers were not properly registered with their National Identification Numbers (NIN), violating government regulations. This led to a significant loss of market share, with Globacom’s share of the Nigerian mobile market shrinking by approximately 60%, leaving it with just 12%. Globacom has also faced ongoing cybersecurity issues, including a high-profile hack in 2023 that exposed the personal data of millions of its subscribers. These issues may have created an environment where Farroukh’s leadership efforts could not make a meaningful impact quickly. “A CEO leaving in one month is unprecedented in the industry. The NCC can investigate the reason for his exit. The commission can seek an explanation from the CEO, who is not obligated to respond, or from the company because this is about corporate governance, which the NCC Act covers,” said Ayoola Oke, a former Special Adviser to the former Executive Vice-Chairman of NCC, Ernest Ndukwe. Globacom’s leadership void following Farroukh’s departure will raise questions about the company’s ability to navigate its ongoing internal challenges and regain its competitive edge. Without significant structural changes, it is unclear how Globacom can address the organizational weaknesses that led to Farroukh’s exit.
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👨🏿‍🚀TechCabal Daily – No shaking!
In partnership with Lire en Français اقرأ هذا باللغة العربية Good morning Let’s dive right in. Tariff hikes have come to Nigeria A big step forward for payments in Kenya Kobo360 cut jobs in November 2024 Nigeria’s cloud players say they’re more than just pricing World Wide Web 3 Events Telecoms NCC approves 50% tariff hike for Nigerian telcos GIF Source: Tenor While the December holidays were in full swing, TechCabal’s Frank Eleanya reported that the proposal to raise Telco tariffs (a.k.a. the amount you pay for calls, texts and data) was a done deal. Here’s what Frank wrote at the time: “The Nigerian Communications Commission (NCC) will approve a long-pending proposal for telecom tariff hikes…in January 2025. This marks the end of over a decade of lobbying by telecom giants like MTN Nigeria, Airtel, and 9Mobile.” At the time, one person with direct knowledge of the talks shared that the conversations began in October 2024, with telcos asking for 100% increases. Reality was a little disappointing, with the NCC capping the increase at 50%. While it will still prove deeply unpopular, some will argue that telco prices should not be regulated in the first place. Companies in other sectors have raised (and continue to raise) prices in response to inflation, yet telcos have been forced to sit there and eat the losses. After billions in losses in 2023 and 2024, something had to give—50% to be precise. Will it be sufficient for the long term? That appears doubtful. But for now, the telcos get a bit of relief. Now imagine if you had bought telco shares when we broke the news in December (this is not financial advice!) Collect payments Fincra anytime anywhere Are you dealing with the complexities of collecting payments in NGN, GHS or KES? Fincra’s payment gateway makes it easy to accept payments via cards, bank transfers, virtual accounts and mobile money. Get started now. Fintech A big step forward for payments in Kenya Image: Reuters/Noor Khamis Last week, Safaricom, Kenya’s largest Telco, published a joint report with the Kenya Bankers Association (KBA) where it estimated that building a new fast payment system (FPS) could cost $200 million and require four years to complete. In that report, the telco argued that upgrading the Pesalink, which facilitates interbank transfers between 39 banks in Kenya, will save the Central Bank of Kenya (CBK) money compared to building the FPS. Following that report, Safaricom’s mobile money platform, M-Pesa is now set to join Pesalink. Pesalink’s current infrastructure doesn’t support mobile money platforms. As a result, sending money from M-Pesa to a bank account is more expensive than bank-to-bank transfers via Pesalink. Also, M-Pesa users cannot receive money from bank transfers, revealing the flaw in Kenya’s fragmented payment system. If M-Pesa joins Pesalink, it will make transfers between the mobile money platform and banks cheaper and seamless, helping the country achieve interoperability. The move will also usher in other Kenyan mobile money platforms like Airtel Money into the network. Importantly, M-Pesa’s proposal could be a strategic move to convince the CBK to upgrade Pesalink instead of building a new FPS. M-Pesa is a widely popular payment service for Kenyans, with users processing more than 61 million transactions daily. Compared to banks, 69% of Kenyan adults do not have bank accounts. This popularity will give fintech a vote of confidence and help fast-track its proposal as banks and other financial service players in the ecosystem see the advantages of onboarding M-Pesa. With M-Pesa as part of the network, a huge pool of Pesalink adopters will instantly be created. Companies Goldman Sachs-backed Kobo360 cut jobs in November as part of restructuring Image source: Kobo360 It feels like ancient history when technology-enabled logistics was the sexiest sector in Africa. Companies raised money hand over fist with the assumption that an Uber-type (on-demand) model could bring order to the chaos of haulage. Kobo360 was at the forefront of that charge, promising to match manufacturers and trading houses to truck owners. Yet, using technology to solve that problem was a real Gordian knot. Here’s Kobo360’s founder in a 2022 conversation: “How do you derisk a truck driver to a bank or financial institution? They don’t want to touch drivers.” “The banks wanted us to ensure we charge the financing costs before they could touch them. They wanted us to structure something where we provide the first loss tranche — that is, if a service isn’t completed, Kobo bears the first loss.” The understanding of the haulage business model remains in flux. And for Kobo360, that has meant leadership changes and in November 2024, some business restructuring. Here’s Ngozi Chukwu in a Monday news story: “Kobo360, a Nigerian truck-hailing startup backed by Goldman Sachs, implemented a company-wide layoff across its seven markets in November 2024. The job cuts followed the exit of immediate ex-CEO Cikü Mugambi who cited difficulty with fundraising as one of the reasons for her departure. In its largest market, Nigeria, Kobo360 cut at least 30 roles from its 50-person team, according to four employees affected by the layoffs. It is unclear how many roles were cut in other markets.” Read more here. What’s it like to work as an engineer at Paystack? Paystack’s engineering team builds simple, powerful tools to connect African businesses to customers. Learn more → Cloud Computing Nigeria’s cloud players say they’re more than just pricing Image Source: LitsLink Smaller competitors often feel the heat when major players expand in a market. But for Nigerian cloud providers, AWS’s decision to accept naira payments isn’t a game-changer. Last week, AWS announced it would now accept naira payments, signalling a potential shakeup in Nigeria’s $1.03 billion cloud market (projected for 2025). For startups earning mostly in naira, the move offers relief from dollar-denominated pricing, which has doubled cloud costs following a 2023 naira devaluation. Local cloud providers, however, say the move isn’t a game changer. Their naira-based billing—designed to shield businesses from exchange rate volatility—has been their core pitch for
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