Ricky Rapa Thomson was a security guard and then a motorbike taxi driver before he became an entrepreneur. SafeBoda, the startup he co-founded, promises safe and reliable transport on Uganda’s deadly streets. It also offers fintech solutions for its drivers and customers and hopes to become Africa’s largest ride-hailing service.
It’s the kind of fairy-tale story that tech investors usually love. Yet it’s also the sort of pothole-filled journey that overseas capital has traditionally avoided in Africa, preferring instead to focus on extractive industries like mining or on infrastructure projects.
So Thomson was anxious when SafeBoda sought Series B investments in 2019. But the startup drew funding from the investment arms of German insurance major Allianz and Indonesian super app Gojek, neither of which had ever put money in African tech before.
“It was humbling,” Thomson told Al Jazeera, recalling his emotions at the time. “It’s an amazing validation.”
Two years later, Thomson’s experience resonates with hundreds of African founders, as the continent emerges as ground zero for a stunning surge in fintech funding. Global investors, often from countries that have traditionally not been major players in Africa, are rushing to back promising startups. From giant corporations to venture capital (VC) firms of myriad sizes, no one wants to be left behind.
It’s an amazing validation
Ricky Rapa Thomson, co-founder, SafeBoda
In the third quarter of this year alone, African fintech firms raised $906m, according to Digest Africa, a database of early-stage investments on the continent. That represented more than 60 percent of all venture money that flowed into Africa last quarter, and more than all other sectors combined in the first half of 2021.
This year’s trend builds on a separate analysis by BFA Global’s Catalyst Fund, which showed funding for African fintechs grew exponentially, from a mere $385m in 2018 to $1.35bn last year.
Unicorns multiply
Three years ago, the continent had one privately-owned startup worth over $1bn – Nigerian e-commerce company Jumia. Today, at least seven African startups have joined the “unicorn” club. Five of those are fintech firms, three of which — Flutterwave, OPay and Wave — became unicorns just this year.
Too many numbers? This wave is just getting started, according to Ryosuke Yamawaki, whose Kepple Africa Ventures entered the continent in 2018.
“I think it’s going to explode,” Yamawaki told Al Jazeera. “Now we see new investors from outside Africa every day.”
In October, Google announced a $50m fund to support African startups. The same month, New York-based Tiger Global invested $15m in Nigeria’s Mono, and $3m in Zambia’s Union54. In March, Tiger Global led a $170m funding round for Nigeria’s Flutterwave, which helped that company become a unicorn.
But it isn’t just the West that has its eyes on African fintech. In August, Nigeria-based mobile money service OPay became the most-valued African startup at $2bn after a mammoth $400m funding round led by Japan’s SoftBank and backed by Chinese investors such as Sequoia Capital.
But while these behemoth funds often grab the spotlight, smaller investors from a diverse set of countries are the ones who’ve laid the foundation for African fintech’s moment in the sun.
Now we see new investors from outside Africa every day.
Ryosuke Yamawaki, Kepple Africa Ventures
Unlike Tiger Global and SoftBank, which started investing in African startups only this year, Japanese venture capital companies Kepple, Samurai Incubate Africa and Asia Africa Investment & Consulting have been rapidly building their portfolios over the past two years.
Kepple has now invested around $15m across 96 companies, Yamawaki said.
In April, Australia’s TEN13 invested an undisclosed amount in Kenya-based ImaliPay. And the investment in SafeBoda from Indonesia’s Gojek underscores how funds from emerging markets are joining their peers from developed economies in betting on Africa. “The world realises that the best way — the only way really — to find solutions to Africa’s challenges is by investing in local innovators capable of designing fixes that actually work,” Thomson said.
The race is on
To be sure, fintech is hot globally — not just in Africa. But the continent has unique features and challenges that make the sector an ideal fit.
Traditionally, the high cost of doing business in Africa has served as a deterrent for many foreign investors, said Aubrey Hruby, who advises Fortune 500 firms and other major companies on investments in the continent. Poor physical infrastructure complicates business activities.
“Fintech does away with those infrastructure challenges,” she said.
African talent in the sector has also matured now, with many founders on their second or third startups. “Investors know they’re dealing with people with a proven track record who’ve learned along the way,” Hruby told Al Jazeera.
Then there’s the market itself: 40 percent of sub-Saharan Africa’s people are under the age of 15, making them potential future customers at a time when smartphone penetration, still under 50 percent, is rising sharply.
Investors know they’re dealing with people with a proven track record.
Aubrey Hruby, adviser
“It’s a huge opportunity,” says Ricardo Schäfer, a partner at Target Global, a London-based venture capital fund. “Like in a gold rush, you want to invest in picks and shovels, we want to focus on the infrastructure of digital money — and that’s fintech.”
Though the United States, China and others are all vying for influence in Africa, the race to invest in fintech is unlikely to be impacted by geopolitics, according to Hruby and Yamawaki. VCs, Yamawaki said, just don’t think that way. But a different competition, among private sector investors from around the world, appears inevitable. “There’s a scramble to get in,” said Yamawaki. “The winners will be those who came to the market earlier.”
Yet getting in early brings its own risks and anxieties. After Target Global led a $10m investment round for Nigerian digital bank Kuda last year, Schäfer said his firm’s “biggest concern” was whether smart capital would “follow us.” It did: In early August, Kuda was valued at $500m after a fresh round of funding. “Our concern faded away very quickly,” he told Al Jazeera.
Now, the entry of some of the planet’s biggest funds like SoftBank and Tiger Global is likely to increase the confidence of smaller VC firms looking to make early-stage investments, said Yamawaki. And as the startups grow bigger, “their talent will leave and start their own businesses”, further spreading the lessons they’ve learned from their success, said Hruby.
True, the political instability and regulatory uncertainty that have long spooked investors in Africa remain realities in several nations even today. But SafeBoda’s Thomson is convinced that the flood of investments into African fintech reveals a pathway to a better future. “When global investors back local innovators and local tech, you build a better world,” he said.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
