Air escapes from Africa fintech bubble
Venture capital investment in African fintech increased to $1.6 billion in 2021 from $230 million in 2020, according to financial data provider PitchBook. PitchBook’s figures for the first nine months of this year — $1.3 billion — suggest a full-year figure roughly in line with 2021.
Despite all the hype, Africa still only has a handful of unicorns or $1 billion startups. As McKinsey notes in research published in October, African fintech investment has slowed in line with global trends.
The continent’s total addressable market, McKinsey claims, is limited by infrastructure constraints, such as weak mobile and internet penetration in some markets, lack of identification and limited payment rails. Only three countries have real-time payments and the necessary payment rail infrastructure, the firm says.
More targeted investment
The prospects for growth remain real: McKinsey predicts that African fintech revenues could reach eight times their current value by 2025. However, investments can be targeted to specific functions within the broad fintech theme. McKinsey says economies with mature financial systems, such as South Africa and Nigeria, will attract innovation in more advanced financial services, such as business-to-business (B2B) liquidity, and anti-money laundering and know-your-customer (KYC) ) technology.
Markets with less developed financial infrastructure are likely to see advances in the likes of banking as a service, and buy-now, pay-later lending to small and medium-sized enterprises (SMEs).
It is a positive development, claims Buhle Goslar, managing director for Africa at Jumo fintech. Until recently, she says, only middle-class African consumers in major cities could shop on e-commerce platforms. “There was no viable business case for business-to-customer (B2C) e-commerce platforms for middle- to low-income African consumers”, mainly due to limited internet access and other logistical constraints.
“This is changing rapidly,” says Goslar, who also sits on the board of the Copia Global B2C platform. Africa’s low- to middle-income consumers, she says, can be “instrumental” in the growth of e-commerce, while building new digital and financial solutions into e-commerce offerings will underpin future growth.
New cycle?
New unicorns are also born. The latest is Egypt’s MNT-Halan, which has raised $400 million from local and international investors in the past year.
Your sector of activity? … Fintech.
