ALN Virtual Tech Conference themed “Decoding the Future of Tech in Africa” was a 3-day conference with eight (8) sessions that brought together a dynamic community of innovators, leading start-ups, SMEs, tech corporates, thought leaders, and other industry stakeholders disrupting the Continent.
Pulse of Tech in Africa – Moderated by Gbenga Oyebode and Karim Anjarwalla (ALN Nigeria & ALN Kenya)
The following were some of Karim’s takes;
- On Africa’s efforts towards a unified front for tech advancement
“AfCFTA heralds a big step towards potential positive change in the dynamic movement of goods and services across an increasingly more integrated continent and technology will be at the heart of driving this to create a single digital market”
- On ALN’s integration vision
“ALN’s module is based on integration. We’ve been in 15 markets for decades and growing. We think of Africa as single market and as one region. For us, what tech can deliver for the continent has unmeasurable potential.”
- On the objectives of the three-day Webinar
- To spark an interest in collaborative continent-wide engagements aimed at unlocking the potential of Africa’s tech ecosystem
- To understand some of the practical challenges facing tech start-ups in different sectors and different jurisdictions
- To explore and work around solutions to some of the challenges identified
From Folarin Aiyegbusi – he gave us what Karim called the matrix that we need to think through moving forward by summarizing the 4 key challenges in the Tech Startup space as follows;
- Access to finance
- Access to markets
- Favourable policy
- Hiring and talent
Notes from the Panel Discussions
The following are other insights shared by the respective panel members;
- Putting things into perspective both globally and internationally is essential towards working through these challenges
- We need structures for resilient capital funding in the continent to eliminate the liability posed volatile and high-risk foreign capital
- Despite the slow downs, there exist several trends that point towards the continent’s potential in terms of tech funding
- Strat ups and VCs are changing the narrative, making Africa a more investible space in terms of technology and entrepreneurship, and this is a positive sign
- The majority of problems in Africa pertain to financial inclusion, logistics and mobility, food, water and security. There needs to be a shift in mindsets – which may take a while.
- Currently, we are seeing a shift in capital allocation from the traditional project funding to less asset heavy project funding
- The more success stories we hear from technology start ups who create positive impact, the more we’ll see capital shift from project and asset funding to venture funding.
- There are certain gaping holes in capital funding.
- The tech space is primarily funded by DFI’s either, directly or indirectly. However, in comparison to the US, Europe and Asia, the top performing VC firms use strategic planning eg connection to industries, to add more to their business rather than simply relying on capital
- We also do not take full advantage of CVCs – insurance, banks need to do more
- The ones that exist aren’t African based
- Risk adjusted investment decisions are rarely used and start-ups end up using capital as leverage
- Industrial families and companies in Kenya should move from traditional property investments and see how they can come into the tech space
- Once you can create a venture with commercial traction, impact, whether direct or indirect, is significantly high
- “Our funders have created more than 1000 sustainable jobs in the last two years across our ventures”
- In terms of matching up to the gaps between breakeven in Africa and the rest of the world, there cannot exist a one size fits all approach, therefore, generic solutions in the industry may not help
- Breakeven means different things in different industries, therefore, case by case analysis of advancements made are more relevant towards measuring true potential
- On access to finance – we are 10 years behind compared to the UK and other developed nations – funding raised. And this can be attributed to the geographical and historical aspects within the continent. Even so, start-ups are growing in Africa, despite the wide funding gaps that exist.
- Failure to account for factors such as access to smartphones, internet connectivity, and access to infrastructure harms access to markets in the tech landscape. Therefore, despite Africa having a considerable population of youth, these infrastructural challenges significantly affect the size of the population/market that can use technological products.
- On policy – governments view tech as a new opportunity to benefit, therefore, the policies seem to end up stifling and creating an unfriendly environment for start-ups to thrive.
- The ratio of developer talent to businesses in the continent is unsustainable. We therefore need more developer training for more people to join the talent pool and help tech businesses thrive.
- When asked about the implications of global challenges and scandals facing the tech world to financing of tech in Africa; –
- The scandals and challenges are not peculiar to Africa only, economic headwinds have been prevalent globally
- “Investment is not benevolent – we invest in where we see the potential”
- Africa exists in the context of the world, so ultimately, money will be directed where there is potential for growth and benefit
- Google for start-ups ecosystem Africa, for instance, committed 50 – 100,000 USD to several start-ups and it spurred other players in the ecosystem to make commitments to put money into more start ups
- “Where there’s a plethora of challenges, opportunities also abound”
- Impact in the tech space can be measured directly and indirectly. The number of jobs created, the number of indirect jobs created, wealth, technology, education and resources directed to the rural area are all indicators of impact.
- Start-ups need more active and proactive engagement with policy makers since it is impossible to build outside the lens of policy in Africa
- To help better the regulation environment, start-ups should create visibility of the work done and impact created in their various spaces
In his closing remarks, ALN Nigeria and co-founder of Aluko & Oyebode, Gbenga Oyebode charged: “As a network [ALN Newtork] including firms around the continent, we spend a significant amount of time around Tech. We do have a tech agenda as we constantly talk to founders while pushing the envelope around regulatory behaviour. Also, it is clear to all of us that the continent still has a long way to go around the skills gap so where ever the Africans are that are working whether on the continent or living in Canada, it is important that we bring all the skills to play in developing tech on the continent.”
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In a session that followed, our Partner Funmilayo Otsemobor spoke on the ‘Regulatory Environment (Current Trends and Developments in Tech/FinTech)’ in Africa. The session was moderated by ALN Kenya partner Dominic Rebelo with Mandeep Birdi, Head of Business Development of Input Output (IOHK) and Sheena Raikundalia, Country Director of UK-Kenya Tech Hub on the panel.
ALN Tech Conference – Day 2
FinTech Rapporteur Report
Date: 16 November 2022
Facilitator: Mr. Ajibola Asolo
- Kiiru Muhoya – Founder and CEO, Fingo Africa
- Fulufhelo Malada – Head of Legal, Transactions and Regulatory Affairs, MFS Africa
- Chad Larson – Founder and CEO, Kopokopo
- Ayodeji Adewunmi – Founder and Co-CEO, Dot
This session focused on obtaining insights from FinTech startups founders and CEOs in Africa. The discussions touched on current issues faced by startups/Neobanks and opportunities for collaboration with regulators. The discussion also extended to opportunities presented by the African Continental Free Trade Area (AfCFTA) to FinTech startups across Africa.
- The Panelists’ reasons for starting their respective FinTech startups
Mr. Ayodeji Adewunmi began by stating that sub-Saharan Africa is one of the most difficult places to do business in the world. From a digital perspective, most sub-Saharan African countries find that they fall behind on technological advancements. To put into perspective, as one moves away from the city in Nigeria, telco infrastructure fades. This sheds light on the existent infrastructural gaps that most Africans grapple with. The opportunity presented by this situation is leveraging the infrastructural migration of people from traditional financial services to digital financial services. He further stated that the said infrastructural migration will surely occur. The aim of Dot is to drive financial inclusion.
Mr. Kiiru Muhoya stated that there are two perspectives to the basis of starting a startup. This is the entrepreneurial and financial inclusion perspectives. The entrepreneurial perspective seeks to identify a problem and come up with a solution to solve the problem (through a startup). This perspective is aligned to the premise of a startup being rapid growth and value addition. The financial inclusion perspective focuses on building tech that is inclusive for all persons (the price of smartphones can deter inclusivity). Mr. Kiiru Muhoya stated that Fingo seeks to offer financial services to the youth. Additionally, Fingo aims to build the best user interfaces. Ultimately Fingo aims to merge financial inclusion with quality of financial services it offers.
- Synergies that can be explored by traditional banks and Neobanks leading to potential convergence in the mid/long-term
Mr. Chad Larson averred there is advantage and opportunity for Neobanks since they do not undertake legacy systems such as clearing of checks. Consequently, Neobanks are more agile compared to traditional banks. This is attributed to the difficulty faced by traditional companies in their efforts to disrupt their respective industries by implementing technology. The attempt by Neobanks and FinTechs in acquiring depositary and banking licenses represents the advent of the potential convergence of Neobanks and traditional banks.
Key trends and/or observations in the FinTech space
Ms. Fulufhelo Malada noted that there has been a recent increase of M&A transactions between FinTechs as a form of equity raising. On the other hand, there has been a shift from equity raising as the sole option of raising capital to debt equity. She noted that a key consideration prior to FinTechs engaging in equity and debt financing, should be taking into account regulatory requirements players. For example, regulators would scrutinise foreign investors on the basis of compliance with anti-money laundering laws and regulations.
- Insights on whether one should build the tech first and then find clients or acquire an existing customer base of a traditional business and implement tech on the customer base
Mr. Kiiru Muhoya pointed out that there are two perspectives to keep in mind before making the decision as highlighted above: the commercial and innovator perspectives. Commercially, it would be best to acquire an existing customer base. However, an innovator would consider building the tech first to ensure quality and efficiency before acquiring a customer base. He concluded that the best option would be aligned to the FinTech founder(s) perspective.
Mr. Chad Larson opined that one should first identify customers’ needs and then proceed to build the tech to fulfil customers’ needs.
Mr. Ayodeji Adewunmi recapped one of the fundamental principles of business plans which is customer research. Customer research assists in identifying the needs and behaviour of customers. Thus, he suggested that acquiring a customer base is the first step that should be adopted.
Aside from the above considerations, Ms. Fulufhelo Malada introduced the regulator’s perspective as a key consideration. She further explained that it would be easier to build the tech first followed by acquiring a customer base. This can be achieved by partnering with a traditional business that is already compliant to avoid non-compliance with the law.
- Avenues available to regulators in ensuring consumer protection
Fulufhelo Malada suggested that regulators often find themselves in a position where they fall behind current tech. In turn, the regulatory measures/solutions posed tend to be least suited for current tech. Instead, regulators should identify and liaise with various market players in order to provide regulatory solutions in line with current tech.
Kiiru Muhoya suggested that the first step should be regulators setting high standards that FinTechs should aspire to. In turn, the founders of FinTech startups would train their staff on the regulatory standards and create policies that would ensure adherence to the standards while providing their services. In summary, FinTechs should merge user experience and regulatory standards while providing services as a solution to consumer protection concerns raised by regulators.
- Ways in which regulators can balance between consumer protection and setting standards that would potentially stifle the growth of FinTechs
The first step is the understanding of the regulator’s perspective by startups and vice versa (i.e, startups understanding the regulator’s perspective. This can be achieved by hiring persons with a deep understanding of startups by the regulator(s). In addition, startups should consult persons who understand laws and regulations. In light of this, regulators would set standards while keeping in mind their subsequent implications on startups.
- Ways of achieving a balance between maintaining high standards and user experience
Mr. Chad stated that most FinTechs are unregulated and often grapple with long wait terms while awaiting licenses since such structures are uncontemplated by the regulators. The best way to maintain high standards and user experience is by adopting good practice while rendering services.
- Opportunities presented by the African Continental Free Trade Area (AfCFTA)
Ms. Fulufhelo Malada averred that the AfCFTA provides an opportunity to remedy the current fragmentation of the FinTech space by offering opportunities for partnership among fintech providers in Africa.
Mr. Kiiru Muhoya highlighted that the AfCFTA has reminded us that Africa is one and this will lead to integration in the wider tech space.
Mr. Ayodeji Adewunmi stated that where people move freely, as proposed under the AfCFTA, trade follows. This will culminate in integration within the FinTech space.
Mr. Chad Larson offered a differing opinion from the other panelists. He stated that although fragmentation is often viewed from a negative lens, it also encourages innovation since every market player wants skin in the game. Therefore, the current fragmentation in Africa serves as a catalyst to greater innovation.