The biggest trend in African Tech and Startup in 2019

As startup and innovation culture deepens on the continent, the explosion of tech hubs across Africa has shown no signs of slowing down: the number of tech hubs across Africa grew by nearly 50% over the past year. As these hubs play crucial roles for community, business incubation and ideation, their growth continues to fuel innovation on the continent.

There are also growing signs that tech hubs on the continent are starting to specialize and expand beyond individual ecosystems: in February, Co-Creation Hub (CcHUB), one of the Nigeria’s pioneer innovation hubs, launched a design hub in Kigali, Rwanda. In September, CcHUB also acquired iHub, a leading Kenyan tech hub.

Africa’s rise as burgeoning source of computer engineering talent also remains on course: the continent is the fastest growing continent for developers globally. It’s a trend that’s seen Microsoft, the world’s largest software company, set its sights on software engineering talent in Africa as it will spend over $100 million on development centers that will employ 500 Africans by 2023.

As startup and tech ecosystems mature across the continent, local talent will have increasingly growing work opportunities on the continent. Data however shows the best African country to be a startup CEO or developer is South Africa.

One mood dampener was Andela, the poster company for developer and engineering talent across Africa, making a major business model shift. In September, the developer training and outsourcing company let go of around 400 developers in Nigeria, Kenya and Uganda as it scrapped the developer training component of its business and chose to focus on hiring and outsourcing only senior talent.

The change of tack, the company claimed, was down to the saturated market for skilled junior developers in the US, Andela’s most important market. Yet, the decision is bound to have major ripple effects across tech ecosystems of the continent.

Internet access, data and shutdowns

As the race to bridge the global digital divide continues, internet shutdowns in Africa, mainly instigated by dictators, remain a stumbling block. In the first three months of the year alone, Gabon, Sudan, Zimbabwe, Chad, and DR Congo all blocked connectivity. They weren’t alone as shutdowns remained a regular feature on the continent this year, hobbling the promise of local tech ecosystems. But Africans are not backing down meekly as they continue to seek alternative ways of staying online, as seen in Nigeria in the run-up to its February general elections.

Where internet access remains unfettered, it remains prohibitively expensive: on average, a gigabyte of mobile internet data costs 8% of average income across the continent—more than anywhere else globally. The reason for the lingering cost of access largely lies in the lack of competition between internet providers in markets across the continent. Aside cost, internet speeds also pose a problem as projections show Africa is at least five years away from faster 4G mobile networks having a major impact. In the meantime however, Google and Facebook, two of the world’s largest tech companies, are setting about boosting connectivity by circling the continent with high-capacity, underwater fiber-optic cables.

As internet adoption in Africa continues to grow despite the obstacles of cost and speed, data privacy and regulation concerns have become louder—and governments are stepping up. Kenya passed new data protection laws which comply with the European Union’s General Data Protection Regulation while Nigeria is investigating a popular call blocking app for privacy breaches.

For its part, Facebook has also stepped up its fight against misinformation campaigns on the continent and removed a network of Israeli and Russian accounts targeting African politics this year. The social media giant is going after fake news in more local African languages.

Big business

Africa’s most valuable company, South-Africa based Naspers, underwent evolution this year as it pretty much split into two. In September, Naspers listed its international internet assets on Amsterdam’s stock exchange and, in the process, created Prosus—the biggest consumer internet company in Europe.

Assets held by Prosus include Naspers’ renowned Tencent stake as as well as investments in Swiggy, the Indian e-commerce startup and Mail.Ru, a major Russian internet platform. The company’s South African unit also made history as it appointed the first female and first black chief executive of the 104-year old company.

Naspers’ move beyond the continent also reflected a wider trend: in pursuit of growth and profits, some of Africa’s biggest startups are increasingly making the risky bet of expanding beyond the continent.

Jumia, the largest e-commerce operator across Africa, launched a landmark IPO on the New York Stock Exchange in April. It marked the first IPO by an Africa-focused tech company on a major global exchange. But the novelty of the event has not proven enough to solve Jumia’s operational inefficiencies and seemingly unending streak of making multi-million dollar losses. In the wake of its IPO, Jumia has wrangled with internal fraud, a tanking stock price as well as tweaks to its business model.

Transsion, the Chinese-owned top phone maker in Africa, launched its billion-dollar IPO in Shanghai in October. It came after a decade of operating solely on the continent and winning over market share by producing phones with locally-tailored features (including multiple SIM slots and camera technology calibrated to darker skin tones) from its manufacturing base in Ethiopia. Transsion will also end the year as the top phone maker on the continent by unit sales as it’s done since 2017.

MTN, Africa’s largest telecoms operator, listed its Nigerian business on the local exchange in May as part of a $1.6 billion sim dispute settlement with the Nigerian government and instantly became the second largest company on the local exchange. However, its listing by introduction meant the stock largely remained out of reach for most Nigerians as no new shares were issued.

The Year of Fintech

The trend of the global financial service companies investing in African fintech businesses continued this year. Card giants Visa co-led a $170 million investment Series C round in Branch in April and also invested $200 million for a 20% stake in Nigerian payments processor Interswitch, confirming the company’s status as Africa’s first fintech unicorn.

For its part, Mastercard followed up a previous investment in Flutterwave, a Nigerian payments company, by backing Jumia Pay, the in-house payment solution for Jumia. After more than a year of use within its e-commerce ecosystem, Jumia has announced plans for a broader PayPal-style spin-off.

Beyond payments, the continued rise of digital lending apps has remained been a key trend in African fintech. By offering users quick loans and access to credit without traditional assets as collateral and instead determining creditworthiness scores by scouring smartphone data, the use and popularity of digital lending apps has skyrocketed. But it has come at a price as there’s growing evidence suggests access to quick, collateral-free loans is causing spikes in personal debt.

But the biggest fintech trend in Africa has roots in China.

Backed mainly by Chinese investors, OPay, a payments service incubated by the China-owned Opera browser and PalmPay, a subsidiary product of China-based Transsion, jointly received over $210 million in funding predominantly from Chinese investors—staggering sums for companies less than 18 months old. One theory is that Chinese investors are looking to replicate the success of Ali Pay and WeChat Pay at home while another is that the play is to fuel quick growth in an Africa-focused fintech company with an eye on a major IPO or acquisition by a global payments company given already established interest.

For its part, OPay is driving mass use of its payments platform by launching operations in other verticals and pursuing aggressive growth. ORide, its motorcycle hailing service in Nigeria, has run heavily-subsidized promotions to edge out other players in Nigeria’s competitive bike-hailing space. And the rising ubiquity of ORide bikes, particularly in Lagos—despite regulatory concerns—suggests the strategy is working. OPay has also launched a car-hailing service in Nigeria where it will face stiff competition from Bolt (formerly Taxify), Uber and inDriver, a low profile but fast-growing Russian ride-hailing company.

Story Credit: Quartz



Categories: Technology News

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