There is something mysterious going on in Africa, the cradle of mankind.
For decades, Africa has been growing at an extraordinary rate and in fact the unweighted annual average GDP growth overtook Asia’s average in early 2000 and has not only maintained this, but the growth gap is holding its own and potentially increasing.
Much has been said about BRIC nations, but in that group only China has been in the top 10 along with 6 from the continent of the lion. Overall though within Africa, taking growth and stability into account, the top cheetah of the pack is Botswana.
And guess what, fintech in Africa is booming! In the last years a good third of venture capital funding raised by African startups was directed at the fintech sector. This might seem surprising since most adults in Africa do not have a bank account, they are “unbanked”. Around 80% of adults did not have access to banking services, in a traditional sense.
So where is the fintech commotion taking place, where are the fintech players in Africa? The big five are South Africa with a clear lead of 30% followed by Egypt, Nigeria, Kenya and Ghana.
Fintech has become a bit of a buzzword and is looked at in the west and developed nations as a force of disruption. In the context of Africa, fintech is not disrupting anything – there was not much to disrupt. So in Africa, fintech is a matter of financial infrastructure, that traditional banking has not been able to solve so far. In everyday life keeping, using and transferring physical money in this region has been cumbersome, for reasons of practicality, mobility and security.
- A lady living near lake Victoria in Kenya will find it quite inconvenient and expensive to transfer money to her cousin living in Botswana.
- In addition, a hard earned wage in Harare can deflates at around 80% per month, with annual inflation reaching 350%.
So there is not much incentive to be banked, in a traditional sense. It is therefore not really surprising that almost 6% of African adults have a mobile money account as opposed to the rest of the World at only 1%. With over 220 million registered mobile money wallets, growing at 25 million a month, fintech is not utopia in Africa, it is actually lived.
When Bitcoin was trading at $6000 around the World, at Golix, Zimbabwe’s only Crypto exchange, Bitcoin was trading at $10’000. This might seem counterintuitive to pay a premium of over 60%, but in a World with hyperinflation, a cryptocurrency can solve a number of fundamental problems from security, trust, transparency and a hope of upward potential – it is a question of survival.
At large, from a financial perspective, Africa is fast jumping an evolutionary step, namely traditional banking and leaping straight to a space we describe as fintech, a World governed by blockchain, cryptocurrencies, mobile wallets / payments and the likes. Relatively speaking they are already there and growing, fast. In that World, it makes perfect economic sense!
This didn’t really surprise me that much after I had returned from a trip to Kenya some years ago. While driving around Amboseli at the foot of Mt. Kilimanjaro looking for lions for hours without avail, I spotted a lone Massai and drove up to him and asked if he had seen any lions recently. Interestingly, he was on his mobile phone, with a solar charger strapped to his arm. He asked me to hang on a second. So I waited patiently in my SUV while this splendid, highly connected Massai finish his phone call in the middle of the African savannah, somewhere in equatorial east Africa – what a magnificent picture! I thought I was in some science fiction film. When he finally finished, he looked at me as if I were some blind, illiterate mzungu (Swahili for white man). He thought I was kidding him!
“You mean you didn’t see the three lions, just 500 yards down from where you came, under the trees next to the boulders?” he asked.
I likewise thought he was pulling my leg. I had just driven around there several times and didn’t see anything. “No I didn’t!” I proclaimed.
Well, after some back and forth, he pointed out the exact spot and sure enough, as I drove back, there perfectly camouflaged in the long, sun-bleached ochre grass at the exact spot he stated, were lying three glorious lions. So in this environment, our friend the Massai was the literate one, more able than myself, who could read the environment, nature and its surroundings – and was online!
Asia and the some Western companies have caught on to Africa. Major telecom companies like Vodafone have flooded the African market, building up communication infrastructure and have begun to invest in the likes of Safaricom, a subsidiary of Kenya’s Telcom.
In 2007 Safaricom opened up M-Pesa (Pesa means money in Swahili), a mobile phone application with
- money transfer
- financing and microfinancing
- money deposit
- balance reporting and distribution
services. This branchless airtime banking service is pin-secured and after a decade in service hosts almost 20 million clients in Kenya alone.
This is just one tiny example of what is going in Africa today. From Nomanini in South Africa, Zeepay in Ghana, Zoona in Malawi and Zambia, Paga in Nigeria, these fintech startups are covering enterprise payments, foreign exchange, paybills / retailers and more.
Africa already recognised ten years ago that our mobile phones are the remote controls of our lives. If our bank, insurance or payment service are not in our mobile device, they essentially – do not exist!
We sometimes chastise our kids for continuously being on their cell-phones, that they should be more social. There are countless quotes on youth that underline our perceptions: “What is happening to our young people? … They riot in the streets inflamed with wild notions. Their morals are decaying. What is to become of them?” Plato, around 400 BC.
If you look at them from a different perspective, they are more social than you might imagine. Now the millennials are at all times aware of their friends whereabouts, what they are doing, are literarily in their space in real-time and even learning. My 12 year old son doesn’t google to check the weather, he asks Siri. In many ways millennials are actually ubersocial. In a decade when he is 22 years old, he will dissect every banking or financial app with evident waftability. If the banking app is not actually talking to him, he probably won’t even consider it – it will be irrelevant!
In early 2006, less than 30% of Kenyans had access to banking services. After the launch of M-Pesa this changed. Today, 93% of Kenyan society is registered with M-Pesa. Within a decade Nairobi is in the fast lane and known today as Silicon Savannah. On the continent 180 million Africans have mobile wallets, compared to USA with around 60 million – 3 times less.
Africa’s contribution to mankind is often taken for granted in light of common beliefs and misconceptions. From mathematics (oldest inscriptions of prime numbers on the Ishango bone, over 35’000 years old found on the border to Uganda), to our favourite beverages (ancient beer), to Art (many of Picasso’s Art in early 20th century was inspired by African art), Africa is continuing raise the bar. In 2009, a consortium of 12 European companies analysed that 1% of the Sahara desert could produce the same amount of energy as all power plants on the planet, combined. The Sahara desert is bigger than the entire United States and has the potential to bring on the Worlds energy revolution. Let’s not imagine what we could yield with 2% of Sahara’s energy capabilities, literally lying there in the sun. There is a bigger picture to Africa that we often oversee. With fintech and mobile payments solutions growing, Africa today has already overtaken the USA in several areas of the Fintech space.
In addition, Africa does not cease to bestow us with diverse and inspiring people from Nelson Mandela to Roger Federer (South African mother), from Obama (Kenyan father) to Elon Musk and Charlize Theron (both South Africa).
When Leland Rice from ‘Africa Fintech Summit’ reached out to the Bankey, we were more than happy to support the initiative. Due to the path of my father with an international conglomerate, I had the forever indebted and grateful good fortune of being able to live and grow up in Nigeria, Ghana and Kenya and other nations around the World (Caribbean, greater Middle East and Asia). This background my parents granted me, definitely widened my horizon, showing me, that often there is not just one monopoly on truth, one way of solving a problem, creating a solution or even perceiving it. In fact, quite the opposite. So, as you might have noticed, with Africa especially close to me, it was a matter of honour.
To learn more in depth insights from the key fintech executives, investors, regulators and if you happen to be in Washington DC on 18th April (one day before the spring meeting of the IMF), visit the www.africafintechsummit.com, where you will discover how Africa leads and transcends, as we speak, into the cradle of fintech.