Chapter Nine

The Digital Economy and The Future of Africa

Without doubt, the future of Africa depends on the growth of her digital economy. Only an orchestrated matrix and sustained iteration will guarantee our global relevance.

Emilia Asim-Ita


The smartphones that distract us from our surroundings also distract us from the fact that our surroundings are strangely old: only computers and communications have improved dramatically since midcentury…Today our challenge is to both imagine and create the new technologies that can make the 21st century more peaceful and prosperous than the 20th.

Peter Thiel

“We live in a rapidly changing world” has become a crutch phrase in government documents and speeches, so much that you start to forget that we actually do, because more often than not, when the government says something, you start to doubt it. But this is true, we actually do live in a rapidly changing world. Our interactions with the changes around us are so passive that we do not really see things happen until we consciously pay attention to them.We often see and experience change happen but we hardly recognise it. Did you know the day black and white television finally disappeared in every home you visited? When did we all stop tuning TVs by turning a knob? Can you point out the day when you realised that you do not see typewriters on office tables anymore? Would you say you were conscious of the day you stopped buying cassette tapes? As the earth spins and revolves, the times are indeed changing. But some things will never change; societies will only thrive as much as the knowledge available to them, and they will be limited by what they do with that knowledge. These days for instance, the ignorance that spews from social media platforms appear to be an anomaly in a world of Google, where you can search to get answers. The challenge now is that we are overwhelmed with information, and we do not know what to do with it. Though there is so much available to be known, yet, there is too many distractions.

FinTech, Mobile Money and the Path to Financial Inclusion

According to the World Bank, mobile money is helping to drive financial inclusion in Africa. The bank, while noting that the share of adults with bank accounts remained flat, noted a 21 percent increase for mobile money accounts in sub-Saharan Africa. Leora Klapper said, “To those of us who study global development, it’s becoming clear that, to eradicate poverty, achieve gender equality, provide quality education, or meet any of the United Nation’s Sustainable Development Goals (SDGs), we must begin by creating a financially inclusive world”. If his words are anything to go by, this is definitely good news for Africa. Maybe we will make the sort of advancements that will reverse the possibility of being home to 86 per cent of the world’s poor, just 30 years from now. Most people think the Fintech industry is about the latest mobile apps that help them pay for products and services without using physical currency. They also think of it as a means to save, send money or borrow money. But the history of Fintech is a long one. Although it is all the rage today, technology has continually brought a great deal of transformation to the financial industry for the past 65 years. Examining a brief history of Fintech is taking a dive into a timeline of the globalisation of the financial space.Since the 1900s, innovators created new ways for financial institutions to streamline and safeguard assets as well as customer transactions. With the advent of credit cards in the 1950s, carrying cash became one less burden. The 1960s brought ATMs to replace tellers and branches. The 1980s saw the rise of bank mainframe computers and more sophisticated data and record-keeping systems. In the 1990s, with the internet as their platform, e-commerce business models started to sprout and thrive. Over time, the financial technology infrastructure that exists today was built and it is changing the face of finance.

The Race to Disrupt Finance in Africa

According to Disrupt Africa’s “The Finnovating for Africa Report 2017”, Africa began to witness a boom in FinTech startups in 2015 and it is currently home to over 300 startups. The crux of these startups is based in Southern and West Africa, leading the space with 34.2 per cent and 34 per cent respectively. Specifically, South Africa, Nigeria and Kenya remain at the forefront of startup activities in the sector. From banking to international money transfers, from business and personal loans to personal investment, and more. These FinTech startups are changing the finance sectors. “The Finnovating for Africa Report” revealed that payments and remittances are the most popular sub-sector, followed by lending and financing. Kenya is currently leading the pack among the top three. Its Safaricom’s M-Pesa product is generally accepted as the pioneer mobile money platform in Africa, which can be said to have birthed the African FinTech industry. M-Pesa is now one of Africa’s most recognised payment products with over 25 million customers across 10 markets in Africa, Asia, and Europe, but it is not the only mobile financial solution enjoying the patronage of adopters. In 2019, another Kenyan-based Fintech firm Cellulant, whose digital payments platform has processed over seven million transactions across 33 African countries, raised $47.5m in a Series C round led by TPG Growth’s Rise Fund. According to the company’s chief executive, the company processed $2.7billion in payments in 2017. Other companies worthy of mention include Nigeria’s Paga, Flutterwave and Paystack. These companies offer payment solutions, with Paga focusing on mobile payments, and Paystack geared towards SMEs allowing its customers to securely process payments. Interviews with the CEOs of Flutterwave and Paystack in the interviews section of the book offers some insights into their work and journey. Yoco and Zoona are based in South Africa, leading the country’s growing FinTech space. While Yoco is aimed at delivering smart technology that process payments, using the payment data to offer insights and automation to SMEs, Zoona is aimed at financial inclusion and providing funding for low-income communities across South Africa. The increasing innovations going on in the African FinTech space has continued to make the fledgling industry attractive to investors. In the same Disrupt Africa report, it stated that venture funding for African startups jumped by 51 per cent to $195 million in 2017, with 45 Fintech startups raising one-third of the total funding. The success of mobile money technology means investors are clearly willing to bet on consumers turning to more non-traditional financial services.