June 21, 2021

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80% of Technologies Investment Funding Going to Nigeria, Kenya, Egypt and South Africa

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Tuesday, June 01, 2021, 01:44 PM / by FBNQuest&#13
Analysis / Header Impression Credit history:  IFC

 

Africa technological know-how is providing advancement

Africa’s&#13
technological know-how sector has thrived in excess of the final decade, pursuing funding by&#13
venture cash firms.  Technology firms turned the continent’s problems&#13
of weak infrastructure, small internet penetration and lack of fiscal entry&#13
into alternatives making use of technological and ground breaking alternatives to address&#13
challenges.  In 2020, 347 African technology startups raised a complete of&#13
USD1.43bn in 359 fairness rounds, representing a volume progress of +44% y/y&#13
compared with just 55 equity rounds in 2015. Startups like Nigeria’s Paystack,&#13
Ethiopia’s Ethswitch and Francophone Africa’s Bizao are also aiding to migrate&#13
Africa into the electronic arena.

 

Technological know-how hubs are accelerating the sector’s advancement

Producing&#13
engineering hubs throughout the continent has accelerated the know-how industry’s&#13
development over the very last number of years.  In accordance to the GSMA, in 2019, hubs on&#13
the continent totalled 618, recording a 40% progress. These hubs deliver crucial&#13
input into the ecosystem for early-phase technology entrepreneurs and freelancers,&#13
presenting funding, innovation accessibility, accelerators, incubators, and co-functioning&#13
areas.  Across the continent, the maximum hubs for each state are Nigeria,&#13
South Africa, Egypt and Kenya.

 

Nigeria, Kenya and Egypt guide in funding

Nigeria&#13
is the most funded sector, followed by Kenya and Egypt.  Jointly the&#13
three accounted for more than 60% of full equity funding for African&#13
startups.  We note the 6 engineering verticals, particularly fintech, agritech,&#13
enterprise, offgrid-engineering (vitality and resources), healthtech, and e-commerce.&#13
The industry accounted for kinds c. 76% of total equity funding in Africa, every single&#13
obtaining in excess of USD100m in financial investment flows.  On the other hand, Fintech led other&#13
sectors with an fairness funding of USD356m (25% of full) in 93 offers past yr.

 

Good investment decision case

The&#13
expenditure case for technological financial investment in Africa is persuasive with the&#13
adhering to advantages: economic development, supportive demographic trends, small&#13
world wide web penetration (<40%), low bank penetration (<50%), and card&#13 penetration of c. 15%. These factors highlight the investment opportunity and&#13 the potential upside.  Nigeria's newest unicorn startup, Flutterwave,&#13 announced that revenues doubled while active merchant growth increased 2x&#13 y/y.  Although Africa has not had many IPOs in the past, current events&#13 suggest the continent holds a ready pipeline.  Flutterwave indicated the&#13 possibility for a future listing on the NYSE.

 

Banks’ digital payments business offering creates latent value

Nigerian&#13
banks have utilised their digital banking platforms to enhance financial access&#13
to previously excluded parts of the population.  We believe Nigerian&#13
banks’ digital payments and agency businesses offer latent value within banks’&#13
corporate structures due to their dominant share of digital transaction volumes.&#13
The digital payments business of a large Nigerian Bank could be worth NGN100bn&#13
(USD244m), conservatively.

 

Expectations of strong double-digit growth

We&#13
expect the sector to continue to post strong double-digit growth y/y.  We&#13
believe growth opportunities will continue to stem from the needs of consumers,&#13
like the financially excluded and underserved segments of the population. &#13
Fintech will likely dominate the emphasis on financial inclusion by governments&#13
and regulators and activity (investments and revenue) in the tech&#13
industry.  We anticipate that Fintech will focus on smaller segments such&#13
as consumer lending, insurance and asset management. We expect other sectors&#13
(Agritech, Healthtech) to continue to rise. 

 

Download&#13
Full PDF Report Here


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