Last year, 300 hundred venture capitalists descended in Nairobi for the Kauffman Fellows Summit, one of the world’s largest fintech conferences – and the first ever in Africa.
The story of technology in Africa is also a fintech story. The majority of Africa’s 10+ unicorns are fintech businesses. Many of which you’ll stumble upon in this article.
Across 2021 and 2022, 40-60% of VC funding in Africa went towards fintech.
The seminar concluded that the future of fintech in Africa, and, by extension, technology in general, is bright. Here are five reasons why.
Africa benefits from strong macro tailwinds
Auguste Comte once observed, “Demographics are destiny.” Perhaps, extending this logic, our destiny is African.
The continent now has 1.2 billion inhabitants, with 70% of them under the age of 35, according to the United Nations. More than 40% are under the age of fifteen. By 2050, Africans will make up 25% of the global population.
Not only is the theoretical market rising, but so is the addressable technology market. Ingressive Capital’s analysis shows that Africa has more than 90% mobile penetration and 88% internet coverage. The African fintech sector is expected to reach $65 billion by 2030, a 13-fold growth from 2021.
The technology industry is particularly benefiting from tailwinds. According to McKinsey research given at the conference, while venture capital spending dropped globally in 2022 and 2023, it rose to about 10% in Africa. Sub-Saharan Africa has more mobile subscribers than the United States and the United Kingdom combined. Africans devote one-third of their daily life to their phones.
The Entrepreneurial Flywheel is Starting
Africa has more than ten unicorns (depending on how you count them). This is ten times more than there were a decade before. And the time it has taken local startups to accomplish this milestone has decreased considerably. Interswitch required 14 years to achieve this milestone. Andela took seven. More recently, Kuda took only three years.
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And these companies are not just growing; they are also grooming the next generation of founders. The local ecosystem is now brimming with early-stage venture finance, mentors, and guidance on launching and scaling.
Exit strategies are the lifeblood of venture capital. Although we are still in the early stages, there are some emerging data signals. Paystack’s CEO, Shola Akinlade, sold the company for $200 million to Stripe. Kopo Kopo was recently sold to Moniepoint. Flutterwave is likely to go public in the following years.
The Impact of mafias – groups within certain companies that have far-reaching influence in their ecosystems – is documented. The PayPal Mafia exists in the United States, whereas the Careem Mafia exists in the Middle East, North Africa, Afghanistan, and Pakistan, as well as the Rappi Mafia in Latin America. There may be a few technology mafias sprouting across the continent. Shola explained that Paystack alumni have started over a dozen firms.
Africa is helping to shape global categories.
The best ideas can emerge from anywhere. Many of these ideas have arisen from Africa.
M-Pesa was the first to successfully expand mobile money in Africa. M-Pesa receives more than 75% of the country’s GDP and is solely responsible for banking the populace. Whereas M-Pesa is almost ubiquitous in Kenya, financial exclusion persists in several of its bordering markets.
Over 300 mobile money deployments exist in nearly 100 countries, many inspired by the original. Furthermore, mobile money has become a foundation for others to build upon.
Lead African Entrepreneurs to create industries with meaningful impact
‘Why would you support a startup connecting you to dog walkers?’ This was the question the Governor of Nairobi posed to the conference attendees. He went on: “Startups (in Africa)are building meaningful technology – access to food, water economic enablement.
Technological innovation has the potential to do so much more than make our lives convenient. It can help make it possible.
In emerging ecosystems worldwide, startups create markets rather than disrupt them – and that’s where the problems come from. That’s why fintech across Africa isn’t about making something faster/cheaper but rather providing real value to consumers, and in some cases changing their lives”
Jeff Harbach, the CEO of Kauffman added “After spending the last two weeks in Kenya, I believe that the future of tech has a home in Africa. And this future will be spearheaded by Kenya’s (and Africa’s) greatest resource: its people. The talent, the drive, and the mindset of the people continue to grow and get stronger.”
The Future Is African
We started the macros with an understanding as to why demographically the future is African. But based on the reasons outlined above, the future of technology is too.
