African start-ups attract international investors during Covid-19
The coronavirus pandemic has been a boost for online business opportunities in much of Africa, according to a report by the Financial Times.
The need for virtual banking and online services during Covid-19, combined with faster connectivity and some early success stories, has attracted rising amounts of international capital to African start-ups.
While these investments remain relatively small — a total of $1.4bn in 2020 — things have reached a tipping point.
This month FairMoney, a Nigerian fintech, raised $42 million in a funding round led by Tiger Global Management, a New York hedge fund.
FairMoney has received the go-ahead from Nigeria’s central bank to take deposits. Last year it disbursed small loans averaging $65 and worth a total $93 million to roughly 1.3 million people and microenterprises.
There are now four African start-ups, loosely defined, that have reached unicorn status with a valuation above $1 billion. One is Fawry, an Egyptian payments platform that went public in 2019.
The others are Flutterwave, Jumia and Interswitch, which all have operations in Nigeria. Jumia, an online retailer, is listed in New York.
Interswitch, a digital payments platform, gained its unicorn spurs when Visa bought a 20 percent stake in it for $200 million in 2019. Flutterwave, which has offices in Lagos and San Francisco, hit the $1 billion mark in March when it raised $170 million from US investors.
Several factors explain this spurt of activity. Africa is getting more connected. Google and Facebook are building undersea cables that will link more than 20 countries with Europe and the Middle East.
Liquid Intelligent Technologies, part of
Zimbabwean entrepreneur Strive Masiyiwa’s Econet Global, is linking east to
west Africa with fibre optic cable. Gaps will be plugged by low-orbiting
satellites from the likes of Elon Musk’s Starlink. Smartphone penetration is
Africa, a region long defined by fragmentation, is ripe for innovation in finance, logistics, health and retail, which will slice the costs of doing business. With a median age of 19, there is a raw entrepreneurial energy in cities such as Cairo, Johannesburg, Lagos and Nairobi.
Young entrepreneurs are stepping into a void left by unimaginative public policies and shoddy infrastructure. Typical is Samrawit Fikru, an Ethiopian woman who founded Ride, a taxi-hailing app.
Young Africans have tapped into international networks. FairMoney was co-founded by Laurin Nabuko Hainy, a German-Nigerian man. It has launched a business in India, part of a trend of African start-ups taking on other emerging economies.