June 19, 2021

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For Tech Lovers

80% of Technological know-how Investment Funding Going to Nigeria, Kenya, Egypt and South Africa

2 min read

Tuesday, June 01, 2021, 01:44 PM / by FBNQuest&#13
Exploration / Header Picture Credit score:  IFC

 

Africa engineering is providing progress

Africa’s&#13
technologies sector has thrived around the previous ten years, next funding by&#13
venture funds firms.  Technological know-how corporations turned the continent’s problems&#13
of weak infrastructure, low internet penetration and absence of financial entry&#13
into chances employing technological and impressive alternatives to address&#13
issues.  In 2020, 347 African know-how startups elevated a total of&#13
USD1.43bn in 359 fairness rounds, representing a volume expansion of +44% y/y&#13
in contrast 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 digital arena.

 

Technology hubs are accelerating the sector’s advancement

Producing&#13
engineering hubs across the continent has accelerated the technologies industry’s&#13
progress above the final couple of yrs.  According to the GSMA, in 2019, hubs on&#13
the continent totalled 618, recording a 40% growth. These hubs deliver important&#13
input into the ecosystem for early-phase know-how business people and freelancers,&#13
offering funding, innovation access, accelerators, incubators, and co-performing&#13
spaces.  Across the continent, the optimum hubs for each nation are Nigeria,&#13
South Africa, Egypt and Kenya.

 

Nigeria, Kenya and Egypt direct in funding

Nigeria&#13
is the most funded industry, adopted by Kenya and Egypt.  Jointly the&#13
three accounted for around 60% of total fairness funding for African&#13
startups.  We observe the six know-how verticals, namely fintech, agritech,&#13
company, offgrid-technological know-how (vitality and means), healthtech, and e-commerce.&#13
The market accounted for varieties c. 76% of full equity funding in Africa, each&#13
acquiring around USD100m in financial commitment flows.  Even so, Fintech led other&#13
sectors with an equity funding of USD356m (25% of overall) in 93 promotions past year.

 

Good financial investment circumstance

The&#13
financial investment situation for technological investment decision in Africa is powerful with the&#13
subsequent strengths: economic development, supportive demographic trends, lower&#13
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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