September 29, 2022

LFP212 – Fintech in Africa, A Tour D’Horizon w/Gbenga Ajayi Partner QED Investors

42 minutes

Africa in general narratives is all too often treated – like many matters – as a super-low-res jpeg, more as if it were a place, one which is complex and widely misunderstood, or not even understood. Africa is, of course, in reality it is a vast continent of a billion people, over 50 countries and countless different languages and peoples. Africa has fractal complexity. Zoom in at any level and you find even more complexity – whether geography, peoples, languages, history, governance, development (from hunter-gatherers to Chinese railways faster than any in the UK) or, as we shall see Fintech where with M-Pesa formed in 2007 Africa has been one of the global leaders in Fintech per se. In LFP210 we discussed the fact that its largest country, Nigeria, has not just three main tribes but another 180 peoples and languages. In terms of physical size it takes less time to fly from London to Cairo than it does from Lagos to Cape Town.

This makes covering Africa from an investment perspective extremely challenging in all aspects. In this excellent tour d’horizon long established techster Gbenga, born in Nigeria and now working for Global VCs QED investors as their African head of Fintech investment joins us to literally lay out the landscape and explain to us how one even approaches such a vast and varied territory in terms of finding key focal markets – five in QED’s case – to firstly invest in and secondly act as hubs for spokes to other local markets.

Finally away from all simplistic narratives it should be noted that QED has a global fund – the corollary of which is at the highest level – QED are simply trying to find Fintechs that are great per se with no allowance or bias towards or against region, merely trying to find great founders and great businesses.

Topics discussed include:

we start with a little dip into the fractal nature of history; the fractal complexity of European imperialism – it was never one thing; ranging from eg at one end the insane and evil rule of King Leopold of Belgium in the Congo to the British West African abolishing slavery. Zoom into even the British “Empire” and one finds that it was not a thing but was rather a collection of dominions, colonies, protectorates, mandates, and other territories with very different governance structures and structures from self-rule, to direct-rule to indirect-rule

SIr Frederic Lugard “British Rule in Tropical Africa” bemoans in 1926 the narratives created at the time by the Labour Party on socialist grounds that the narrative about Africa was “exploitation by bad capitalists”. He also mentions that the Labour- even a century ago – party was foremost in pushing global rule by international committees. The UN/WHO/WEF et al have deep and perhaps unexpected roots.

the creation and naming of Nigeria – origin of the name and who proposed it – Lugard’s wife or mistress?

European involvement was perhaps much shorter than commonly understood – by the late 19thC only around 10% of Africa was under European control whereas after the so-called scramble for Africa by 1914 this was 90%. Half a century later and roughly all powers had packed up and gone home.

modern state governance is often a significant issue – even at the trivial level of Fintech. However as the Ibrahim African Governance index shows at an aggregate ‘score’ level there is a huge range from at the bottom 19, 20 /100 [Somalia/South Sudan] to, on the mainland , at the top Botswana/Tunisia, at 66 & 70

nor is the continent free of external influence to this day – the Chinese being a major source of funds and infrastructure. Equally the hyper-greenies of “the West” appear to pay little attention to terrible facts such as that in terms of essential minerals for so-called “green energy”, 60% of cobalt and lithium comes from the Democratic Republic of Congo where unregulated mines use children as young as seven as miners and who breathe in the cobalt-laden dust that can cause fatal lung ailments

the worlds debt to Africa for vetoing a vote for WHO to have complete control over future global pandemics

Gbenga’s career journey through Google and London Fintechs

how one starts reducing the complexity of countries, regulatory landscapes, economies…

“70% of Africa’s GDP comes from 11 key markets”

the impossibility of generalising even within a specific vertical within Fintech

in Kenya ~75% of all payments are digitised – more so than in the UK – yet in Nigeria only ~15%

5 key markets Egypt, Francophone North Africa, Nigeria, Kenya, South Africa

investing outside of “core markets” – hubs as gateways to the more local region

“Fintech-ready” criteria

logistical challenges of the distances and geographical and linguistic complexity

consumer behavior varies widely eg Nigeria vs Kenya

Egypt Fintech activity

Francophone North Africa trends

VC activity in the continent and patterns thereof

Japanese VCs, yet Chinese State involvement and no VCs

global competition for capital

West African Fintech

lack of being able to generalise even across smaller regions – eg in many ways Ghana is more similar to Kenya in Fintech than to Nigeria

South African FS/Fintech – “a tale of two South Africas” and the relative Fintech focus in the two different markets

three reasons why Fintech is important and on the rise in Africa now

in Nigeria ~60m debit cards yet only less than 0.5m credit cards

“investing in Fintech in Africa is a very complex thing which you have to take a very local approach to”

QED’s investments in Africa to date

QED shoutouts

And much much more

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By Tony Clark

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