Africa’s Tech Innovators Spy Opportunity Amid Pandemic
WHY YOU SHOULD CARE
The pandemic is crippling business and economies globally. In Africa's tech ecosystem, it's sparking innovation.
In March, Kenyan telecom operator Safaricom announced a move that on the surface appeared counterintuitive. For a 90-day period, it made free all person-to-person (P2P) transactions under 1,000 Kenyan shillings ($9) on the popular Nairobi-headquartered mobile money service M-Pesa, which revolutionized mobile payments globally.
Daily transaction limits on the platform have also been increased from 70,000 shillings ($660) to 150,000 shillings ($1,415) for small and medium-sized enterprises. Safaricom earns a quarter of its revenue from M-Pesa’s 20.5 million customers, mostly in Kenya and Tanzania, so it is effectively agreeing to risk losing some of those earnings.
But it’s a gamble the telecom firm appears willing to take to pull in more low-income users at a time economic, sociopolitical and cultural activities stand disrupted across the continent due to the global coronavirus pandemic. With social distancing in effect, there’s no telling when the storm will subside. So fintech startups and others in the tech ecosystem are reappraising their services to try and cater to the economically vulnerable who are most affected — an audience that they would hope to retain once the crisis passes.
After Safaricom’s announcement, Rebecca Enonchong, CEO of Cameroon-based incubator ActivSpaces, used her influencer status to appeal to MTN Cameroon on Twitter to follow the Kenyan firm’s lead. Within a few hours of other Cameroonians chipping in, the operator came through, suspending payment fees for amounts up to 20,000 FCFAs ($33).
Having mobile money operators lower or eliminate transaction rates will save lives.
Rebecca Enonchong, ActivSpaces, a Cameroon-based incubator
The moves by these big firms are spawning optimism that more companies could change in the coming weeks, potentially opening the floodgates. Experts say it’s critical that low-income earners are targeted with some sort of reprieve in these hard times.
“We’re in an unprecedented situation,” stresses Enonchong. “I think that having mobile money operators lower or eliminate transaction rates will save lives. It’s the right thing to do. … I just hope the others follow suit.”
As a business model, what telecom market leaders like Safaricom and MTN Cameroon are trying to do makes sense. For years, central banks around the continent have been trying to cut the percentage of Africa’s population that remains unbanked. Now, as the pandemic puts brands and people on high alert, they are trying to minimize individuals handling cash for the sake of individual safety — or fraud, as in the case of the South African Reserve Bank, which issued a statement after a group of scammers went around houses preying on innocent citizens under the guise of retrieving banknotes to reduce chances of being infected with the coronavirus.
With banks and people more reluctant to use cash, there’s greater demand for mobile payments than ever before. According to a World Bank report, two-thirds of people in sub-Saharan Africa remain unbanked, but mobile money is driving financial inclusion. Between 2014 and 2017, the percentage of those with a bank account remained unchanged — but the fraction of the region’s adults with a mobile money account doubled to 21 percent. What firms like Safaricom and MTN Cameroon are doing offers lessons for other countries with large unbanked populations, such as Pakistan and Indonesia.
African fintech companies have also been trying to capture a larger share of the unbanked population and bolster digital saving and investment cultures. E-commerce in Africa has been on the rise as internet penetration increases — 40 percent of the continent’s population is currently connected to the World Wide Web.
Challenges persist for firms trying to adapt to this period of social isolation and lockdown. Cash on delivery remains a popular option for e-commerce customers because of a trust deficit. That makes it harder for businesses to deliver products door to door without touching cash.
But others see this crisis as an opportunity. “Our platform is primed for a time like this when physical interaction is limited,” says Chijioke Dozie, CEO and co-founder of Carbon, a digital-only lender that operates in Nigeria and Kenya. During the coronavirus crisis, it’s possible, he says, that people might need additional funds to make ends meet.
“If this does happen, we specialize in providing short-term loans [in Nigeria and Kenya] entirely digitally and with minimal information required,” he says. “All our other services, such as providing access to high-yield investments and P2P payments, do not require any human interaction.”
Meanwhile, to assist the Nigeria Centre for Disease Control, Abuja-based early-stage venture capital fund and accelerator Ventures Platform Hub has thrown an open challenge to the country’s tech community. Each of the first five projects approved by the NCDC will get workspace, mentorship and $1,000.
Using the crisis to breed innovation is key, suggests Enonchong. “Beyond technology solutions that will support the battle against COVID-19, creating this challenge builds a sense of community, of solidarity,” she says. “These might be more important than the tech itself.”