FinTech start-ups in Africa

This is an audio transcript of the FT News Briefing podcast episode: FinTech start-ups in Africa

Marc Filippino
Hello from the Financial Times, today is Friday August 13th and this is your FT News Briefing.

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Airbnb and Disney are taking advantage of the resumption of travel, we recap their latest gains. And there is a wave of people quitting their jobs and many taking their company’s source code with them. Additionally, global investors are investing more in African FinTech start-ups. But who does it benefit?

Topsy Kola-Oyeneyin
When you go under the numbers, you find that even the money that flows into Africa often goes either to foreign start-ups operating in Africa or to local founders who have foreign affiliations.

Marc Filippino
I’m Marc Filippino and this is the news you need to start your day.

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Marc Filippino
Airbnb reported more than $ 1.3 billion in revenue in the second quarter, nearly four times more than the same period last year, and 10% more than in 2019. The company said that tourists from places with higher vaccination rates were driving the recovery. There were also more bookings in destinations with increased vaccine availability. But the company has warned that the global spread of Covid variants and inconsistent local regulations could hurt bookings later in the year. Airbnb stock fell nearly 5% in after-hours trading. Another business that has benefited from the travel upturn? Disney. More people went to its theme parks, which helped the House of the Mouse to post net income of $ 923 million in the second quarter. Sales are up 45% from a year ago when the pandemic hit. Also helping Disney’s bottom line: 12 million new subscribers to its Disney + streaming service, doubling its customer base from a year ago and overtaking rivals like Netflix.

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Record numbers of employees are leaving their jobs and many are stealing sensitive data when they leave, according to an analysis by cybersecurity group Code42. In the last quarter, the number of times employees took sensitive computer code or source code from their business was three times higher than a year ago. This is Hannah Murphy from the FT.

Hannah murphy
So I think there have always been what are called insider threats, and it’s not a threat to a corporate network from an attacker or an external hacker, but a threat of their own. employee. And these have been around for a long time. And sometimes it’s just employees who accidentally disclose something. I’m uploading something to a personal network or personal email that they really shouldn’t be taking there. Other times it’s a bit more with malicious intent. So it could be deliberate theft because you are unhappy or because you move on to another job and want to take some information or data that you created, even like the source code for that next job or just to have it for yourself. So there are a lot of different reasons you might want to do this. But of course, businesses won’t want you to take the most valuable and sensitive data elsewhere.

Marc Filippino
Hannah Murphy is our technical correspondent. She is based in San Francisco.

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The pandemic has been a boon to fintech companies, lockdowns have forced people to use more online banking and payment services, and Africa has been no exception. Fintech start-ups were already starting to bubble even before the pandemic. And over the past year and a half, the tech industry has hit what some people have called a tipping point.

Topsy Kola-Oyeneyin
The fintech scene is very lively in Africa. It’s just the truth. The energy has increased.

Marc Filippino
It’s Topsy Kola-Oyeneyin. She is a partner at McKinsey consultancy and is based in Lagos, Nigeria. She has been following fintech in Africa for over a decade. And she says that even with the current growth, money is still king.

Topsy Kola-Oyeneyin
And this is the reality for most African economies. However, during the lockdown, people in informal markets who typically generate large volumes of cash relied on electronic transfers to run their businesses, were made to seek electronic solutions to conduct their business. And I think the penetration of that segment is actually what would trigger the unlocking of huge growth. And this tipping point. . . you know . . . for me, I think with the bank agents, with the distribution points which leave, with the informal markets, the adoption of electronic payments. I think this time is very, very near.

Marc Filippino
But she says the rise of fintech companies is not happening across the continent. This only happens in certain places.

Topsy Kola-Oyeneyin
A lot of the volumes and a lot of the activity is really focused on three or four locations in terms of hot spots, isn’t it? It’s Nigeria, it’s South Africa, it’s Kenya, it’s Egypt, maybe more and more Ghana. It was motivated by a number of factors, increasing smartphone penetration, pressure from regulators for financial inclusion. And they created a bunch of different license categories that got innovators into the space. And then also a new technology which has enabled small players, small start-ups to reach the market very quickly and launch innovative products.

Marc Filippino
So far, four African start-ups have achieved unicorn status. This means that they are valued at over a billion dollars. Three are fintech groups, one is an Egyptian payments platform called Fawry. The others are Flutterwave and Interswitch, which have operations in Nigeria. The point is, most successful African start-ups are backed by foreign investors. There aren’t many African venture capital firms, and few rich African entrepreneurs are willing to invest their money in start-ups.

Topsy Kola-Oyeneyin
A lot of entrepreneurs with some sort of significant investment capacity tend to be older. They grew up in a generation where the traditional kind of business is they understand, they understand the economy, they understand the dynamics. A lot of these start-ups are just starting out, they’re not profitable. You see the numbers go up, but you can’t see the profits, which is something they can’t quite correlate with, right? We’re talking about reviews and it’s just not something they’re used to.

Marc Filippino
So right now the best way for African start-ups to be successful is to find foreign investment. But in the long run, FT’s Africa editor David Pilling says it’s not ideal.

David Pilling
And after all, if it’s really some kind of big phenomenon, it’s going to start driving some African economies and transforming some African economies, surely one of the things we would want is African ownership. We wouldn’t really want all of these companies to end up being subsidiaries of foreign companies. I think foreign capital is absolutely welcome. But in addition, why not more African capital too?

Marc Filippino
Topsy Kola-Oyeneyin has some ideas on what it will take to bring more African capital to African start-ups.

Topsy Kola-Oyeneyin
I think what it takes for domestic capital to flow is just more success stories. This is an area that many traditional entrepreneurs, traditional businesses do not understand, to which they are exposed. And as they see more success, they will be more willing to invest there.

Marc Filippino
It’s Topsy Kola-Oyeneyin, partner at McKinsey in Lagos and David Pilling from FT in London.

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Before we left, there was a development in a story that we told you about earlier this week. This is the battle for the takeover of the British inhaler company Vectura. The group with the highest bid was Philip Morris International, maker of Marlboro cigarettes. Yes, there is irony in a cigarette company buying an inhaler company and there has even been some backlash. Philip Morris has insisted that Vectura is part of his strategy to go beyond nicotine and Vectura’s board seems to agree with that. He said yesterday he would back Philip Morris’ $ 1 billion bid over a lower bid from private equity group Carlyle. From now on, the shareholders of Vectura only have to approve the takeover.

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You can read more about all of these stories at FT.com. This has been your daily FT News briefing. Be sure to come back next week for the latest business news. The FT News Briefing is produced by Fiona Symon and me, Marc Filippino, our editors, Jess Smith, with help this week from Gavin Kallman, Michael Bruning, Zoe Han and Persis Love. Our theme song is from Metaphor Music. I’ll be off work next week and a little bit the following week while I’m on vacation. However, we will have great hosts to replace me. I’ll be back on August 24th.

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