Funding is streaming into African fintech and tech firms
The structural rigidity, which has long defined Africa's commoditydependent economies, is giving way. At least, we can no longer speak in generalised terms that Nigeria is an “oil economy” or that Kenya is agro-based. One of the sectors that have been broadening the productive base of African economies is information and communication technology (ICT).
In Q4 2016, the ICT sector accounted for 10.78 percent of Nigeria's GDP. The sector grew by 17.4 percent in nominal terms in the same period. In 2014, Kenya's ICT sector grew by 13.4 percent – more than two times the GDP growth rate of 5.5 percent.
The trends in Nigeria's and Kenya's ICT underpin the outlook of the sector across Sub Saharan Africa. The region has a youthful population, which provides a burst of brain and brawn for innovation. Expansion in data networks and Internet access is now in tow with the dramatic increase in mobile penetration of the last one and half decades. And, macroeconomic conditions have significantly improved across Africa over the last two or more decades, boosting an emergent middle class.
Global financiers and early-stage investors have been responding to the growth outlook of Africa's technology and fintech companies. There are now several funds that are targeting start-up firms and providing growth funding for African companies in the technology space. They are doing so in pursuit of risk diversification, earnings growth and, in some cases, as impact investment.
The remainder of this article highlights some of the funds or funding that have been announced in the last one year, providing an indication to the risk appetite of financiers for African technology firms. This is not intended as a comprehensive roll call of the funds. The aim is to inspire Africa's tech entrepreneurs that they can overcome funding challenges if they deliver innovations at scale to the market. The funds mentioned may also serve to provide indication as to the kind of opportunities that are being funded, given the broad range of activities within the ICT sector.
Last month, TLcom, a leading private equity firm, said it raised $40 million for its TIDE Africa Fund to invest in companies that provide technologydriven solutions in Sub-Saharan Africa. “TIDE Africa offers a great opportunity to our investor partners and to global private capital to achieve significant returns and support world class technology entrepreneurs who are working in Africa to create solutions for local and global markets,” said Omobola Johnson, TLcom's Senior Partner and a former Nigerian Minister of Communication Technology.
Adenia Partners, a leading Africafocused private equity firm, has raised €230 million to invest in high-growth sectors in Sub-Saharan Africa. The fund manager said it raised the funds under a new vehicle – Adenia Capital IV - which will target a variety of growth sectors including consumer goods, business services, manufacturing, financial services, ICT and telecommunications, hospitality, and healthcare.
African financial technology company Zoona has successfully raised $15 million in a second round of financing. This Series B round is led by the International Finance Corporation (IFC), a member of the World Bank Group, and will help Zoona scale up its operations as it aims to reach 10 markets and 30 million active consumers across Africa by 2020.
The IFC, in partnership with Google, Convergence Partners, and Mitsui & Co. has also agreed to invest up to $100 million in CSquared – a company focused on deploying wholesale, “carrierneutral”, open-access fiber optic networks across Sub-Saharan Africa.
Last month, Tizeti, a Nigerian wireless Internet company, raised $2.1 million in seed funding to extend its Wifi services in Nigeria. The company raised its seed funding from African and American venture capital firms, including Western Technology Investment, Social Capital, Vy Capital, Picus Capital, Ace & Company, Lynett Capital Partners, Zeno Ventures and several angel investors including Y Combinator's Michael Seibel and Gabriel Hammond.
Apart from the investment funds, some acquisitions have also been taking place in Africa's technology space. Synergy Capital Managers, an Africa-focused private equity firm, recently acquired the Nigerian and Ghanaian subsidiaries of Dimension Data Group, a leading Dutch ICT provider. The Lagos-based firm said it made the acquisition through its Synergy Private Equity Fund (SPEF) – a $100 million private equity fund targeting high-growth companies in West Africa.
The investment flows into Africa's fintech and tech firms are coming on the back of Africa’s telecom boom of the early 2000.Besides the payment and ecommerce industries, which have leveraged significant funding from the telecom boom, other frontiers that can attract funding through innovations include ICT education – an area where Andela has pioneered in Africa – as well as ICT applications in the agribusiness value chain.
Omobola Johnson, TLcom's Senior Partner