How Tech is Revolutionizing the Business Landscape in Africa

When those in the Western world think of Africa, images of The Lion King and more recently, Black Panther are probably what first come to mind. While these two iconic movies (and many others) help put Africa on the map, there is so much more than meets the eye on this fast-emerging continent. Thinking beyond the typical African image of charities, missionaries and fundraising efforts, (which I recognize are completely valued and incredibly important) Africa also deserves to be recognized as a key player in the emergence of tech in the global economy.

Many of us Africans were awe-struck when Black Panther came out. This film shone an important light on where Africa is and the potential it has. Marrying a continent rich in culture, combined with the game-changing abilities that tech enables, this was more than just a superhero movie.

It’s a movie about what it means to be black in both the West and in Africa — and more broadly, in the world. Rather than dodge complicated themes about race and identity, the film grapples head-on with the issues affecting modern-day life. “You have superhero films that are gritty dramas or action comedies,” director Ryan Coogler told TIME magazine. But this movie, he says, tackles another important genre: “Superhero films that deal with issues of being of African descent.”

This is not an article about superhero movies, but rather one of opportunity and success in the face of adversity. And so begs the question, (minus the powers of the marvel universe) could a real life, tech-focused Wakanda exist?

With the mass adoption of innovative technologies throughout the continent, Africans are developing products at a staggering rate that are set to disrupt the global tech industry. For the purposes of this article, I am mainly referencing mine and REITIUM Co-Founder, Michael Moll’s home country of Kenya, but many African nations face similar issues and thus solutions.

The exciting thing is that what was once seen as a disadvantage — the lack of institutional and regulatory hurdles that the West is rife with, African nations now have the freedom to build technology needed to succeed and excel in daily life, thus leapfrogging countries that are left with their hands tied.

The Rise of Fintech in Africa

The Introduction of Mobile Money

Launched in 2007 by Safaricom, Kenya introduced M-Pesa (‘money’ in Swahili). At a time when many citizens did not have access to banking, due to tough rules and high balances required, M-Pesa was created as a solution that swept the nation, quickly becoming the preferred method of payment — from grandmothers selling their wares to tourists in the safari park to the franchised gas stations in the city, M-Pesa is accepted everywhere.

M-Pesa is a branchless banking service where customers can deposit and withdraw money from a network of agents that includes airtime re-sellers and retail outlets acting as banking agents, allowing users to withdraw and deposit money into to mobile wallets. Payments and transfer of money is distributed to one another via SMS — offering banking solutions as a mobile service, without the need for WiFi.

M-Pesa spread quickly, and by 2010 had become the most successful mobile phone-based financial service in the developing world. By 2012, a whopping 17 million M-Pesa accounts had been registered in Kenya and by 2016 another 7 million accounts had been opened in Tanzania. A 2020 joint venture with Vodacom accelerated the growth of M-PESA into new African markets and as of March the 14 year-old company is live in 7 countries, services 49.7M customers and had 15B transactions in 2020 alone.

The service has been applauded for giving millions of people access to a formalized financial system and for reducing crime in otherwise largely cash-based societies. At least one individual in 96% of Kenyan households uses M-Pesa and since its inception Kenya has become the most advanced mobile payment market in the developing world.

It should also be noted that according to the 2017 Global Findex report by the World Bank, one third of Kenya’s population remains unbanked.

Historical Crowdfunding Behaviours

In an effort to alleviate extreme levels of poverty, crowdfunding solutions have existed for centuries. One such practice is Harambee (‘all pull together’ in Swahili). It’s the practice of community members contributing resources to raise money for conventional financial needs i.e. for development or fundraising for activities such as medical expenses, funeral arrangements, school fees etc.

Without access to financial assistance or loans, communities had to ban together to help one another out. This practice is embedded so deep into the culture, creating the way Kenyans think and operate — it is also the official motto of Kenya and appears on its coat of arms.

Another similar crowdfunding activity known as Chama (‘group’ in Swahili) is an informal cooperative society that is normally used to pool and invest savings by people throughout Africa, particularly Kenya. The chama phenomenon is also referred to as a“micro-savings groups”. The chama phenomenon arose out of the idea of harambee, in the late 1980s and 1990s. Originally, chamas tended to be exclusively women’s groups, but as chamas started to grow in sophistication and success, men started participating in chamas as well.

In Kenya there are estimated to be 300,000 chamas managing a total of US$3.4 billion in assets. Chamas are known for their exclusivity — in order to join, new members are typically subjected to extensive interviews and must have assurances or guarantees made for them by an existing member. It is estimated that one in three Kenyans is a chama member.

Although their crowdfunding practices are not yet digital, it is relevant to note. As this behaviour is present and not a new concept in Kenya, it is just a matter of time before crowdfunding companies will successfully take off. Unlike in the West, this mentality and practices have existed for decades, technology just needs to catch up.

When we first started talking about REITIUM in North America, people were interested and since the crowdfunding rules and regulations came into effect in 2012 in the USA (2015 in Canada) people were learning to understand it more. But the truth is, they never had to think about crowdfunding in the past, due to easy access to credit, capital and financing.

In Africa, this was not an option, so chamas had to be created, which also strengthened the trust and community involvement associated with an investment.

When we presented our company to a group in Kenya in 2019, we were met with much eagerness and began our conversations about bringing our REITIUM platform to the continent.

Advanced Digitized Identification

Currently the integration of digitized identification is taking place throughout Kenya and across other African nations. Citizens have their biometric data and personal identification attached to their passports and drivers licenses via microchip.

The National Integrated Identity Management System, or NIIMS, is expected to help government better understand its citizens, provide services effectively, curb corruption and create solutions to policy challenges, according to a report by the Ministry of Information Communications and Technology (MICT). When departments can clearly identify individuals — overcoming differences in the way they hold data, and minimizing the opportunities for fraud or errors — it becomes far easier to deliver integrated services and exchange data between public bodies.

The adoption of this technology is set to leapfrog the KYC process and provide improved government services for Kenyan citizens.

“Our vision is that in the next five years, every part of the country will be connected, thus allowing all citizens to partake in the digital movement,” said president Kenyatta, speaking at a tech conference recently.

The US $60M program will serve as a “test bed for new ideas for the rest of the continent”, Kenyatta added.

The government is keen to “control and commercialize” the ‘‘significant natural and monetary resources in the digital economy”, the MICT report explains, adding that the new system will create opportunities for private sector involvement in service delivery — through verifying people’s identities, for example, or providing additional services. Some public services are also likely to be commercialized, to create fresh sources of revenue for the state.

“It is vital that each country develops a vibrant digital economy lest it be swamped by fast moving global brands and companies,” the report says.

Where does Blockchain fit in?

Simply put, blockchain’s transparency encourages people to be good actors, enabling trust and exposing any loss of integrity. Perhaps the biggest benefit for this emerging technology is that Africa is not strangled by laws and institutional issues, which offers huge opportunity for change at a foundational level.

Blockchain adoption in Africa is on the rise. From transportation to farming to the gaming and lottery industries, reports of companies utilizing decentralized ledger technology (DLT) across the continent are emerging. Several stakeholders in the African blockchain scene say DLT is the key to solving the developmental issues plaguing the continent as a whole. They also believe the technology provides a platform for Africa to elevate itself to a position of greater relevance in global affairs.

While the general attention of governments still appears minimal, some countries are reportedly taking steps to promote increased blockchain adoption. Nations such as Kenya and Nigeria have announced plans to pursue regulation and greater cooperation with the private sector to leverage the benefits accruable from blockchain utilization.

Blockchain aids in the fight of corruption with audit trails and incentives good practice among users. As each transaction is tracked, any fraudulent activity will be subject to law enforcement thus, consumer protection is a favourable result.

In 2019 REITIUM’s Co-Founders, Michael and Laura were in Kenya meeting with a blockchain and AI group that is on the forefront of creating some incredible things for the country, which will likely be modeled by similar groups across the continent.

Sandbox Review Committee

The Kenyan Board of Capital Markets Authority (CMA) approved the Regulatory Sandbox policy to review applications from fintech firms.

The Sandbox is expected to accelerate CMA’s understanding of emerging technologies and support the adoption of an evidence-based approach to regulation. Participants are required to comply with certain minimum regulatory requirements prescribed by law however, CMA will assess regulatory requirements to be temporarily modified during a Regulatory Sandbox test on a case-by-case basis, this includes blockchain companies.

The Sandbox strives to create a conducive environment to unlock the potential of the fintech space, which is incredible news for forward advancement.

What About the Brain Drain?

Locals leaving their home country in search of opportunities that allow them to reach their full potential elsewhere is a common issue that most countries outside of America are experiencing, particularly in tech.

Partially in an effort to bring highly educated people back to their home countries, major tech companies are setting up shop in many jurisdictions worldwide. This is a huge benefit to countries outside of America and the UK that don’t get as much attention as they deserve.

IBM Research–Africa is IBM’s 12th global research lab and the first industrial research facility on the continent of Africa. With facilities in Kenya and South Africa, IBM Research–Africa is driving innovation by developing commercially-viable solutions to transform lives and spark new business opportunities in key areas such as water, agriculture, transportation, healthcare, financial inclusion, education, energy, security and e-government.

IBM Research — Africa is actively engaging with Africa’s innovation ecosystem to kick start new business opportunities and ensure the full commercial viability of its solutions and services. Entrepreneurs, developers and business partners are a key part of IBM’s research programs and go-to-market strategy in Africa.

Google — Now positioning itself as an “AI first” company, Google has set up research and development centres across the globe in places such as Tokyo, Zurich, New York, and Paris. Recently, the tech giant opened its first centre in Africa in Ghana’s capital city, Accra.

If we look deeper into country specifics, we see the emergence of up and coming fintech companies spreading all across Africa. With one strong and recent example, we can look at Nigerian-founded fintech startup, Flutterwave and how they raised $35M, partnering with Worldpay for payments in Africa. Going on the notion that the past repeats itself, this is even more incredible news for the continent, a wave that is likely just getting started in an ocean of opportunity.

While we have still not yet discovered the ‘most advanced technology’ in the world, Wakanda’s fictitious Vibranium, the technologies we’re implementing today are rapidly changing lives, offering incredible opportunities and allowing nations to rise up to their full potential, making leaps and bounds towards a future that is ever brighter.

Article written by REITIUM’s
Marketing co-ordinator,
Wanjiru Nganga
Edited by COO,
Laura Fortey

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