Welcome 2Africa

Wealthtech in Kenya

Hello Friend, 

It seems we’re gradually adjusting better to life as it is. On the bright side, after months of inaction, Football is returning, albeit with a few adjustments and fashion lovers all around Africa are using masks which have become compulsory to make a fashion statement, that’s a good one for tailors and local designers.

Now to the stories of the week 😊

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Welcome 2Africa

It’s one of the biggest collaborations we’ve seen this year.  Dubbed as one of the world’s largest subsea cable projects, 2Africa will connect 23 countries in Africa, the Middle East and Europe. And has the capacity of providing internet at a speed of 180Tbps! 

Led by a consortium including China Mobile International, Facebook, MTN GlobalConnect, Orange, Telecom Egypt, Vodafone and West Indian Ocean Cable Company (WIOCC). 2Africa is the rave of the moment, the project which would cost roughly $1B is led by Facebook.

What this means for Africa

Africa is the next avenue for Growth for many Global companies, with other regions such as America & Europe being saturated and Asia being somewhat difficult to get into due to regulations. Better access to the internet for Africa means more users.

Improving Internet access in Africa: While Africa currently only has 11.5% of the world’s Internet Users. With 17% of the world’s population, it has the potential to add more users since it has an average internet penetration rate of 39.3% as against a 62.9% rest of the world average. 

If this project is successful by its completion date (2024). It should also make internet access more affordable. As per Stears, According to the Alliance for Affordable Internet (A4AI), affordable data means that the cost of 1GB must not cost more than 2% of monthly income. The cost of 1GB in Nigeria is roughly $2.78, compared to $2.33 in Rwanda, $3.63 in Ghana, and $5.99 in Gabon. 

What this means for Facebook

Considering its past efforts, Facebook has come a long way in its quest to provide better internet access for Africa.

It started in 2013, with the launch of Internet.org, a humanitarian effort to provide internet access as a basic human right in emerging markets around the world that failed. Then in 2016, Facebook attempted to launch a satellite that would beam internet signals around Africa but the rocket carrying the equipment blew up on the launchpad. A year later, in partnership with local internet service providers of various countries, it launched the Express wifi initiative, public WiFi service for some emerging markets. This service is reportedly currently active in Ghana, India, Indonesia, Kenya, Nigeria, Philippines, South Africa, and Tanzania.

Also, just last year Facebook also had a partnership with MainOne to bring internet service to some states in Nigeria.

Apparently, Facebook isn’t stopping till it achieves its mission to bring the world closer. All this comes barely a month after Facebook spent $5.7B in becoming the largest minority shareholder in India's largest mobile telecom provider. And a few hours before it announced a 400M purchase of popular GIF-making website Giphy. Most of the world might be retreating right now but Mark Zuckerberg is keeping true to his words that in times of economic downturn, the right thing to do is to keep investing in building the future.

Big Picture: Building the future involves doing things that are difficult and the members of the consortium led by Facebook have achieved their first milestone by agreeing to do this. For the rest of the world, to come out of the mess the world is in, we’d need more investments in key infrastructures like this.

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The new fate of commercial motorcycles in Uganda & Nigeria

@CaleinD (Twitter)

Uganda has about four more days before lockdown is lifted but there are talks on the regulation of “Boda Boda” in the country's capital.

What is “Boda Boda”? 

Basically commercial motorbikes. 

Growth and current mode of operations: With $31 million spent on its imports back in 2012, boda boda is the most popular means of transportation in Uganda. Factually, with the rate of recent growth where motorcycles in Kampala increased from 15,979 in 2007 to 405,124 in 2014, it is safe to say boda boda is the second largest employer of labour in the city but this is not without its problems. .  

Sadly: There are a lot of safety problems associated with motorcycles especially those without proper knowledge of road safety laws. Death toll has reportedly risen to more than 4,000 death cases each year, resulting from accidents caused by boda boda. 

On the flip side: The industry has evolved and the quest for formal motorcycle taxis brought about new online hailing operators including Taxify, Mondo-ride, Safe Boda and Uber but a larger population of riders are still independent operators without training and safety measures. 

Regulations: Kampala Capital City Authority (KCCA) wants to divide riders by groups and have them operate mainly in their allocated division. Also to allocate vests and numbers to riders in each division.  This is a step to check the activities of riders. 

Future of boda boda in Uganda

The traffic and road Safety Act, 1998 (Amendment) Act, 2019, as passed by the nation’s Parliament in January, significantly gives maximum penalties for traffic offences. 

No-go zones: The central business district makes up about 80% of the population in Kampala and there you have a cluster of riders. The government plans to make the area a free zone for motorbikes. This might pose a problem since there are no alternatives for boda boda in the area but it is for the safety of people in the area. If Lagos could do it, Kampala can do it too.

Meanwhile, Oride is selling off some of its bikes. After the ban of operations on major parts of Lagos, the online hailing company has now pivoted into the logistics business  OExpress, thereby having less need for some motorbikes. The bikes are being sold at about  ₦180,000 and ₦270,000, depending on how long they have been in use, are selling out fast as courier businesses take advantage of the opportunity. 

If the government doesn’t turn back on its policies, businesses have to change their business models to stay alive.

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Jumia’s Q1 Performance -  A better Quarter

Earlier this week Jumia Africa’s foremost eCommerce platform released its financial reports for the First Quarter of 2020.

How did it do?

Slightly better than expected.

Revenue: It made $31.79 million for Q1 2020 from 6.4 million eCommerce orders. A 6% decline from the $34.1 million it recorded in Q1 2019.

GMV: The GMV, a very important metric, is the gross value of all items sold on the platform. In Q1 2020, Jumia’s GMV stood at $205.92 million, an 11.4% drop from March 2019.

Expenses: It notably spent $9.6 million on Sales & Advertising expenses, the lowest since 2017

Losses: Another quarter of its loss-making streak as it lost $47.4 million, which is lower than losses from both the previous quarter ($69.2 million) and Q1 2019 ($49.4 million). The first time it’s seen a reduction of quarterly losses in almost 2 years. 

Why this?

The quarter was slightly better because of Jumia’s portfolio optimization strategy. Jumia focused on reducing its costs and is looking to do more of that in the coming months. It’s looking to reduce promotions and consumer incentives on products like electronics and mobile phones, which has been one of the highest-grossing categories. 

On the bright side: Its cash reserves rose 12% to $207.24 million and Jumia Pay seems to be holding up fine processing 2.3 million transactions worth $39 million in Q1 2020, that’s about the same 2.4 million transactions processed in the same period in 2019.

Zoom out: While many eyes are focused on when Jumia would be finally profitable, it might be worth asking this: 

If it took Amazon 9 years to be profitable, How long would it take Jumia, a company founded about 9 years ago but operating in a more difficult terrain to become profitable?

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Mobile Money & Wealthtech in Kenya

A rapidly growing economic landscape in Africa has seen Fintech startups become the cream of the crop on the continent. In Kenya, the rise in the use of platforms such as M-PESA has seen the country achieve a massive financial inclusion rate of 82.9% per cent, the highest on the continent. The bulk of the players on the fintech segment have focused on mobile payments processing, digital lending and online banking.

Crunching Numbers

To put this into perspective, An average of $111.7 million was transacted on mobile phones daily in 2019, totalling a sum of $40 billion, an increase from a total of $37.3 billion attained in 2018. In digital lending, Kenya leads the continent with 49 digital lenders operating momentarily

Wealthtech Boom 

In more recent times, there seems to be a new set of fintech companies gradually moving to offer services in wealth management prioritizing savings and investments overspending and consumption aka “wealthtech” in Africa. 

A tale of two cities

In Nigeria, there have been a lot of wealthtech startups granting individuals ease to make savings and investments. These investments exist in securities and agriculture. One of these startups, Piggyvest reportedly has about one million users which saved about $8m last year alone. 

This is not the same in Kenya as this fintech segment is still largely unexplored. There are a lot of reasons responsible for this, one of which is the lack of investment products available for low-income individuals. Another issue is stringent regulation which makes it difficult for new wealth tech entrants.

In conclusion: Unlike Mobile Money, Savings/investment is still raw and untapped in Kenya, being limited to the investment banks and large insurance companies in Kenya. Any change in regulations could see the rise of the wealth tech industry in Kenya.

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Worth Reading

Where to Invest N5 Million right now

Music streaming in Africa: An overview of 25+ platforms 

The radical response of South Korea to curb the spread of Coronavirus 

Quote

“What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.” 

— Warren Buffet

Thank you for reading this week’s edition 

Written by Daniel Adeyemi, Damilola Amusan & Bright Azuh