ZALE HECHTER: SA could lead the way in the African fintech revolution

While SA struggles with social unrest, criminality and high unemployment, I wonder if too much navel-gazing will leave us behind in the global tech revolution. 

The tech sector is the fastest growing global industry, and the further we fall behind in making our mark, the harder it will be to catch up and keep pace with global developments. 

Technology can be the silver bullet SA needs to get our economy back on track. It offers enormous business opportunities and can be used to leapfrog areas of development where we have been lagging. 

Technology can be an equaliser and break down silos of exclusion to help improve our competitive rankings and increase the employability of our youth. It can educate the remotest of citizens, unite the country around important issues at scale, and help grow the economy.  

Fintech brings financial services to underserved customers, empowering them to manage their finances more efficiently.

In The Fortune at the Bottom of the Pyramid, CK Prahalad says: “When the poor at the BOP [bottom of the pyramid] are treated as consumers they can reap the benefits of respect, choice and self-esteem and have an opportunity to climb out of the poverty trap”.

SA, Kenya and Nigeria are forerunners in the African fintech industry. SA has terrific start-ups like Lipa Payments, Yoco, Jumo, Tyme Bank and others. According to German market and consumer data company Statista, we had 154 fintech start-ups as of the first half of 2021. Nigeria had 144 and Kenya 93.

Though SA leads the global rankings for developed start-up ecosystems in Africa (the only one to break the top 50 globally, according to the StartupBlink Ecosystem Index Report 2021), we still fall behind in rankings by city.

Lagos and Nairobi lead Africa as the top African tech-hub cities. Cape Town is trailing behind in third, with Kigali fourth and Cairo fifth.

Africa has 643 tech hubs — 50 are in Kenya, 78 are in SA, and 90 are in Nigeria. These hubs provide education and training, fast internet and technical support to new businesses. They also catalyse professional networking, which helps tech entrepreneurs to learn and grow.

These top three African countries have a favourable ecosystem of large markets, high mobile internet penetration and good network coverage, supported by companies like MTN and Safaricom.  

Corporate involvement and venture capital are driving the tech sector’s growth. However, capital and favourable government policies are big obstacles. Many hubs cannot help companies reach investors who could fund their growth. Another obstacle is a lack of connections and skills and advice to help these tech start-ups grow and become profitable.  

Fintech growth 

According to a Harvard Business Review report, SA has strong demand for digital businesses and has supportive regulations. We are leaders in emerging technologies like biometric data and payment cards. And, believe it or not, we have the lowest frequency of monthly power outages on the continent.

We were also ranked 19th globally as a financial hub by the World Economic Forum and scored highly for having one of Africa’s most advanced transport infrastructures. 

The two most prominent pain points holding us back from pulling away from our counterparts is poor education, which leads to unemployability, and internet access. The education system does not provide practical skills and struggles to adapt to the evolution of technological tools. Internet penetration in SA is at 64%, with speeds below the global median.

As a result, only 30% of the poorest 40% of the population can partake in digital payments. This reality leaves a significant portion of the population untapped and unserved when it comes to financial service offerings.

In Kenya more than 70% of citizens have a mobile money account, and over 75% aged 15 or older made a mobile payment in the last year. In SA, these payment capabilities must become broadly inclusive. 

A unique identity system is a necessity in developing countries. Nigeria is ranked first in internet affordability, but 87% of its economy still transacts using cash. Most Nigerian citizens have never heard of mobile money.

The Nigerian government’s National Identity Management Commission is driving a huge registration programme for the country’s mandatory national identity number. Most of the population have few other ways to prove their identity so as to access public services or the financial system.

In SA, youth unemployment in the 15-24 age group is at 54%. More home-grown, digitally based businesses are needed to bring them into the fold. Digital skills development, education and internet access are critical factors if SA wants to capitalise on tech opportunities. President Cyril Ramaphosa’s skills revolution needs to be a top priority.

Come on, SA, let’s break into the top 10 tech nations globally.

• Hechter is CEO at CliqTech.