This newsletter is a weekly special focused on the effect of the novel coronavirus, COVID-19 on African tech and innovation ecosystems. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT. This edition is brought to you in partnership with Helium Health.
The coronavirus pandemic was supposed to be an unintended catalyst for fintech and mobile money in Africa. What we are now seeing is a mixed bag. Good and not so good.
Welcome to today’s edition of our weekly update where we examine the impact of the pandemic on tech and innovation in Africa. Catch up on previous editions here; Issue 1, Issue 2, Issue 3 and Issue 4.
We hope you are well and keeping safe?
For some good news, Africa currently has a 30% coronavirus recovery rate. Yaayy!
There have been prophecies, and although it’s too early to tell, most of what we are seeing isn’t what was predicted. As young people like to say, everything is moving mad.
First of all, e-commerce was supposed to see a boom but started facing policy roadblocks. And now, fintech is dealing with a mix of consumer behaviour, distribution and microeconomic issues.
Here’s what’s happening:
A fintech boon? Not really.
Safaricom is now forecasting that it could lose about $51.64 million in revenue from M-Pesa, its globally acclaimed mobile money service, in the three
months from mid-March.
When the virus hit the continent, the consensus was that it will boost mobile money adoption considering an increase in e-lifestyle necessitated by social distancing.
According to the GSMA, Sub-Saharan Africa remains “the
enduring epicentre of mobile money” with the region making up over 60% of the $690 billion transacted through mobile money services in 2019.
The pandemic was supposed to boost mobile money usage. Major telcos in partnership with governments waived transaction fees to encourage users to adopt mobile money and avoid using cash for fear of spreading the virus. Safaricom was one of the telcos.
The company says the estimated loss is forgone revenue which equates 7.3% of M-Pesa’s annual earnings.
The forgone revenue is caused by “the removal of
all charges on small peer-to-peer transfers to facilitate cashless payments to help to contain the coronavirus pandemic.”
As mobile money expert Michael Kimani put it, could there be additional reasons for the loss in revenue that Safaricom hasn’t clearly communicated? I am inclined to agree. Here’s why.
Remittances are one of the major use cases of mobile money in Africa. But they are estimated to drop about a quarter this year according to the World Bank.
According to the World Bank, remittance flows will drop by 23.1% to $37 billion in 2020 in the wake of the COVID-19 economic crisis. Job losses and economic crisis in wealthier countries will cause migrants to send less money home. And this is not good, at all.
After receiving $635 million from abroad in 2019, a lockdown complication highlighted Zimbabwe’s dependence on remittances. The southern African
country is not alone.
In South Sudan, remittances of $1.3 billion in 2019 accounted for 34% of the country’s GDP, the highest in the region. They are a major source of income for the region.
As key as these remittances are to economies, and homes, the coronavirus pandemic has however made it more difficult for people to remit money since most payments are still in cash and most money transfer agents are closed.
Fintech startups with an agent network or an offline component are facing difficulties especially in countries with a nationwide lockdown.
South African fintech Yoco reported a 90% decrease in in-person transactions since the coronavirus lockdown began in the country. In response, it launched a suite of online payment solutions to help its merchants and consequently its own business stay alive
through the crisis.
Yoco is one of the well-funded African fintechs. It has raised about $23 million to date with investors betting on its mission to help merchants accept card payments without having to pay the often exorbitant fees charged by banks for card machines used by larger retailers. The company has a customer base of 80,000 merchants.
Sources at OPay, another well-funded fintech company, say people are defaulting to mobile money agents to do cash transactions, and that the company’s core payment services are still growing. However, OPay is still badly impacted by the virus.
So while mobile money providers expect to benefit from increased usage as users shun cash, it’s too early to say.
In the words of Safaricom’s CEO, Peter Ndegwa, “We are not factoring in any upside until we see how customers cope with this crisis,” he said. “We are in a good place to be able to weather this storm, but our business is linked to how the country comes out on the other side,” he told Reuters.
Things are not going to get easier for these companies, and the only respite in sight is a relaxation of the social distance necessitated lockdowns across the continent, and the world at large. Even then, recovery is a long road.
To help in the fight against COVID-19 and ensure care provision continues during this pandemic, Helium Health is giving hospitals and clinics across Nigeria free access to its telemedicine software. To sign up or get more information, contact email@example.com. Hurry!! Offer is for
a limited time.
FROM THE CABAL
Veteran investor makes the case for investing in Africa despite coronavirus.
“Antifragility is the case for why Africa is more interesting than anywhere else,” Eghosa Omoigui said during his TechCabal Live
session. Omoigui’s thesis is that while reasonable anxiety exists over the return of many small businesses in the US after the crisis, African businesses have adapted a resilience to disorder and uncertainty over time, making them suitable opportunities for investors.
What do we do when economic strains make lockdowns impossible to maintain? A late notification that the Siem Marlin, an offshore vessel he was on, had six coronavirus carriers led Abel Ekele, founder, Trivoda
Digital to develop Safety Visa; an application using GPS technology to track a person’s whereabouts and alert them if they have been exposed. Primarily targeted at frontliners and essential service providers, the app will become critical in monitoring non-infected individuals, those who have recovered and been discharged as well as those at risk when normal economic activities are forced to resume.
OPay is having a difficult 2020. In 2019, the Nigerian-based fintech startup raised $170 million and began an aggressive expansion across different verticals. It became a source of worry to fintechs and their investors. Following a motor-cycle ban in Lagos and a global pandemic, OPay is struggling. The pandemic has hit the super-app badly across board. Company insiders, however, claim that its core payment services are still growing.
Sim Shagaya on the impacts of COVID-19 on African businesses. In a new video series with TechCabal, one of Africa’s most prolific
founders, Shagaya outlined what startups should do to maintain momentum and prioritize efficiency amidst the tough business climate initiated by the coronavirus pandemic.
NEWS FROM AROUND THE WORLD
Facebook’s answer to Zoom and Houseparty for the pandemic. The social media giant announced Messenger Rooms on Friday. Messenger Rooms is a tool for starting virtual hangouts with up to 50 people
and allowing friends to drop in on you whenever they like. For video calls on Whatsapp, it is doubling the capacity from four people to eight, adding video calls to Facebook Dating, and adding new live-streaming features to both Facebook and Instagram.
More than 12 million people attended Travis Scott’s Fortnite concert The virtual concert topped Fortnite’s Marshmello’s concert, another one from last year which saw more than 10 million people in attendance, making it Epic Games’ largest-ever event. Many more people saw the concert outside of the game on platforms such as Twitch and YouTube. According to TechCrunch’s Anthony Ha, Scott and Fortnite-maker Epic Games delivered “a gloriously surreal “astronomical” event, with an enormous, kaiju-sized Scott
avatar looming over players and teleporting around the venue.”
WHAT WE ARE READING
Ubiquitous screening is the key to ending lockdowns & social distancing.
Paul Buchheit, the engineer who created Gmail and partner at YCombinator is leading the charge to produce millions of scanners for detecting COVID-19. The scanners can be produced at less than $1 per test and can give results in ten minutes using a small amount of saliva. “We must never again allow a pandemic to threaten our health and disrupt our society. With the ability to screen for multiple viruses, we can not only end this pandemic, but also prevent the next,”
Our widespread inability to build is why we were unprepared for the coronavirus pandemic. “Many of us would like to pin the cause on one political party or another, on one government or another. But the harsh reality is that it all failed — no Western country, or state, or city was prepared — and despite hard work and often extraordinary sacrifice by many people within these institutions. So the problem runs deeper than your favorite political opponent or your home nation,” Marc Andreessen, cofounder at the venture capital firm Andreessen Horowitz writes.
Best wishes for a great week
Stay safe and please observe all the guidelines provided by health experts.