Cloud company, Rackspace files for IPO

A TechCabal roundup about the
impact of the coronavirus pandemic
on Africa’s tech industry

JULY 12, 2020
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.


Hello,

Money in the pandemic has been a recurring theme in a lot of our newsletters; fintech, mobile payments, salary slashes, and whatever form it comes in, we have attempted to analyse.

And one thing is clear; COVID-19 is highlighting deficiencies in Africa’s financial systems.

This week, South Africa’s struggle with distributing intervention funds; a problem that tech can solve, brings socio-economic challenges of fintech on the continent to the spotlight.

This is the 16th edition of our
weekly special focused on the effect of the novel coronavirus, COVID-19 on African tech and innovation ecosystems. If this is your first time on this newsletter, catch up with
previous editions here.

The pandemic is still afoot, stay safe and follow safety guidelines.

Let’s dive in.

WHAT’S HAPPENING

Cash still rules

The South African government has issued an apology for delaying payments of the Unemployment Insurance Fund (UIF); a COVID-19 relief fund that it set up.

Originally, the UIF is a pension scheme of sorts where workers contribute 1% of their salaries, and their employers match it to 2%, on a monthly basis. But since the lockdowns and its attendant economic hardships, the UIF has been adjusted to include non-contributory citizens who have lost their means of livelihood.

South Africa’s Minister of
Employment and Labour, TW Nxesi said this last factor has caused an increase in the number of participants and made it a little bit harder to process the payments.

While it had reportedly successfully disbursed over R28 billion, there were still hiccups. In a lengthy Facebook
post
, Nxesi listed challenges causing the delays, a lot of them could be political and bureaucratic, at face value, they are all problems that could be solved by fintech and financial inclusion.

Access to mobile money services would ease processes like this.

But like most of Africa,
socio-economic factors have been, and still are, a major hindrance to the proliferation of financial (technology) services.

Even though 75% of its population have bank accounts and access to digital financial tools, South Africa has always been and is still largely a cash-based society.

A 2019 report (PDF) by Deloitte and MasterCard sums this paradox up perfectly;

“In South Africa, financial inclusion for consumers has shifted from an access issue to a digital adoption and usage issue. For example, there are more than 80 million bank cards in circulation, assisted by the approximately 17 million South African Social Security Agency (SASSA) cards, and a mobile penetration rate of 157%. Yet there is a decline in the use of these accounts and an increased utilisation of cash in the informal market. For informal merchants, the challenge remains acceptance of electronic payments, which in turn is restricting growth on the consumer side.”

It is important to note, that the almighty MPesa failed in South Africa, and was shelved in 2016; 6 years after launch, because of a lack of mass adoption.

One year after, in 2017, WeForum outlined challenges to financial inclusion in South Africa, and 90% of them were socio-economic factors.

At the end of the day, South Africa is not alone. In April, the Nigerian government announced a ₦1 billion intervention fund, and disbursement seemed to be one of its biggest headaches.

Photos online showed stacked bundles of naira notes to be distributed. This is as inefficient as it is unhealthy, considering the pandemic, but there are no viable alternatives to financially reach the larger populace.

Somewhere in Northern Nigeria, bundles of cash are stacked and awaiting physical distribution


The Nigerian government has its Trader Moni empowerment scheme, but this is targeted at the perpetually unbanked. According to a report on TraderMoni disbursements;

“…the first loan of ₦10, 000 can be collected without Biometric Verification Number (BVN) or bank account.”

This method can’t, and won’t scale.

When you think about it,
all this is surprising considering that financial technology has become something of a fad in the last few years.

While fintech has caught on like wildfire, and even accelerated financial inclusion to a large extent, the aforementioned examples, and lots more, are proof that there is more work to be done.

Smartphone penetration is increasing on the internet, Africa is a mobile first continent, yet there are no commensurate improvements in the general financial technology atmosphere.

While building for the world, the process of architecting financial technology in Africa still needs
to consider prevalent socio-economic factors. Whether by education, trustworthy systems, and or adjusting transaction fees, fintech needs to adjust to the African reality to improve adoption rates.

FROM THE CABAL

MultiChoice’s Showmax is finally positioned to dominate Africa’s streaming market
Entertainment company Multichoice has launched a new streaming service called Showmax Pro, a year after testing Showmax its Netflix killer. The new platform will bundle its on-demand content and live TV programming in a bid to give Netflix and other streaming services a run for their monies.

Showmax had revealed at the beginning of the pandemic that it saw a 50% increase in daily unique users during the lockdown in South Africa. Will its new service be enough to lure existing users from its competitors as well as on-board new users? Abubakar explores some of the answers here.

How MAX is scaling its mobility solutions despite Lagos Okada ban. Despite an Okada ban in Lagos and the ongoing pandemic, mobility startup, MAX says it is on track to achieve a 10x growth before the end of the year in four other Nigerian cities.

The company says the Lagos ban affected the drivers focused on its transport business. As a result, it doubled down on its existing logistics business and its operations in Ibadan, Kano, Akure and Ado Ekiti. Its focus now is “more on building that infrastructure that allows people and things to move around,” according to CEO, Adetayo Bamiduro.

NEWS FROM AROUND THE WORLD

Cloud company Rackspace files for U.S. IPO
Rackspace leases server space and helps corporations store and access data in the cloud. Its IPO could value the company at $10 billion. It had been exploring an IPO for the last two years, but its weak organic growth and large debt stopped it from pursuing it. The company has seen demand for cloud services go up as a result of coronavirus lockdowns.

The Bill & Melinda Gates
Foundation has pledged $250 million toward COVID-19 research.
According to the foundation, the money will be used to support the development of diagnostics, therapeutics, and vaccines… and help mitigate the social and economic impacts of the virus.

“We need leaders to make these hard decisions about distributing based on equity, not just on market-driven factors,” Co-founder Bill Gates said. Gates argued that the drugs should go where they are needed most and not to the highest bidders.

WHAT WE ARE READING

Pivoting to COVID-19: How a weekend sprint helped one startup boost adoption
Speaking to doctors one Friday, Jacob Haddad, CEO at patient communication company AccuRx realized they were getting worried. They needed a video appointment solution. AccuRx built the video appointment solution and launched it the following Monday. Within three weeks it had signed up half of the GP practices in the UK.

Haddad spoke with Protocol about how they quickly built the solution and the future of healthcare.
Read it all here.

Best wishes for a great week

Stay safe and please observe all guidelines provided by health experts.

You can subscribe to our TC Daily Newsletter; the most comprehensive roundup of technology news on the continent, and have it delivered to your inbox every weekday at 7 am WAT.

Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay updated on tech and innovation in Africa.

– Victor Ekwealor, Managing Editor, TechCabal

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