While TechCabal recognises that 90% of its workforce cannot dance, it will now concentrate all its effort into making sure the 10% that does have moves makes a profit from it.
In today’s edition
DiDi pulls the plug on South Africa
More African countries are considering CBDCs
TC Insights: Nigeria’s YC strides
DiDi PULLS THE PLUG ON SOUTH AFRICA
One year after touching down in South Africa, DiDi—the China-based e-hailing company—has announced it will halt its operation in the country.
Globally, DiDi is the second-largest e-hailing company, second only to Uber. While Uber has an $80.5 billion market value, DiDi is next with $21 billion, beating Lyft.
South Africa marked the company’s 17th country of operations, and its entry into Africa.
Unfortunately, though, DiDi’s entry was poorly timed. Two months after launch, South Africa was hit by its third COVID wave, which prompted yet another lockdown as the country recorded nearly 12,000 infections per day.
Other than the crippling effects of the pandemic on e-hailing platforms, DiDi also faced fierce competition from already-existing platforms in South Africa—Uber and Bolt.
Globally, DiDi claims to have over 500 million customers. In China, DiDi dominates the market by 80%. After expanding to Brazil in 2018, it quickly acquired a Brazilian e-hailing platform, 99, which it claims led it to dominate 50% of South America’s e-hailing market.
In South Africa, though, DiDi has had a rough time competing with other platforms. At the time of its launch, Uber controlled 78% of South Africa’s e-hailing market, and Bolt controlled 28%. While Didi launched with a variety of incentives—including lower commission fees for drivers, and ride-sharing options for riders—the platform didn’t see much growth.
ITWeb also reports that riders and drivers who flocked to get DiDi’s incentives made a U-turn to favourites after the first few months.
Zoom out: E-hailing platforms in South Africa are also experiencing pushback from drivers who are protesting security challenges posed to them, as well as low wages and high commission from the platforms. If multinational companies like DiDi can’t keep up, how difficult will it be for home-bred platforms to enter the market?
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Side-bar: CBDCs are digital fiat currencies that are different from cryptocurrencies in a number of ways. While crypto is decentralised and unregulated, digital fiat currencies are deployed on centralised and private blockchain networks that are supervised by a central bank.
Nigeria is not the first African country to develop or even test a CBDC, though. Tunisia was first in 2019 with the e-dinar, but only tests were run at the time. Presently, the e-dinar is available for limited use only within Tunisia. But the Tunisian government is running tests for cross-border payments.
PricewaterhouseCoopers (PwC)—a multinational insights firm—placed Nigeria at the top of its global CBDC retail index for 2021. The firm also mentioned that 80% of central banks across the world are considering CBDCs. PwC’s Blockchain & Crypto Specialist, Haydn Jones, also said, “The success of Nigeria’s eNaira is likely to spur CBDC development in countries where financial inclusion is one of the key desired outcomes.”
So are African countries considering CBDCs?
Other than Tunisia and Nigeria, there are 9 other African countries testing or developing CBDCs.
Project Dunbar is led by the BIS Innovation Hub, based in Singapore. On March 22, BIS Innovation Hub and the South African Reserve Bank confirmed the successful testing prototypes that will enable international settlements using central bank digital currencies.
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The first Nigerian company to get into Y Combinator (also called YC) was the defunct online advertising platform, PetaSales in 2009. YC is an American seed accelerator valued at over $600 billion. The accelerator has helped in launching over 3,000 startups globally including Stripe, Coinbase, and Dropbox amongst others.
After a seven-year drought, Paystack and Flutterwave—leading payment platforms in Nigeria—joined the accelerator program. Since then, Nigerian startups have become regular participants in the famous accelerator program.
Nigerian startups made up 5 out of the 12 African startups that made it into YC in the 2020 winter batch. This number tripled to 18 in the 2022 winter batch, a feat which ranks it as the third-largest representation when categorized by country, behind the U.S. and India. Essentially, the number of Nigerian startups selected for YC has increased astronomically by 1000% in six years.
To understand this rising trend, one has to consider that the country remains the most active venture capital scene in Africa, attracting more than $1.80 billion of the $5 billion raised across the continent in 2021.
As of 2020, the number of startups in Nigeria was estimated at around 3,300
—the highest number in Africa. This places it at a numerical advantage over startups from other African countries. While these are obvious reasons for the country’s dominance, the success of Flutterwave and Paystack points to a viable location for startups. Both startups have improved the payment landscape across the industry and the continent, making it easy for startups playing in other sectors to achieve significant traction.
Similarly, YC alumni have helped coach prospective YC applicants, making sure their applications/ideas sound more compelling. All of these have played a significant part in Nigerian startups becoming regular participants at the coveted global accelerator in Silicon Valley.
The trend will likely continue in the coming years. Startups that are unable to get into YC may likely consider other global accelerators like Techstars, and 500 Startups amongst others. Still, the allure of getting into a prestigious accelerator like YC and hitting great heights like Flutterwave and Paystack will always persist.
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