Information technology must not be the exclusive privilege of the elite
ABIDJAN, Ivory Coast, April 8, 2019 — African Development Bank President Adesina, on Friday, pleaded for Africans to embrace technology, and governments to urgently move away from “investing in the jobs of the past, but rather in the jobs of the future. A future that is just around the corner.”
Adesina was addressing a debateentitled: The New Tech Era: Job-killer or Job-creator?organised by Africa Report and Jeune Afrique as part of the 2019 Mo Ibrahim Governance Week. The debate took place in the Sofitel Hotel in Abidjan, Cote d’Ivoire.
“The people who control data, will control Africa. Coding must be compulsory, at all levels. The currency of the future is going to be coding,” Adesina said. “Information technology must not be the exclusive privilege of the elite, we must democratize technology,” he added.
Panelists included Pascal Lamy, board Director of the Mo Ibrahim Foundation and past Director-General of the World Trade Organization; Eric Kacou, an Ivorian businessman and co-founder of ESP Solutions; Chioma Agwuegbo, a Nigerian tech specialist and Zyad Liman, publishing director of Afrique Magazine.
In his welcome remarks, Mo Ibrahim urged the panelists to think about ways to address the “tsunami of young people entering the job market.”
In response to that call to action, Kacou insisted on the need for “a change in mindset to move from BBC or Born Before Computers to rethinking education to teach people how to learn and help them solve problems.”
Panellists acknowledged the critical role the tech industry can play in Africa’s economic transformation through the continent’s digitization. However, they agreed on the urgent need to upgrade the skills of the past, to do it fast, and move away from the social fear of technology.
Research has shown that if governments harness the full economic potential of just the internet, Africa could add $300 billion to its GDP by 2025. Also, 70% of all jobs will have an ICT component by 2020.
Opportunities to transform Africa through technology are endless. In agriculture, drones can monitor crops, Artificial Intelligence can speed varietal selection, and the Internet of the Things can control smart irrigation systems. Block chains can also aid food traceability.
“We must grab the opportunities…We must democratize technology. Africa should prepare itself. Digital technologies, including Artificial intelligence, big data analytics, blockchains, 3D printing, are already upon us,” Adesina concluded.
The three-hour interactive session ended with members of the audience calling for accelerated policy reforms and creating an enabling environment for innovative technology to thrive. The issue of data protection, identity protection and fake news and how to turn population into assets, topped discussions.
The African Development Bank has already made big strides in building skills in technology and innovation with its Job for Youth programme. In all, 234,000 new coders and 130 Coding Centres of Excellence are being created for Africa to participate in the supply side of the digital economy. The programme is not restricted to coding. The Bank is working with partners in the private sector, such as Facebook, Google and Microsoft, to build technical literacy and arm people at all educational levels with the skills they will need going forward.
To ensure there is a general reskilling of Africans, the Bank has invested EURO 70 million in a technology park in Senegal, to create a regional cluster of tech businesses in francophone Africa. The tech park is expected to contribute to the diversification of Senegal’s economy, creating 35,000 direct and 105,000 indirect jobs.
Additionally, the Bank has invested in several funds such as the TLcom TIDE Fund, Partech and African Technology Ventures to overcome the challenge of access to finance for tech entrepreneurs.
The Bank has also provided a US$30 million loan to the Rwandan Government to contribute to the innovation economy through the Rwanda Innovation Fund, focused on funding Tech-Enabled SME’s and to develop Rwanda’s entrepreneurial/innovation ecosystem capacity.
The Mo Ibrahim Governance Weekend kicked off in Abidjan on Friday. Adesina is joining Africa’s most influential leaders and thinkers for this event, which celebrates the continent’s leadership, debates issues of critical importance to Africa, and charts the way forward for the region.
African Development Bank Group (AfDB)
Intel ‘Youth In AI ePavilion’ to promote inclusion of youth-focused initiatives at AI Expo Africa 2020
Intel is set to promote inclusion of African youth in Artificial Intelligence (AI) through the ‘Intel Youth in AI ePavilion’ at AI Expo Africa 2020, this after the industry-leading tech firm signed up to sponsor nine youth-focused companies and organisations to exhibit at this year’s expo.
Now in its third year, AI Expo Africa 2020 is the continent’s largest trade-focused AI, Robotic Process Automation (RPA), 4IR and Data Science business conference. This year’s show will be held online on 3 and 4 September.
The AI Expo Africa 2020 speaker line-up features keynotes by Kay Firth-Butterfield, Head of AI and Machine Learning at the World Economic Forum; Neil Sahota, IBM Master Inventor, UN AI expert and lecturer at University of California, and Fred Werner, Head of Strategic Engagement at the International Telecommunication Union, and Bayo Adekanmbi, CTO MTN Nigeria and founder of Data Science Nigeria, as well as Prof Tshilidzi Marwala, and Vice-Chancellor of the University of Johannesburg and Deputy Head of the 4IR Commission of South Africa.
The Intel ‘Youth in AI ePavilion’ will promote and showcase youth-focused AI companies and organisations, as well as Science, Technology, Engineering and Mathematics (STEM) initiatives.
Roy Bannister, co-founder of AI Media Group and director of AI Expo Africa show production stated: “We’re delighted to welcome Intel back as a sponsor this year, especially given their focus on skills development and great support in the past, where Intel assisted us in providing free AI Workshops to a large number of data science students, young engineers and entrepreneurs.”
Nick Bradshaw, co-founder of AI Media Group – curators of AI Expo Africa stated, “With the impact of COVID, we have taken the entire community online this year. It means we can reach more countries and include more people. Uniquely this platform not only allows us to run our two-day business event, but it also serves as a 30-day learning platform after the main event ends. All the talks, vendor booths, posters and content are available for young people, students, entrepreneurs and learners from across South Africa and wider Africa to join us and learn about the latest technology driving the Fourth Industrial Revolution in Africa”.
“We thank Intel for supporting this aspect of our show as this is a great opportunity for young people to learn about the Fourth Industrial Revolution and even find a job. The reach of this online eConference and Youth AI component will be bigger than our previous two shows – we can’t wait to welcome everyone on the 3rd of September,” concluded Bradshaw.
ITU’s AI for Good platform to showcase how AI is advancing SDGs at AI Expo Africa 2020
ITU Head of Strategic Engagement, Fred Werner (Image by: AI Expo Africa)
In 2015, in a universal call to action to end poverty, protect the planet and ensure all people enjoy peace and prosperity by 2030, world leaders adopted the 17 Sustainable Development Goals (SDGs) at the landmark United Nations Sustainable Development Summit in New York.
With 10 years left to reach the SDGs, Fred Werner, Head of Strategic Engagement at the International Telecommunication Union (ITU) believes it’s time to move the needle and use artificial intelligence (AI) to meet these goals by 2030.
Werner will give a keynote speech at AI Expo Africa – Africa’s largest business-focused AI, Data Science and Robotic Process Automation (RPA) trade event and conference – on how the AI for Good platform is identifying and generating practical AI applications which advance the SDGs and scale those solutions for global impact.
The ITU strongly believes AI can help solve humanity’s greatest challenges. Its AI for Good Global Summit — the leading action-oriented, global and inclusive United Nations platform on AI has since 2017, together with its community of innovators and problem solvers, identified, strategised and created new projects, roadmaps and initiatives around the use of AI to accelerate progress towards the SDGs.
In June the ITU as part of its AI for Good Webinar Series — and in partnership with AI Media Group and Alliance4ai — held a webinar that explored Africa’s varying AI strategies and how they are impacting on the continent’s economic growth. Panelists who included South Africa’s Minister of Communications and Digital Technologies Stella Tembisa Ndabeni-Abrahams, UNESCO-IBE director Mmantsetsa Marope and Machine Intelligence Institute of Africa director John Kamara provided regional success stories that explained the opportunities and challenges in deploying these strategies.
“We have 10 years left to achieve the 17 SDGs and we need to act now to make this happen. AI solutions that we identify today need a few years to develop, a few more years to achieve scale and then a few years after that to achieve the desired impact. At a minimum, we are looking at a 10-year timeline, bringing us right up to 2030. We have to act now if we want a chance of moving the needle,” says Werner.
AI Expo Africa 2020 will be held online on 3 and 4 September with a speaker line up led by Kay Firth-Butterfield, Head of AI and Machine Learning at the World Economic Forum; Neil Sahota, IBM Master Inventor, UN AI expert and lecturer at University of California, and Bayo Adekanmbi, CTO MTN Nigeria and founder of Data Science Nigeria.
South Africa’s Minister of Communications, Telecommunications and Postal Services Stella Tembisa Ndabeni-Abrahams; Prof Tshilidzi Marwala, and Vice-Chancellor of the University of Johannesburg and Deputy Head of the 4IR Commission of South Africa are also set to speak at the show.
A ‘second renaissance’ for African payments post COVID
African payments is fast becoming a ‘gold-standard’ for payments worldwide, and COVID is set to accelerate both the value and funding available to this segment across the continent. Since M-Pesa launched in Kenya, the proportion of Africans (particularly East Africa) paying by mobile has exceeded every other emerging region. In Africa, perhaps more than anywhere else, ‘mobile first’ has given way to ‘mobile only.’
Another attraction is, perversely, COVID. Digital businesses across the continent are normalizing the use of payment technology and money transfer in the informal economy (i.e. the part of the economy that is neither taxed nor monitored by any form of government) out of sheer necessity. To encourage the shift, leaders such as Kenya’s largest teleco, Safaricom, have implemented tactics such as a fee waiver for M-Pesa (East Africa’s leading mobile-money product), to reduce the physical exchange of currency and drive increased adoption.
Across the continent there is a renewed drive to reduce reliance on cash. Meanwhile payment data value is only now being leveraged, which sets the stage for creating another ‘value peak’ for emerging African payments vendors in the near future.
This is a perfectly ‘natural’ response for economies with large informal sectors, still-low average transaction values, and a large proportion of transactions for essential goods and services. The IMF, in its April 2020 World Economic Outlook, recommends countries with large informal sectors further develop their digital payments systems. These systems “may provide an opportunity to improve the delivery of targeted transfers to the informally employed.”
In the coming ‘renaissance,’ what are African payment players doing to differentiate and position themselves for the next stage?
Insights from Leading African Payments Players
Hybrid and Pure-Play Payment Players
African payments companies take two broad forms. The first is ‘pure play,’ generally based on Payment Service Provider (PSP) functionality. These vendors run a defined set of services and leverage partnerships to achieve scale. The second are hybrid vendors, who are more vertically integrated, usually offering a broader range of services off their core technology stacks:
- Examples of pure-play: Direct Pay Online, Interswitch, Paystack, Flutterwave.
- Examples of hybrid: Cellulant, Pesapal, Paga, Jambopay
The definition is important to distinguish as it impacts strategic direction of any company, which would also directly affect the set of longer term buyers or investors for each of the companies.
Winning SMEs & Agent Distribution/Network
Winning in African payments generally means winning the SME sector. There are very few true enterprise corporates, and a significant number of sole-proprietor businesses across all sectors. The fragmentation of the potential customer base is so much greater than in other fast-growing regions that many payments companies need to adopt a broader ‘ground game’ to target, connect, engage, and maintain a broad SME customer base, often across quite different markets.
To effectively target SMEs, direct selling, agent distribution or agent networks are crucial for payment players, particularly in West Africa, due to the lack of infrastructure. Over the last 10 years, M-Pesa’s rise was closely associated with Safaricom’s dominance in Kenya (70% mobile market share), its broad and tied agent network across the country, and the focus applied to rolling out this service broadly.
In West Africa, the continent’s largest prize, the market is deeply fragmented, ATMs are virtually non existent or not functional (Nigeria has < 20,000 working ATM’s), and for many of Africa’s 1 billion+ population agents of various forms are the main or only means of transacting effectively. Companies such as Paga and Kudi already demonstrate the requirement for, and value of, developing and maintaining a broad enough agent network on which to drive scale and reach.
Broader number of use cases
Creating and maintaining an agent distribution network is expensive. The ‘quid pro quo’ are a broad range of use cases enabled as a result, and the first-mover margins available to payments companies which can scale this way. Across the continent, agents are used for cash in/out, remittances, bill pay, payment for utilities and power, and the purchase of basic goods and services. While many of these remain cash transactions that are then converted to digital, increasingly payments companies are linking services to make transactions end-to-end digital.
Another benefit for creating broad based agent/direct distribution is that payments companies often can achieve higher margins on transactions than almost anywhere else. Its not atypical for take rates to be 2x+ what they would be in more competitive markets like India, and even at those levels they are still far below other alternatives. For example, the avg cost of transferring $200 via a bank transaction can exceed 10%, and in remittances many emerging digital players can charge 2x ‘normal’ take rates and still reduce the cost to consumers significantly vs traditional services such as Western Union.
Digital works for payments companies, and for consumers, and the higher take rates are simply a function of the challenges and costs of reaching such a distributed, informal customer base.
In developed markets, data value is nearly always under-leveraged within payments providers. Many have built legacy systems that cannot easily adapt to actioning data insights to deliver value to customers, and increase margins significantly. An African ecosystem only now being built has the incalculable benefit of ‘starting with a clean sheet of paper’ in terms of realizing the value of data earlier and more completely.
As a result, intelligent leverage of data and insights from an early stage could vault the strategic value of payment players to an entirely different level than current valutions. And since in the data monetisation game, ‘better data always beats better algorithms’, it is our view that many African payments companies are sitting on a large and growing ‘gold mine’ of proprietary insights on customer and SME behavior which can be leveraged in many ways to drive margins.
In time, many payments vendors will have greater insight into consumer spending habits to deliver targeted offers via mobile in a way which is simply impossible to envision in developed markets, where that ecosystem is already dominated by much larger incumbents. For example, both Square and Stripe have introduced and expanded significantly in the financing area.
Square extended almost $700m SMEs loans per quarter in Q4 2019, highlighting the massive market potential. The point is that through the value of data and insights, many African payments companies can grow value well beyond pure payments value, because what they are ‘seeing’ are truly unique insights.
Capital Efficiency & Unit Economics
Because of structural inefficiency in Africa (‘reinventing the wheel’ is by definition required as there is no ‘wheel’ of infrastructure that functions successfully today) there is a degree of inherent capital inefficiency presumed to be required to get to minimum size to scale. Second, targeting SMEs and consumers is inherently more expensive than enterprise sales, with higher churn, greater cost to acquire and service, and a still-limited ceiling on realistic customer lifetime value.
We see that emerging African payments leaders go through different stages of capital inefficiency. For most, there is a multi-year period of greater inefficiency, as basic vertical integration is built. However, once companies pass a ‘tipping point’ of scale, rising take rates, and the leverage available from layering on additional services and use cases quickly turns that inefficiency into a highly capital efficient set of assetsIt is particularly important to distill, frame, and articulate these metrics as investors / buyers value a ‘perpetual motion machine’ that targets, acquires, services and ‘up-sells’ customers.
Having a well-crafted set of unit economics also underscores the value of the existing and prospective customer base, and validates the ‘ground game’ execution strategy of local distribution across Africa. Buyers of equity can also rationalise paying more upfront because there is no significant $ required to subsequently drive customers to profitability. This transition from inefficiency to hyper-efficiency is a key element of story telling for African payments companies to sell equity at rising prices.
Africa presents maybe the biggest payment opportunity in the world today. For companies with some degree of scale, they have already done much of the hard work to generate long term embedded value, and only now are many starting to see the benefits of high marginal unit economics. With more capital, and compelling equity stories to tap the next generation of larger investors, we see several potential ‘unicorns’ emerging in the space in the next 5 years. M-Pesa and Interswitch are only the tip of the (value) iceberg.
Credit: Magister Adivors
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