World Economic Forum Edition
Guest Curated by Raghav Prasad, Division President, Mastercard Sub-Saharan Africa
Mastercard’s Raghav Prasad carefully chose this week’s Top10 business news stories, and summarised each story from his unique perspective as the head of one of Africa’s most important players in payments technology and financial inclusion.
According to Raghav, technology innovation is influencing the way consumers engage with the world around them, shaping economies, creating smarter, more connected, and financially inclusive cities.
Raghav is passionate about extending access to financial services to all Africans and driving financial inclusion on the continent to reach Mastercard’s goal of including 100 million people by 2020 – an objective that can only be achieved by working with partners across the public and private sectors and by introducing market-relevant digital payment solutions.
1African Leapfrog Index Unveiled
A research collaboration between the Mastercard Center for Inclusive Growth and The Fletcher School at Tufts University highlights the strengths and opportunities of six major countries in Africa for harnessing the true potential of technology to drive inclusive growth. The countries surveyed include Egypt, Ethiopia, Kenya, Nigeria, Rwanda, and South Africa whose examples provide insights on key drivers that could accelerate digital inclusion across the continent. The ultimate aim of the report is to help countries across Africa optimize their burgeoning digital evolutions, in order to accelerate economic development and highlight that it is now crucial to build an inclusive digital economy that works for everyone. Key country insight includes: Rwanda has the potential to benefit from investments in infrastructure, greater internet penetration and online freedoms. Nigeria has a major opportunity to leapfrog through improving the reliability of basic infrastructure. One of Egypt’s primary strengths lies in the ease of creating medium- and high-skilled digital jobs. Ethiopia has the potential for greatest digital gain from creating strong digital foundations, improving on its low momentum and moving away from its near-total reliance on cash payments, towards digital payment rails.
2Strategies to De-risk Africa’s SMEs for Lenders
Overall, only 20% of African SMEs have a line of credit, according to the African Development Bank. Looking only at formal SMEs, the overall unmet need for credit in sub-Saharan Africa alone is close to $100bn, the highest figure compared to other emerging market regions, according to McKinsey. As the growth engine of economic development, the gap illustrates a major priority for African policymakers, lenders and innovators. Easy access to corporate records, at scale, particularly on accurate ownership information, is not impossible. Governments should invest in new Africa-centric data regulations that, while protecting individuals’ privacy, incentivise formal participation in the private sector.
Source: AFRICAN BUSINESS MAGAZINE
3The First Challenge to Converting a Cash Economy to Electronic is Education
Pointing out the common perception that cash is better, though also a very inefficient form – the time has come to digitize it. Mastercard is ramping up investments and expanding its reach across Africa. New offices have opened in Senegal and Cote d’Ivoire, with another on course in Zimbabwe. There are more people on the ground, closer to the local markets. Over the last five years, Mastercard’s employees in Africa have gone up by over three times, and 40% of all new hires in MEA are in Africa. The company has also stepped up the backing of African fintechs, investing in a number of firms such as Flutterwave and DukaConnect, and e-commerce platforms such as Jumia. In Rwanda, Mastercard has provided a grant of $1 million, spread over three years, to advance economic growth and financial inclusion. Agriculture is one of the focus areas alongside education and MSMEs (micro, small and medium enterprises). Partnering with mobile network operators to build a stronger payment ecosystem on the continent is of high importance. Ultimately, it’s about giving communities that are excluded access to the services they care about; it’s not financial inclusion just for a bank account, but to support an economic livelihood. Adding efficiency and choice, safety and security happens with digital. Mastercard is laying the superhighway of digital transactions, so, people can benefit and connect to the global economy.
Source: FORBES AFRICA
4The African Startups Mentoring the Next Generation
Today, there are approximately 50 active Africa-focused angel investor groups – ABAN, LAN, Dazzle Angels, Jozi Angels, and Cairo Angels to name a few, with new ones arising in Benin, The Gambia, Ethiopia, and Mali. Next to pre-seed, seed and series A funding, what can angels offer? Angels can help solve early stage African venture challenges by mentoring the rising entrepreneurs and by connecting them to our business networks, so they can continue to build up their ventures. Angel support that targets women-led ventures is especially vital considering the traditional stumbling blocks they must overcome to achieve success. Another thing that existing angel investors can do is to spread the word and lend support to other aspiring angel investors who wish to invest in African businesses. Meghan McCormick in her aptly named article, ‘Africa Needs More Angel Investors,’ highlights the fact that high net-worth individuals do not invest in African startups is simply because they are not familiar with asset classes adjacent to tech, a space where many African startups fall (naturally, many also fall within tech). Angels, therefore, have a dual role to play – both entrepreneur-facing and towards fellow investors – if we want to see the continent take off even further.
Source: CNBC AFRICA
5Women are the Drivers of African Economies
Mastercard puts the spotlight on gender diversity and female entrepreneurship at the 28th World Economic Forum on Africa during its Together We Lead event. Gender inequality is costly on a macro level. Discussions at this event focused on challenges faced by women entrepreneurs in Africa, and the role of technology in helping drive inclusive growth in the age of the 4th Industrial Revolution. The United Nations Development Programme estimates that failure to integrate women into national economies costs sub-Saharan Africa countries a combined $95 billion in lost productivity every year. Mastercard’s head of lab for financial inclusion Salah Goss said through their lab they had been able to help millions of women through the products they had launched to support sectors such as education, agriculture as well as small and medium-sized enterprises. Education, technology, and capital need to be made more accessible to encourage cultural dialogue and overcome gender stereotypes, the discussion focused on ways in which women’s potential could be used to unlock stronger, more sustainable economies.
6Africans Use Tech to Address their Pain Points
Ghanaian startup Nvoicia is helping SMEs solve short-term cash flow issues by providing an online platform that allows them to quickly and easily secure loans when dealing with credible clients. It’s encouraging to see Africans address the pain points of their local markets by leveraging digital. Despite the recent uptick in venture capital for African startups, cashflow issues still plague most African SMMEs. Loans are especially difficult to secure when you don’t have a suitable credit history. For a large portion of the population in Africa, the very idea of financing or credit is not an option. Many operate on risk and in cash. If Africa is serious about economic growth and equality, it must revisit traditional systems of banking and regulation, which were built to exclude people. True financial inclusion in Africa is possible. It can be effectively achieved by leveraging the power of digital innovation and mobile connectivity.
Source: DISRUPT AFRICA
7How Women Add Value to Africa’s Intra-trade Plans
It is essential to consider women when deliberating on the implementation of crucial policies such as the Africa Continental Free Trade Area (AfCFTA) agreement. The AfCFTA aims to create a single continental market for goods and services in member nations of the African Union. It is expected to be the largest global trade bloc, consolidating a market of 1.3 billion consumers with a combined GDP of about $3.3 trillion. The role of women in driving general consumption patterns cannot be overemphasized. Across households, women are more likely to spend their income on products and services that will benefit the smooth running of their homes. Evidence from a range of countries shows that increasing the share of household income controlled by women, either through their own earnings or cash transfers, changes spending patterns that benefit children. Industry sources suggest that women reinvest 90% of their income back into their families, while men reinvest only 30-40%. Therefore, women have a critical part in achieving the desired demand boost that would support the exchange of goods and services among countries throughout the AfCFTA.
Source: WORLD ECONOMIC FORUM
8Support for a Single African Market
What Africa needs to sustain economic growth, while addressing better jobs and proper social protection is three things: greater cooperation, policy injection, and human capital development. African countries need to work together to promote peace and stability while addressing trade obstacles, climate change, corruption, cybersecurity, and the opportunities and challenges of the Fourth Industrial Revolution. AfCFTA addresses the need for a single market that will allow industries to develop across borders, creating economies of scale for investors as they look at wider integrated markets. Africa is still a massively attractive prospect for investors though it’s challenges are three-fold: design data-dependent policies that boost productivity and long-term growth, cut debt, and reduce Africa’s vulnerability to economic downturns. As millions of young people join the labour market, the pressure to provide quality jobs will escalate. Mastercard has already used its technology, data, and expertise to help more than 60 governments design and implement more than 1 300 programmes that are customised to address challenges and opportunities in national security, citizen empowerment, economic development and financial inclusion. Building and maintaining a domestic payment network is complex and expensive. Even under extreme market dynamics (e.g. sanctions), Mastercard can be a value-added partner and co-exist with local players.
Source: WORLD ECONOMIC FORUM
9Creating an Enabling Environment for SMMEs
Delegates at the World Economic Forum in Africa say that Africa needs more nimble policy-making to allow entrepreneurship to flourish and the continent to take advantage of the Fourth Industrial Revolution. “What you need is policy certainty, don’t fiddle with policy forever,” A.T. Kearney’s managing director for Africa, Theo Sibiya, said at a panel discussion of the Africa Growth Platform on the opening day of the WEF meeting in Cape Town. Sibiya said SMMEs had a superior ability to bring youth into the workforce and should again be given the space to identify the technologies that are critical to flourish, with 3D printing and artificial intelligence driven technologies being growth areas. WEF launched the Africa Growth Platform to help the continent’s start-ups to grow and compete in international markets. One of its aims is to secure a commitment from governments to implement policy reforms to stimulate business growth.
10The Jobs of the Future
With e-commerce having the potential to create 3 million new jobs in Africa by 2025, the World Economic Forum has outlined an action plan to build this new form of commerce. Dr. Elsie Kanza, the WEF’s Head of Africa, believes the scale of the challenges in Africa should not hold back on this effort “given that e-commerce could bring jobs for youth, new markets for rural communities, and empower female entrepreneurship, among other benefits.” This eight-point plan sets out the e-commerce ecosystem in which governments and the business community need to invest to harness the power of the digital marketplace. The eight agenda action items are: refresh policies, expand connectivity, upgrade logistics, enable e-payments, manage data, grow the tech industry, coach small business and join forces. Unemployment and underemployment are the top risks for doing business in the region, according to the WEF’s Sub-Saharan Africa Risks Landscape report, followed by governance.
Source: FORBES AFRICA