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Financial technology start-ups in Africa

Good morning from the Financial Times, today is Friday, August 13th, and this is your FT News Briefing.
Airbnb and Disney are enjoying the recovery in travel, we’ll recap their latest earnings. And there’s a surge of people
quitting their jobs and many are taking their company source code with them. Plus, global investors are putting more
money into African financial technology start-ups. But who’s benefiting?
Topsy Kola-Oyeneyin

When you go underneath the numbers, you find that even the money that is flowing into Africa often flows into either
foreign start-ups operating in Africa or local founders who have foreign affiliations.
Marc Filippino
I’m Marc Filippino and here’s the news you need to start your day.
Marc Filippino
Airbnb reported more than $1.3bn in second-quarter revenue, that’s almost four times higher than the same period
last year, and it was 10 per cent higher than in 2019. The company said tourists from places with higher vaccination
rates were driving the recovery. There were also more bookings in destinations with increased vaccine availability. But
the company warned that the global spread of Covid variants and inconsistent local regulations could hurt bookings
later in the year. Airbnb stock fell nearly five per cent in after-hours trading. Another company that benefited from the
travel recovery? Disney. More people went to its theme parks, and that helped the House of Mouse post a second
quarter net income of $923m. Sales rose forty five per cent from a year ago when the pandemic hit. Also helping
Disney’s bottom line: 12 million new subscribers to its Disney+ streaming service, doubling its customer base from a
year ago and outpacing rivals like Netflix.
A record number of employees are quitting their jobs and many are stealing sensitive data when they go, according to
an analysis by the cyber security group Code42. In the last quarter, the number of times employees took sensitive
computer code or source code from their companies was three times higher than a year ago. Here’s the FT’s Hannah
Murphy.
Hannah Murphy
So I think there’s always been what’s known as insider threats, and that is not a threat to a company network from an
outside attacker or hacker, but a threat from their own employee. And these have long existed. And sometimes it’s just
employees accidentally leaking something. I’m uploading something to a personal network or personal email that they
really shouldn’t be taking there. Other times it’s a little more with malicious intent. So it might be deliberately stealing
because you are disgruntled or because you’re moving on to another job and want to take some information or some
data that you’ve created even such as source code over to that next job or just to have it for yourself. So there’s lots of
different reasons why you might want to do this. But obviously companies will not be wanting you to take the most
valuable and sensitive data elsewhere.
Marc Filippino
Hannah Murphy is our tech correspondent. She’s based in San Francisco.
The pandemic was a boon for financial technology companies, lockdowns forced people to use more online banking
and payment services, and Africa was no exception to this. Fintech start-ups were already beginning to bubble up even
before the pandemic. And over the past year and a half, the tech industry has reached what some people have called a
tipping point.
Topsy Kola-Oyeneyin
The fintech scene is really, really buzzing in Africa. That’s just the truth. The energy has been rising.
Marc Filippino
That’s Topsy Kola-Oyeneyin. She’s a partner at the consultancy McKinsey and she’s based in Lagos, Nigeria. She’s
followed fintech in Africa for more than a decade. And she says that even with the current growth, cash is still king.
Topsy Kola-Oyeneyin
And that’s the reality for most African economies. However, during the lockdown, people in the informal markets who
typically drive cash volumes were relying on electronic transfers to drive their business, were moved to have to look
for electronic solutions to conduct business. And I think the penetration of this segment is actually what would trigger
the unlock for tremendous growth. And that tipping point . . . you know . . . for me, I think with agent banking, with
distribution points going, with informal markets, adopting electronic payments. I think that time is very, very near.
Marc Filippino
But she says the rise of financial technology companies isn’t happening across the continent. It’s only happening in
certain places.

Topsy Kola-Oyeneyin
A lot of the volumes and a lot of the activity is really centred around three to four locations in terms of hotspots, right?
It’s Nigeria, it’s South Africa, it’s Kenya, it’s Egypt, maybe increasingly Ghana. It’s been driven by a number of factors,
increasing smartphone penetration, push by regulators for financial inclusion. And they’ve created a bunch of
different categories of licences which have allowed innovators to come into the space. And then also new technology
that has allowed small players, small start-ups to get to the market very quickly and launch innovative products.
Marc Filippino
So far four African start-ups have reached unicorn status. That means they’re valued at more than a billion dollars.
Three are financial technology groups, one an Egyptian payments platform called Fawry. The others are Flutterwave
and Interswitch, those have operations in Nigeria. The thing is, most successful African start-ups are backed by
foreign investors. There aren’t many African venture capital firms, and few wealthy African entrepreneurs are willing
to sink their money into start-ups.
Topsy Kola-Oyeneyin
A lot of the entrepreneurs with sort of ability to invest significantly tend to be older. They’ve grown up in a generation
where the sort of traditional business is they understand, they understand the economics, they understand the
dynamics. A lot of these start-ups in the early stages, they are not profitable. You’re seeing the numbers go up, but you
can’t see the profits, which is something they can’t quite correlate with, right? We’re talking about valuations and it’s
just not something they’re used to.
Marc Filippino
So right now, the best route for African start-ups to achieve success is to find foreign investment. But long-term, the
FT’s Africa editor, David Pilling, says that’s not ideal.
David Pilling
And after all, if if this really is to be a sort of a big phenomenon, that’s going to begin to drive some African economies
and transform some African economies, surely one of the things that we would want is African ownership. We
wouldn’t really want all of these companies to end up being subsidiaries of foreign companies. I think that foreign
capital is absolutely welcome. But in addition, why not more African capital as well?
Marc Filippino
Topsy Kola-Oyeneyin has some ideas on what it will take to get more African capital to African start-ups.
Topsy Kola-Oyeneyin
I think what it takes for domestic capital to sort of flow in is just more success stories. This is an area that a lot of
traditional entrepreneurs, traditional businesses don’t understand, they’re getting exposed to. And as they see more
success, they will be more willing to sort of invest there.
Marc Filippino
That’s Topsy Kola-Oyeneyin, a partner at McKinsey in Lagos and the FT’s David Pilling in London.
Before we go, there’s been a development in a story we told you about earlier this week. This is the one about the battle
to buy the British inhaler company Vectura. The group with the highest bid was Philip Morris International, maker of
Marlboro cigarettes. Yes, there is some irony in a cigarette company buying an inhaler company and there’s even been
some backlash. Philip Morris has insisted that Vectura is part of its strategy to move beyond nicotine and Vectura’s
board seems fine with that. Yesterday, it said it would support Philip Morris’s $1bn offer over a lower bid from private
equity group Carlyle. Now, Vectura shareholders just need to approve the takeover.
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check
back next week for the latest business news. The FT News Briefing is produced by Fiona Symon and me, Marc
Filippino, our editors, Jess Smith, with help this week from Gavin Kallman, Michael Bruning, Zoe Han and Persis Love.
Our theme song is by Metaphor Music. I’ll be off hosting duties next week and a little bit of the following week while I
take some vacation time. We’ll have some awesome hosts filling in for me, though. I’ll be back on August 24th.
This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to:
typo@ft.com. We will do our best to make the amendment as soon as possible.

Source: Financial times

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