This week in Africa: Nigeria's monthly inflation hits seven-year high on food prices
15 min Read July 21, 2023 at 2:09 PM UTC
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Nigeria’s monthly inflation hits seven-year high on food prices
- Nigeria’s monthly inflation rate soared to a seven-year high in June, after President Bola Tinubu scrapped fuel subsidies and allowed the currency to weaken before declaring a state of emergency to control staple food costs.
- Prices rose 2.1% in the month, the most since May 2016, and annual inflation quickened to 22.79% from 22.4% in May.
- The inflation figure, according to the data published on the National Bureau of Statistics website, was less than the median estimate of seven economists in a Bloomberg survey of 23%.
Tinubu announced the removal of the petrol subsidy upon his inauguration into office. Barely three hours after the speech, fuel prices across the country surged by an average of 174.6% from their then price a month ago. The inflation rate of 22.79%, a new 17-year high, suggests the increase in energy costs is beginning to reflect in the prices of transport and food, contributing to inflationary pressures and raising inflation expectations in Africa’s biggest economy.
Egyptian fintech Flash raises $6m seed round
- Egypt-based fintech Flash has completed a $6 million Seed round led by Addition with participation from Flourish Ventures and other angel investors.
- Founded in 2021 by Erik Gordon and Sherine Kabesh, Flash is a payment application that provides cashless payment solutions for consumers and businesses through a scan-and-pay service.
- This funding will be used to accelerate Flash’s product development and customer and business acquisition in Egypt.
Although the digital payments landscape in Egypt has grown in recent years, with the rise of e-wallets and cards, around 80% of goods purchased online are still paid cash on delivery. Consumers tend to prefer getting the product before paying; however many businesses do not provide a POS option on delivery. Therein lies the gap that Flash is looking to fill; with its service, customers can simply scan a QR code presented by a delivery representative. The solution reflects rapid fintech innovation in Egypt, where 64% of people increased their adoption of digital payment solutions last year while mobile phone wallets reached 46,500 per 100,000 people, according to Mastercard.
Access Bank to acquire StanChart’s subsidiaries
- Access Bank has completed negotiations to acquire the sub-Saharan subsidiaries of Standard Chartered Bank for an undisclosed sum. This acquisition is in line with Standard Chartered’s plan to divest its businesses in Africa.
- The deal includes the sale of Standard Chartered’s stake in subsidiaries in Angola, Cameroon, Gambia, and Sierra Leone to Access Bank.
- Additionally, Access Bank will acquire its consumer, private, and business banking business in Tanzania. The deal, which is to be completed by 2024, excludes the sale of the bank’s Nigerian subsidiary.
Source: African Markets
Nigeria’s largest bank by asset and customer base, Access Bank has expanded its pan-African footprint significantly in the last few years through acquisitions. In 2021, it acquired a majority stake in BancABC of Botswana, offsetting the most active day in the history of the country’s bourse, the Botswana Stock Exchange. Per Tracxn, the bank had made 8 acquisitions before the StanChart deal, spending more than $285 million on those deals. With this latest move, the bank should see its value skyrocket as it takes a more prominent position in the African banking scene.
IMF approves $1 billion for Kenya after latest loan review
- The IMF has approved almost $1 billion for Kenya after the East African country met conditions for continued financing under programs to help reform the economy and confront challenges posed by climate change.
- Kenya got a $415 million disbursement under the Extended Fund Facility and Expanded Credit Facility, programs designed to shore up its economy and boost its foreign exchange reserves, following a fifth review.
- Nairobi also got $551 million as part of the Resilience and Sustainability Facility to support its ambitious efforts to build resilience to climate change.
Kenya’s government in February 2021 agreed to a 38-month IMF program to help reduce debt vulnerabilities, which was extended by 10 months to April 2025 in May. The package was also increased by 45% to $3.52 billion, including additional funds to help Kenya deal with climate change. The country’s public debt stood at 9.63 trillion shillings ($68.1 billion) in April, or two-thirds of GDP with debt servicing costs taking up more than half of tax income. President William Ruto’s administration has vowed to improve Kenya’s finances by raising more revenue and slowing borrowing.
Bboxx and MTN partner to deepen smartphones access in Rwanda
- MTN and Bboxx have inked a partnership aimed at widening access to smartphones across Rwanda and accelerating the country’s digital agenda.
- Bboxx’s pay-as-you-go smartphone service will give customers a simpler, more accessible way to pay for their smartphones while MTN Rwanda will provide SIM cards, making use of its impressive 99% coverage in Rwanda.
- Both parties intend to leverage their combined expertise to make essential technology more accessible for all Rwandans, helping to bridge the digital divide and provide internet access to previously unconnected communities.
Africa might be one of the fastest-growing mobile phone markets in the world but affordability remains a key barrier to smartphone penetration, which is key to powering Africa’s digital economy. Despite network coverage of 99% in Rwanda, for instance, the country’s current smartphone penetration stands at just 23.5%. Efforts from companies like Bboxx are thus crucial. In addition to its smartphone deal with MTN, the London-headquartered startup provides electricity to 10% of Rwandan households through its off-grid solar home systems.
Kenya’s Co-operative receives $100m for MSMEs lending
- The Co-operative Bank of Kenya has received a long-term 7-year loan of $100 million from a group of financial institutions for on-lending mainly to Micro, Small, and Medium-sized Enterprises (MSMEs) in Kenya.
- DEG acted as Lender, Mandated Lead Arranger, and Facility Agent for the Tier II Facility, which has already been fully disbursed, while the consortium included a host of DFIs and SME funds.
- The long-term tenure of the facility has significantly boosted the bank’s ability to offer solutions that are better structured to fulfill the long-term financing needs of MSMEs.
Small and medium enterprises play a major role in most economies, especially in developing countries but access to finance has always been a major constraint to their growth. As much as 65 million firms, or 40% of formal MSMEs in developing countries, have an unmet financing need of $5.2 trillion every year, per the International Finance Corporation (IFC)—and it’s a problem several lenders and foreign investors are particularly keen to address as it promises attractive returns.
South African inflation slows back within central bank target
- South African inflation slowed more than projected to a 14-month-low in June, easing pressure on the central bank to continue raising interest rates.
- The annual inflation rate was 5.4%, down from 6.3% in May, according to a report released by the statistics office on Wednesday.
- The slowdown was greater than forecast. Analysts polled by Bloomberg had expected a reading of 5.5%. On a month-on-month basis, consumer inflation was at 0.2% in June, the same as the previous month.
The latest figure puts South Africa’s inflation below the central bank’s target ceiling of between 3% and 6%, where inflation was last seen in April 2022, on lower food costs. The South African Reserve Bank (SARB) has raised its main lending rate at its last 10 monetary policy meetings to tame inflation, but the majority of analysts polled by Reuters expect it to leave the repo rate at 8.25%. Its next policy meeting is tomorrow and while inflation is beginning to show signs of abating in Africa’s most industrialized economy, risks remain linked to the country’s power crisis.
MyCover.ai gets $1.25m to scale its insurance API platform
- MyCover.ai, a startup offering an open insurance API that allows insurance companies to distribute their products, has closed a $1.25 million pre-seed funding round.
- The pre-seed round was led by Ventures Platform and included participation from Founders Factory Africa and Techstars, who are making a follow-on investment after the startup’s participation in its 2022 Toronto Accelerator program.
- The startup says it will use the capital injection to bolster its in-house operations and tech talent, invest heavily in its proprietary technology and strategically expand its operations into other African markets.
Africa has an ever-growing need for innovative insurance solutions to address the significant lack of coverage on the continent. As of 2018, the insurance penetration rate in Africa stood at a meager 1.12% or 3% with South Africa. Several insurtech startups have launched in almost every corner of the continent over the past couple of years to address this, riding on the increasing adoption of mobile devices and with sufficient backing from venture investors. While they operate different business models or verticals—ranging from peer-to-peer and on-demand to infrastructure and index insurance—these startups are more customer-centric, allowing micro-payments, flexible sign-ups, and access to a wide range of services.
IFC backs Amethis Partners to support African businesses
- To support the development of medium-sized companies in Africa across a range of sectors, IFC has made an investment in the first close of Amethis Partners’ Amethis Fund III.
- IFC will make an equity investment of $45 million in the fund. In addition, the project includes a co-investment envelope of up to $34 million to enable IFC to co-invest in select companies alongside the Fund.
- Amethis Fund III will provide essential growth capital to 10-12 medium-sized enterprises working in industries vital to the development of African economies across countries such as Côte d’Ivoire, Egypt, Kenya, Morocco, Mozambique, Senegal, and Tanzania.
Private equity fundraising in Africa faces several challenges including high-risk perception, foreign exchange risk, and economic uncertainty. As a result, international investors have reduced investment allocation to the African market. IFC’s investment seeks to anchor the fund’s fundraising to help keep vital financing flowing to mid-cap companies in Africa. The new investment is IFC’s third commitment to funds managed by Amethis Partners. In 2017, it invested $17 million in Amethis Fund II, a pan-African growth equity fund, and in 2021 committed $14 million to Amethis MENA Fund II, an SME-focused fund targeting investments in the MENA region.
Vantage Capital invests $25m in East African watermaker
- Vantage Capital, an Africa-focused mezzanine debt fund manager, has made a $25 million investment into Aquasantec International, a manufacturer, and distributor of water tanks, pipes, and related products in East Africa.
- The investment is in the form of mezzanine debt and ordinary equity, acquiring a controlling shareholding in the Group as part of a leveraged management buy-out.
- Aquasantec was originally founded in Kenya over 30 years ago by Chandulal Shah and family. Since then, the business has grown organically, becoming a household name across the region with factories in Kenya, Uganda, Rwanda, and Zambia.
This transaction represents Vantage Capital’s 35th investment across four different funds with its portfolio of investments spread across 11 African countries. Along with venture capital, private equity investments have grown significantly in Africa over the past decade. Per AVCA, $7.6 billion in private investments (both VC and PE) was poured into Africa last year across 626 deals, a remarkable 46% year-over-year increase in deal volume, impressive figures considering 2022 presented numerous challenges for private capital fund managers globally.
Elon Musk’s Starlink launches in another African country
- Starlink, a satellite internet provider founded by Elon Musk, has launched services in Kenya, paving the way for more intense rivalry among regional network service providers.
- With promised download speeds of up to 250 Mbps and upload rates of up to 35 Mbps, the multinational, which is a spinoff of SpaceX, has also named local internet company Karibu Connect as its first authorized distributor in Kenya.
- The purchase of a terminal to allow the connections will cost a Kenyan home user Ksh89,000 ($628) plus a Ksh3,100 ($21.88) delivery fee, while the monthly membership rate will be Ksh6,500 ($45.89).
Source: Business Insider
The World Bank estimates that only 29% of people in sub-Saharan Africa had access to the internet in 2020. Whereas it is often uneconomical to lay cables or build telecom towers in remote parts of Africa, satellite internet providers can cover these areas at no extra cost after serving their main customers. Hence, Starlink’s promise of high-speed and low-latency connectivity could provide a big boost to the region’s economic activity. But the obvious drawback is the cost for users; pricing will determine to what extent Starlink can penetrate Africa.
TerraPay, M-Pesa partner to facilitate cross-border remittances
- TerraPay, a global payments infrastructure company is partnering with Safaricom’s M-Pesa in a deal that aims to facilitate instant borderless payments.
- The partnership, through TerraPay’s group company Mobex, will enable more than 30 million M-PESA mobile wallet-holders in Kenya to send real-time payments through TerraPay’s interoperable network across all wallets in Bangladesh & Pakistan, with plans to roll out India & Nepal in a few months.
- Given the rise of cross-border deals, in the six months to March 2023, M-PESA Global transactions grew YoY in volume & value by 2.2% & 5.6%, respectively.
For African startups, there’s a major market opportunity in the massive diaspora remittances business. For context, remittances accounted for nearly 4% of Nigeria’s GDP as of 2020 and Africa received $49 billion in inflows last year. Yet, sending money from places like the US and UK or even Asian nations to the continent remains invariably expensive, with fees at an average of nearly 9% (the highest rate in the world and 3x the SDG target of 3%). Although most of the traditional players that charge high commission rates still dominate the space, fintechs are now wrestling market share with lower fees.
Kasha raises $21m to improve women’s healthcare across Africa
- Kasha, a Rwandan digital retail and last-mile distribution platform for women’s health needs has raised $21 million in a Series B funding round.
- Operating as an e-commerce platform, Kasha caters to a diverse customer base, including individual consumers, resellers, hospitals, pharmacies, and clinics.
- The funding round was led by Knife Capital, a South African venture capital firm and the new investment will be used to help the startup expand its health access platform across Africa.
Female healthcare that broadly addresses women’s menstrual and reproductive health has been a subcategory in the African startup ecosystem that has been subtly neglected. This is despite the huge attention investors have given to the African startup ecosystem and private healthcare startups. According to a report, only 55% of women in sub-Saharan Africa have access to modern contraception. Kasha’s platform has the potential to help close this gap and improve the health and well-being of millions of women across Africa and the investment is a sign of the growing interest in women’s health care on the continent.
Nigeria forecasts $9.5bn of taxes in the second half of the year
- Nigeria forecast it will raise N7.5 trillion ($9.5 billion) in taxes in the second half, after a record performance in the first six months of the year, as the government improves its collection processes.
- The West African nation’s government collected N5.5 trillion in the first half, surpassing the 5.3 trillion-naira target set by the government for the period.
- Per the federal inland revenue service’s Executive Chairman Muhammad Nami, Nigeria raised N10.1 trillion naira of taxes last year and set a target to raise 25 trillion in 2024.
Africa’s largest economy has one of the lowest tax collection rates in the world at around 10.8% of gross domestic product due to high levels of evasion and a narrow tax base. The government has repeatedly said it wants to boost non-oil revenues because oil sales account for much of foreign exchange receipts to curb reliance on borrowing for public spending. But raising more money from taxes has proved difficult in a country where many small businesses are not registered. The new administration now plans to reform its tax system by removing barriers impeding compliance to achieve a target of at least an 18% tax-to-GDP ratio in three years.
New program launches to support pre-Series A startups in Egypt
- 500 Global, one of the world’s most active multi-stage venture capital firms, and The Egyptian Information Technology Industry Development Agency (ITIDA), have launched the 500 Global first batch of the Scale Up program in Egypt.
- The 7-week hybrid program is focused on providing strategies and methods to accelerate growth for Pre-Series A startups in Egypt.
- With this program, the goal is to develop talent in the region even further for local startups to achieve greater scale, expand in their respective regions and bring their unique concepts and technologies to consumers and enterprises globally.
One of the defining trends of Africa’s venture capital landscape in 2022, per a Briter Bridges report, was a notable growth in the early-stage support framework available to startups on the continent, involving angel networks, seed funds, and accelerator programs. Accelerators, incubators, and pitch competitions provide crucial access to capital and mentorship to startups, and the benefits of this in the African startup landscape—which is playing catchup to ecosystems in advanced economies—can’t be overstated, especially in times of economic uncertainty and dwindling investments.
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