Investors update: August 14 2023 - Mastercard to buy stake in MTN’s $5.2bn fintech unit

Mastercard to buy stake in MTN’s $5.2bn fintech unit

Highlights

• MTN Group, Africa’s biggest wireless carrier, has agreed to sell a minority stake in its $5.2 billion financial-technology business to Mastercard.
• The deal will be structured in two parts, including a commercial agreement on payments and remittance that uses Mastercard’s technology infrastructure to expand in Africa and the investment into a minority stake.
• Meanwhile, in 2021, Mastercard inked a deal with Airtel Africa, one of MTN’s competitors, that saw the India-founded telecom receive $100 million for its mobile money business, Airtel Mobile Commerce BV, at a $2.65 billion valuation.

Source: Bloomberg

Our Takeaway

It’s not just Airtel and MTN that have lofty fintech ambitions. Across Africa, Safaricom, via M-Pesa, has dominated the Kenyan mobile money business for years. The telecom operator, alongside South Africa’s Vodacom, is also keen on separating its fintech arm from the traditional telecom business. There’s an incentive to push fintech activities for these telecommunications carriers in Africa because the continent is gradually shifting from primary voice and text mobile to digital services. The financial services these telecom operators offer will see them compete with already established companies in Africa’s fintech space, including Interswitch, Flutterwave, Chipper Cash, and MFS Africa.

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South Africa, Kenya lead Africa’s B2B digital payments

Highlights

• A new Duplo report finds that Nigeria trails South Africa and Kenya in the development of crucial B2B payment processes across Africa, including the adoption of electronic bank transfers, speed of processing invoices, and payment automation.
• The study surveyed more than 1,200 professionals from those countries and Ghana. South Africa leads in electronic bank transfers, with 49.1% choosing it as their preferred way to pay vendors, followed by Nigeria (48.5%), Ghana (34%), and Kenya (31.9%). 
• Kenya leads by payment automation, with 83.4% of Kenyans stating that their payment system was either semi-automated or fully automated, compared to Nigeria (79.9%), South Africa (71.69%), and Ghana (67.23%).

Source: Duplo

Our Takeaway

Africa’s B2B payment sector represents a significant, yet largely untapped opportunity partly due to the complexity and larger transaction volumes associated with B2B payments. Per the World Bank, the continent’s share of the global B2B payment opportunity stands at $1.5 trillion but many businesses still grapple with considerable payment delays and other issues, which negatively impact their cash flow and slow their growth. In recent years, digital payments solutions have eased many of these challenges but there remains a number of issues to be addressed in the journey of easing the flow of money between businesses in Africa.

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D.Light gets $125m to provide off-grid solar products

Highlights

• d.light, a provider of household products and affordable finance for low-income households, has closed a $30 million securitization facility with the capability to purchase up to $125 million of receivable assets.
• The funding was secured from the Eastern and Southern African Trade and Development Bank Group (TDB Group), bringing its total securitized financing since 2020 to $490 million.
• d.light will use the capital to increase its existing securitized financing facility in Tanzania and scale up its low-cost Pay-Go personal finance service in the country to reach more low-income people and households.

Source: ABC

Our Takeaway

Tanzania is the fifth most populous country in Africa and its population of 63.6 million people is spread out over a wide geographical area. Per the World Bank, only 40% of the population has electricity access: the majority currently don’t have grid connectivity and a reliable power supply. Seeing the market opportunity in closing this gap, Tanzania was one of d.light’s first markets and it has been selling its products there since 2008, a year after the company was founded.