The Africa SMME Tech Report

Issue No. 4. AME small business tech news for 17 May 2021. This edition features Safaricom, Telkom Business, Mobicred, MFS Africa, Maviance, and more...

Safaricom’s M-Pesa Revenues Surpass Voice

Safaricom’s recent FY2021 earnings results reveal an interesting milestone. For the first time, M-Pesa (mobile money) revenues surpassed, if only slightly, voice revenue for the East African telecom.

For the financial year ending 31st March, voice revenues totaled 82,552 million Kenyan shillings. M-Pesa accounted for 82,647 million. The difference is so slight that the two items round out to the same share of mobile services revenue, but it was a milestone nevertheless.

Max Cuvellier, head of mobile development at GSMA, highlighted this milestone in a LinkedIn post. The post includes a debate in the comments on whether M-Pesa’s elevation to the top revenue category for Safaricom’s mobile services is really a good thing.

Most of those commenting on Cuvellier’s post celebrated the milestone as a great achievement for Safaricom, and for the African telecom sector generally. For example, one commenter posted, simply, “From Telco to fintech - the future is here”.

However, Firas Ahmad, Group CEO of AzamPay and a recent guest on the BIG5D Podcast, offered a contrarian view. It’s a view he expressed on our podcast and in his own Substack newsletter.

Here is what Firas said on LinkedIn.

“Mobile Money is a risk area in the long run. Mpesa dominates [because] the mode of MM transfer is through USSD, a proprietary system that requires a network to operate. Once smartphones proliferate and users move up to more sophisticated forms of ordering, OTT payments operators can compete on a more level playing field where USSD is not required to manage payments. If I was an MNO looking 10 to 15 years down the road I would be investing in content to drive adoption of data. It's an area where the MNO has a better and less assailable competitive advantage.”

Is Firas right? You can view the entire Safaricom earnings video presentation here.

Mapping Telkom’s Journey from Yellow Pages to Fintech & eCommerce

A recent profile of Telkom Business CEO Lunga Siyo follows his journey leading Telhom’s Yellow Pages division out of obscurity and into a promising future as Yep!, the new eCommerce marketplace that Telkom Business launched last year.

Telkom Business’s challenge is to find new ways to deliver services to the 500,000 small businesses listed on the carrier’s Yellow Pages database. The answer in Telkom’s view is to pivot from marketing services into eCommerce and fintech.

"We’ve been able to establish Telkom Business as a unit focused solely on serving small businesses,” Siyo told the Financial Mail. “We understand customers better, we’ve segmented them, we know what they buy from us."

He described running the small-business division in deliberately contradictory terms.

"It’s like running a 50-year-old start-up. The business unit has been around for a long time but we have to operate differently."

In addition to eCommerce, Telkom Business sees insurance and lending as ways to grow revenue in the small business space.

These two areas have been receiving intense focus in Africa. A growing number of startups are attracting capital to solve the lack of access to affordable insurance and capital among the continent’s SMMEs.

Telkom has offered life and device insurance in the past and is looking to add insurance products to its SMME portfolio. It already has a lending solution for SMMEs, offering loans up to ZAR1 million (roughly USD 71,000).

Telkom’s efforts with Yep are emblematic of the challenge that legacy telecoms face. They are pivoting from solutions like fixed-line telephony to offerings like online payments, insurance, and lending that have attracting billion in VC investment in nimble startups using cutting-edge technology to make these services affordable to SMMEs.

As Siyo says in the profile, everything Telkom does in the SMME space has to be driven by the imperative to reduce the cost of operations for small businesses.

Legacy companies have advantages. They bring existing customers and recognized brands, for starters. But are they nimble enough to convince these customers to buy new solutions from them? Time will tell. But Siyo’s “50-year-old startup” comment neatly sums up the challenge he faces.

Here is an interview we conducted with Lunga back in June 2020, where he discusses the reorganization of Telkom and the origins of Yep!

Mobicred Expands Retailer Network Past 3,000

Mobicred, a South African virtual credit platform supporting online retailers, announced it has surpassed 3,000 retailers in its network. The company says it is adding roughly 150 retailers each month.

Mobicred fits loosely into the “buy now, pay later” space. That is the growing collection of fintechs that give retailers — online and increasingly offline — the ability to offer flexible payment terms to buyers.

Typically, BNPL platforms offer a pay-in-four (or three) model, which allows consumers to spread out payments in four equal, usually interest-free, installments. Consumers may pay a fee, but typically these platforms make most of their money from merchant fees.

Mobicred is a bit of a BNPL outlier. It offers virtual credit, which differs in a number of ways from what most of us think of as BNPL. The main difference is that Mobicred charges interest, around 17%, which Sive says is a competitive interest rate in South Africa. Another difference is that in the pay in four model, the first payment is usually at the time of purchase. Mobicred’s facility allows for the first payment to occur a month after purchase. Whatever the flavor, BNPL gives consumers an attractive alternative to traditional credit.

Mobicred CEO Jason Sive was a speaker at the recent BigFive Small Business FintechSummit. We also had a conversation with Jason earlier this year to understand what makes his business tick.

Jason told us earlier in the year that offering quality service and being good at risk management are qualities necessary to avoid failure. Success requires repeat business.

You certainly don't differentiate yourself in this business by keeping your bad debts down, or being able to deal with customer queries in an hour or two,” Jason told us. “That's just stock standard to us. What shows that our business is working is, how sticky is our product? How many of the customers that we're activating are continuing to use the product?”

From Shoes to Laptops to College Tuition

Also on the BNPL beat, we found this recent report in Gulf News interesting. Apparently, BNPL providers in the UAE will soon begin to allow consumers to use their platforms to pay down student debt.

Study Shows Nigeria’s Fintechs Are Growing Up

Nigerian fintech has experienced a boom recently. And that boom is quantified in a recent survey of Nigerian fintech startups by Ernst and Young, revealing that more than 50% of the surveyed startups reported yearly revenue of at least US$5 million.

There are reportedly more than 200 fintech startups operating in Nigeria, and of the companies reported in the survey, 85% of them are post-revenue, and 76% of that 85% earning revenue were profitable.

MFS Africa Building a Fintech Empire?

Cameroon-based fintech company, Maviance received funding to expand its payment solution platform, Smobilpay, across Central Africa. The company provides mobile payment systems for local and international transactions within Central Africa.

Maviance raised US$3 million from fellow fintech company, MFS Africa, which connects mobile money users across different networks. The funding comes after MFS Africa purchased Beyonic, a Tanzanian digital payments service provider. Does MFS aspire to be an African fintech conglomerate?

Mastercard Index Shows Massive ZA Digital Payments Uptake

We all know the pandemic has changed how people shop. In South Africa, it’s changed how people pay as well.

Contactless, digital payments have been skyrocketing in popularity as a result, as documented by the Mastercard New Payments Index, which showed that 95% of South Africans will consider using a new payment method. This comes after more than 100 markets saw contactless payments grow by more than 50%.

“As we look ahead, we need to continue to enable all choices,” said Craig Vosburg, chief product officer at Mastercard. “Both in-store and online, to shape the fabric of commerce and make the digital economy work for everyone.”

Additionally, the survey said that 57% of South African Consumers would avoid businesses with no contactless payment options. And 77% said they saved money by using contactless payments.