Africa Tech Summit (ATS) 2023, Nairobi – Fintech & Venture Capital – the Year Ahead
Picking up right where we left off last year, Verdant Capital participated in the first panel session to open up the 2023 edition of the Africa Fintech Summit in Nairobi which took place in February. Edmund Higenbottam represented the firm on this panel which played host to representatives of top venture capital firms on the African continent such as: Anthony Kimani, Investment Associate at Enza Capital, Amee Parbhoo, Managing Partner at Accion Venture Lab, Yvonne Okafor, Investment Officer at Untapped Global. The panel was moderated by Samuel Salako, Partner at DLA Piper Africa.
The panel session centered around Fintech & Venture Capital, particularly examining the years ahead. While over 75% of tech investments in Africa are attributable to fintechs, in 2022 we observed a decline in the quantum of funding (value and volume) to fintechs in Africa, albeit from the very high levels of 2021.
The panel sought to answer the question of what this year and the rest to come portends for Fintechs in Africa in terms of VC funding.
Posing the question to Amee, Samuel mentioned that “Fintech revenues are expected to grow 8x in the next few years, more so, we have been witnessing increasing competition from banks within the fintech space, what impact does this have on the VC funding landscape generally.” To which Amee answered, saying despite what might be perceived as an “increasing” competition for fintechs from banks, there still exists a huge chunk of problem to be solved within the payment landscape, particularly when we realise that over 90% of transactions on the continent are still consummated in cash – as such causing fintechs and VCs bent on solving these problems to still be well aligned.
Asking Edmund, Samuel asked “What corporate governance considerations are to be considered before investing in Fintechs on the continent”, Edmund replied saying “There’s a natural dichotomy between exciting businesses typically composed of new teams and trying to organise companies in a way that is consistent with international best practice Marrying these two opposing foces is critical in this decade and is key to building businesses that are not only sustainably economically, but also sustainable from a broad stakeholder perspective.
Speaking on the lack of Uniformity in regulation across African countries, Samuel sort to ask Amee how this impacts VC’s investment decisions, to which she answered saying “this really doesn’t impact VC investment decisions that much, as investors more than anything and irrespective of the geography would ensure that they are comfortable with any investment that they are making – and a regulated environment does this for them.” Edmund added saying, “financial services as a sector is heavily regulated and sometimes there might be conflicts between being in a highly regulated environment and being a disruptor. He said, it would be beneficial for entrepreneurs and fintech business leaders to invest in regulatory compliance and the level of investment in compliance should ramp up as businesses evolve from seed to growth stage.