The fintech market worldwide is in bloom, with 2015 a record year for fintech investing worldwide. The trend holds true in Africa too, with fintech startups on the continent raising over US$55 million in 2015. South Africa has performed particularly well, leading Africa’s fintech sector investment.
However, South Africa’s fintech sector has nonetheless come under harsh attack recently, with Michael Roberts, chief executive officer (CEO) of African business solutions provider Khonology, claiming that South Africa lacks the skills, training, and financial literacy to be an active player in the pan-African fintech industry.
“Fintech is a booming industry throughout the African continent but South Africa is reluctant to take advantage of this opportunity,” Roberts said.
“The education system is deteriorating at a rapid pace and it is not helping with employment or building any new competencies.”
In my view, his claims run contrary to a number of industry indicators over the past year, which in fact suggest South Africa has huge potential in the fintech market in Africa.
In the Disrupt Africa African Tech Startups Funding Report released earlier this year, data revealed that in 2015, South African fintech startups received the most funding in Africa – accounting for 47.6 per cent of fintech sector funding recipients, and 53.2 per cent of total funds invested in the fintech sector in Africa over the year.
Additionally, South Africa was the stage for a number of exciting fintech investments in 2015, such as the more than US$26 million reportedly raised by WiGroup in August, or the funding round raised by Nomanini from Goodwell Investments in November.
Already in 2016, there is exciting news coming from fintech startups based in South Africa. In April, Zoona announced it has processed over US$1 billion in money transfers, bill payments and other financial services through its network of entrepreneur agents; and the startup revealed plans to expand to the Democratic Republic of Congo (DRC) and Mozambique this year, as it closes in on a US$15 million funding round.
Local fintech companies are also having an impact on the global stage, such as Stellenbosch-founded Entersekt – which offers authentication systems for online and mobile banking services -, which has already scaled to the US and Europe.
According to Zoona, there is no shortage of highly skilled individuals in South Africa’s fintech space; in fact, the startup says there is a large talentpool of impressively skilled people.
“Fintech is a booming industry, and the next round of disruptive innovation in this space will definitely come from Africa. Cape Town is one of the many innovation hubs that have emerged, and the level of skill is impressive. There will always be competition for the top talent, but the talent is definitely there,” says Brad Magrath, co-founder and chief people officer at Zoona.
“At Zoona, we’re in the process of scaling and growing our business with the aim of being in ten African markets by 2020. Part of this process is bringing on new talent, and we’ve been able to secure some amazingly talented individuals,” Magrath says.
There are also no signs that institutional players are lacking any faith in South Africa’s fintech skill, with banks launching accelerators and competitions to identify and support the country’s top fintech talent.
Standard Bank, for example, has launched business incubators in Johannesburg; partnered Microsoft Bizspark and Sw7 to launch an accelerator; and the rolling out the PlayRoom, a dedicated innovation lab aimed at unearthing disruptive ideas from staff, customers and startups.
In November, Standard Bank also announced it was offering fintech entrepreneurs the chance to win ZAR500,000 (US$34,747) in prizes and business support at its Pathfinders Challenge finals.
Similarly, Barclays is ever active in South Africa, launching its Rise open innovation platform in Cape Town as its first African destination last year. The bank went on to sign proof of concept partnerships with three African startups after the Cape Town programme.
According to Ian Merrington, chief executive officer (CEO) of the Cape Innovation and Technology Initiative (CiTi), these projects show that local fintech startups are attractive to global organisations, and that ongoing development of tech skills will perpetuate the fintech talent on offer in South Africa.
“Cape Town is leveraging its innovation capability and start-up ecosystems to attract global fintech players. CiTi’s growing fintech cluster now has Barclays Rise, Thomson Reuters and also the BitCoin academy as members at its Barn Woodstock facility,” Merrington says.
“All of these initiatives have selected Cape Town as the location for their fintech initiatives due to its strong and rapidly growing fintech ecosystem […] Successful tech skills development initiatives […] serve to feed the pipeline with skill tech talent,” he says.
Meanwhile, Barclays argues a pertinent truth when it advises us to look to the future potential of the African fintech space.
“There are still way too many costly problems in financial services across Africa not being solved by digital companies – illustrating the huge opportunity available in this sector,” Warren Squires, head of the seeker fund for Barclays Africa tells Disrupt Africa.
The future – and present for that matter – for South African fintech startups, from where I’m sitting, looks pretty bright.
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